OVER the past decade or so, companies seem to have been in a perpetual struggle trying to decide how best to publish their financial reports online. Practices and formats seem to change from one year to the next, with each year seeming to bring some new “innovation” designed to make it “easier” for companies to digitize their increasingly bulky documents.
In general though, the battle has been between well-formed HTML online reports and PDF ones, with cheap imitations of the two popping up from time to time in the form of image-based, Flash paper, and modified Flash paper formats. My view has always been that decisions about formats, design and content should be driven by the needs of the audience. If you understand who your users are and how they interact with the information, you will likely arrive at sound conclusions for which format to use.
What the research says about PDF financial reports
With this mind, it’s worth looking at what the research says about how investors use annual reports online. A 2010 survey by Thomson Reuters for SAS Design in the UK, found that PDF was by far the most preferred format among the 50 industry professionals surveyed. This isn’t the first time PDF has been found to be a preferred format among a large percentage of investment professionals.
A traffic log study published in 2003 (PDF160KB) by Nick Rowbottom and Andy Lymer of the University of Birmingham found that 88.5% of 2,306 visitors to a UK company’s website in 2001 downloaded the PDF version of the company’s annual report. Only 11.5% used the HTML version. They speculated that “the preference for PDF may be due to the strain of viewing financial reports on screen compared to viewing a hard copy document, or perhaps the conservatism of financial reporting users who are unaccustomed to viewing on-screen reports where hyperlinks connect the different sections.”
A 2004 study by Frank Hodge at the University of Washington and Maarten Pronk at Tilburg University, which looked at actual site traffic logs, found that 41% of visitors who identified themselves as investment professionals on Philips NV’s website downloaded only the PDF version of the company’s annual report. This compared to 42% who used only the HTML version and 17% who used both formats. However, when looking at the shorter quarterly report, the researchers found that 62% of the professionals chose only the PDF version.
Rowbottom and Lymer followed up their study by looking at traffic logs of 12 FTSE 350 companies listed on the London Stock Exchange in a paper published in the American Accounting Association’s Journal of Emerging Technologies in Accounting in November 2009. They found that about 42% of all annual report requests by both professionals and non-professionals were for PDF while 58% opted for HTML. However, when Rowbottom and Lymer isolate what a professional audience used, they found that these users “make proportionately more requests for pdf-based information.”
Too little attention given to PDF?
Although the research shows that PDF is an important format for many professional users and some non-professionals, it is mostly silent on how investors actually use PDF reports. Once a PDF is downloaded, it is impossible to track which pages users view, what they search for, what functions they use or whether they print out the document.
One interesting aspect of the recent Thomson-SAS survey is how it differentiated between the usefulness of “Searchable PDF,” “Printed PDF” and “Front-end in HTML and FInancials/Backend in PDF.” Respondents gave “Searchable PDF” the highest overall score (4.8 on a 5-point scale) for usefulness, followed by “printed hard copy” (4.4) and then “printed PDF” (4.3).
The hybrid HTML-PDF format scored 2.1, the same as a “full HTML report.” Least popular of all, scoring just 1.9, was “additional enhanced online summary review.” These results show strong support among analysts for annual reports on paper — printed PDF or hard copy.
However, most support is expressed for the so-called “searchable PDF,” which is an interesting label to use because virtually all PDF annual reports are searchable. The exception would be if they’re manually scanned from a physical printed copy, which we haven’t seen in recent memory.
Results from a 2010 Thomson Reuters survey show finance professional's prefer "searchable PDF"
What this seems to suggest is that financial industry professionals both print out PDF reports and use them electronically to search for information. This makes sense because of the superior utility of searching a PDF document versus searching an HTML document. It’s faster and more efficient to search a PDF document for a phrase or keyword than it is an HTML report.
In the final analysis, while it’s clear that no single format is the clear winner with all users, the research findings suggest that PDF is more important than most companies and their web advisors acknowledge.
If so many professionals prefer PDF, then it would seem that insufficient attention has been given the PDF versions of financial reports.
For instance, the UK Investor Relations Society’s IR Best Practice guidelines for online annual reports mention PDF 3 times and only go as far as recommending that companies provide separate PDF files of each report chapter.
Evaluating “Smart PDF” reports
It has long been possible to make PDF documents more interactive instead of just being electronic replicas of printed documents. Relatively few companies bother with these features though. At best, they’ll add a bookmarks panel or activate the “Fast Web View” setting, which enables investors to begin using the document before it has been fully downloaded.
However, there are a variety of techniques that can make a PDF document feel and function more like a web page. For instance, you can:
- Code page references as hyperlinks;
- Add bridging links between the financial statement line items and their respective footnotes;
- Add clickable tables of contents pages at the start of key report sections;
- Include navigation links on each page; and,
- Add links to external resources;
Allianz SE, the Germany-based insurance and financial services giant, was one of the first companies to embrace advanced PDF formatting with its 2002 annual report (PDF 1.2 MB). For years that particular document remained the best example of a so-called “Smart PDF.”
However, the past two years have seen a comeback of sorts for the “Smart PDF,” especially in the United Kingdom. Examples include British Land (PDF 7.5 MB), BT plc (PDF 5.7 MB), and ING (PDF 3.1 MB) These companies are mostly providing Smart PDF documents instead of offering HTML. This is clear from the fact that they often provide a standard PDF download in addition to the smart PDF.
A common feature of these smart PDFs is that functions built into the PDF viewer itself, such as search, print and navigation buttons, are separately hard-coded into a custom toolbar at the document layer.
Instructions for how to use these controls are typically included on the first page of the document. This suggests that the intended audience for these documents is people who are unfamiliar with the basic functions in Adobe Reader and other PDF readers. That would include most retail shareholders rather than frequent PDF users like analysts and researchers.
Smart PDFs include instruction pages and their own toolbars at the document level. These are unlikely to make them more usable to non-professionals and add little or nothing for professional users who are already familiar with PDF reader functions.
However, it’s a mistake to position smart PDFs as a retail investor resource. The available research into retail shareholder preferences shows clearly that they use HTML more than PDF. Adding a toolbar and an instructions page to a PDF will do little to make it an attractive option for non-professional users.
As the old web usability adage says, if you need instructions on how to use something, it’s probably not usable. However, if you exclude the tool bars and instruction pages, the new Smart PDFs do include many features that improve usability for a professional audience, such as linked tables of contents, linked page references, and hyperlinked footnotes.
While I don’t think the additional toolbars detract from the usefulness of smart PDFs for professionals, they probably don’t make the documents more usable for them since they are most likely familiar with the same features in the reader software.
In the final analysis, the question of whether to include instruction pages and custom tool bars in smart PDFs hinges on the additional cost involved. If including the toolbar adds more than 10% to the cost but no additional functionality to what is already built into the professional user’s PDF reader software, then it is hard to justify including them.
Consider a Financials-Only Smart PDF Report
Many companies break up their annual reports into separate PDF files of each main section. The idea is to lessen the downloading burden on people who only want information in one section.
In 2007, Rowbottom and Lymer at the University of Birmingham looked at which sections of the annual report visitors to a sample of 15 UK companies downloaded most frequently. While the study did not distinguish between types of users, it did show clearly which sections of an annual report investors are most interested in.
Their results, based on 2003 and 2004 activity, underscore the importance of the financial sections of annual reports. This confirms other research we’ve seen from various sources. Ironically, these are the very sections that most online annual report designers tend to pay the least attention to.
Based on the above results, it may make sense for companies to provide a Smart PDF comprised only of a combination of the most-used report sections while leaving less used sections to standard PDF conversion. Such a document might be called a Smart PDF Financial Annual Report.
Acrobat 9 introduces embedded Flash video, portfolios
With with the introduction of Acrobat 9 in June 2008, PDF documents gained native support for Flash. This means that companies can now include Flash content such as video and applications like calculators and RSS readers. In fact, any application that can be built in Flash can be incorporated into a PDF document.
Investors do not have to be online to use these features, but they do need Adobe Reader 9 and the Flash player installed to access all of them. This is likely the main reason that we have yet to see many companies take advantage of these new capabilities.
Another new feature, PDF Portfolios, enables you to include a wide range of other documents and formats into a single PDF download. For instance, you can provide an annual report along with Excel spreadsheets in a single downloadable portfolio. See this example (PDF 1.4 MB), which requires Adobe Reader 9.
The portfolio feature could be useful in an investor relations setting. Eni SpA, the Italy-based oil giant, has used PDF portfolios for its quarterly results. See this example (PDF 1.4 MB), which includes several PDFs in a single document. To create these advanced PDFs, you will need the Acrobat Pro Extended software, which retails for $700 for the full version or $230 for an upgrade.
PDF portfolios enable you to package a variety of documents into a single PDF download. They may be a good tool for annual and quaterly reporting if and when more users have the Adobe Reader 9 installed.
In our research, we’ve found very few annual reports that make use of the Flash support in PDF Reader 9. One example is the 2009 Annual Report of Edvantage Group, an e-learning company, which includes animated charts in its somewhat large annual report (PDF 10.7 MB).
However, whether embedding Flash multimedia is a good investment of time and money remains somewhat doubtful. If you are going to use multimedia, then you should do it on a standard web page, where it will get more attention.
Of course, if you already do that, then adding a CEO video message to a Smart PDF Financial Report designed specifically for analysts and other heavy users might be a clever way to dress up an otherwise drab document.
Still no replacement for HTML
Although PDF is widely accepted and can include many of the same features as HTML, it is still not an effective replacement for good quality HTML. The available research shows that while many professional investors prefer PDF, either for onscreen use or for printing, retail investors and some professionals prefer HTML. Companies should also consider several drawbacks of PDF compared to standard HTML web pages. They include:
- It’s harder to reuse content from a PDF document compared to a standard web page. Copying content from annual reports and other disclosure documents for reuse in the user’s own documents is a common activity. Analysts do this when compiling research reports, journalists do it when researching articles, and bloggers do it for their posts. However, reusing information from PDF is not as simple as copying and pasting it from a web page. Copying information from a PDF can be difficult if the information is laid out across more than one column. Information pasted from a PDF often includes hard page breaks that have to be reformatted.
- PDF content does not lend itself to easy machine translation, such as by Google Translate. In today’s global market place where investors increasingly trade across international boundaries, machine translation has become an important tool for communications.
- PDF files sizes can be large, especially smart PDFs and those that use the portfolio and multimedia features in Acrobat 9, which are about 50% to 125% larger than standard PDFs. Large file sizes result in slower downloading, especially for international users.
- While Smart PDFs generally can be supported by most PDF viewers, those developed using Acrobat 9 require users to have Adobe Reader 9 installed on their computers. According to usability expert Jakob Nielsen, it is best to assume that web users are running software that is 2 versions behind the current version. From experience, this would apply to the computers of many securities analysts.
- Various usability studies have found that many people just dislike using PDF documents. Search Google for “hate PDF” and you’ll be surprised how many people detest the format and are willing to say so publicly.
Ultimately, though, HTML is a more efficient format than PDF for people who need to retrieve information quickly or who use the information only superficially. Instead of having to download a large PDF file, accessing information in a well-designed HTML report is quicker and requires less bandwidth. This is particularly relevant for information retrieval visits, such as when an analyst or journalist visits an IR website to cherry pick specific bits of information.
It also applies to the visits of many retail shareholders, who will tend to spend only a few minutes reviewing a report. PDF and print, however, may be better for users who want to read a report thoroughly, either because they have a vested stake in looking for new information that wasn’t disclosed in the Q4 earnings announcement or prelims, or because they are unfamiliar with a company and are highly motivated to understand its story.
Accessibility lacking
Accessibility, or the ability for users with various disabilities to use online information, is often misunderstood in the context of PDF documents. The simple fact is that while PDF documents can be made accessible, it is extremely difficult to do.
Many web workers do not understand this, and mistakenly believe that accessibility is built into the Adobe Reader software. This is not the case. For PDF documents to be accessible, the source document from which it is created – such as a Word document – must be compiled with accessibility in mind. Any images in the Word file should have alternative descriptive text and the document should use Word’s heading levels to provide a logical structure for screen reading software to follow.
Any tables in the document, which are common in an IR context, require special tagging so that they make sense when read by disabled users’ assistive software. The general rule of thumb when checking if a PDF document is accessible is to verify that the “Tagged Document” setting is active in the “Document Properties” dialogue. If it is not checked, then the PDF document is most definitely not accessible.
However, this only indicates that the document is tagged, not that it is tagged correctly. In addition, the accessibility checking tools in Adobe Acrobat also do not provide assurance that a document is fully accessible. Ultimately, accessible HTML is a better option than using a PDF document for accessibility.
Don’t forget these basic PDF good practices
With all this discussion about new features, it’s important not to lose sight of the basic PDF best practices that all companies should already be following. These include:
Layout documents for the screen
Print conventions like text set in columns create usability problems when people are reading the document on a screen. It is best to set your text in a single column across the page. With multi-column layouts, onscreen users may have to scroll repeatedly up and down to read the text on a each page of your document. The additional mouse action can become a chore and discourage people from reading as much as they otherwise would.
Since people tend to skim through onscreen information, it’s important to use headings, bullet points, emphasis, pull-quotes, visual supports and captions to attract users’ eyes to key information. Make sure these elements impart useful information. Avoid label headings like “Outlook.” Instead, say “Outlook: Fundamentals Improving, Targeting 4% Sales Growth.”
This will ensure that someone who merely skims the highlighted text will go away having learned useful information.
Eliminate gratuitous images
Beautiful full-page photos of green fields and laughing children are great in a glossy printed book, but they detract from the usability of online PDF documents and lead to large file sizes. If you must include them, scale them down to no more than a quarter-page and surround them with informative text.
Use the “Fast Web View” setting
Ordinarily, PDF documents must be downloaded in full before the user can begin reading them. However, if you enable progressive downloading by selecting the Fast Web View setting in the conversion software, people can start using the document while the rest of it downloads in the background. This speeds up users’ access to the information and may also improve their perceptions of a website’s usability.
Use loose document restrictions
PDF documents can be locked down with a variety of restrictions, such as requiring a password to be opened or preventing content from being copied or manipulated. These restrictions almost always create usability problems for users.
Analysts often mark up PDF documents with their own notes or copy information from a report into a word processor or spreadsheet. If the document security settings are too restrictive, analysts and others are prevented from easily doing their work. It increases the risk of errors if they have to manually rekey information.
Restrictive security settings, especially barring content from being copied, is ultimately counterproductive. It discourages analysts, journalists and others from using the company’s information in their own publications, which may attract widespread investor attention to the company. It also prevents people from uploading PDF documents to document sharing websites to created embeddable versions they can use to support their blog posts or articles.
Finally, restrictive settings may render a document inaccessible to disabled users who rely on assistive technology to read content aloud.
Documents with PDF restrictions like this are practically useless for anything other than reading.
Open PDFs in a new window or the reader software
To avoid usability problems, PDF documents should always be set to open in a new browser window or in the native reader software. They should never be embedded in a web page itself or open in the current browser window. Usability studies have found that a many people close their browser sessions after viewing PDFs in the current window.
Show the file size
Although more users have access to broadband Internet connections, PDF file sizes also have grown over the years. It is good practice to indicate the file size of a PDF in brackets after the link, for example (PDF 7 MB).
This tells users before they click on the download link to expect the PDF reader to open rather than a normal web page. It also gives them a general sense for how long they’ll need to wait for the document to download.
If users are accessing the web on a mobile device, or if they have to pay for bandwidth, they may not want to open a particularly large file.
I’m not a fan of PDF documents, which puts me at odds with 90% of investor relations departments whose websites are basically PDF repositories. However, if you’re going to use the format, at least try to do so properly.
Dominic Jones (bio) created IR Web Report in 2001. He is a consultant to leading public companies and investor relations service providers worldwide. You can contact him via the contacts page.
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