STATISTICS from trackable links in company press releases suggest that even small companies’ websites are the most heavily used sources for financial disclosure information and that dissemination via PR wire services is mostly ignored by investors.
The public statistics bust the widely held misconception among investor relations professionals and securities lawyers that PR wire services are the most effective way for companies to achieve broad disclosure. They show that while PR wires distribute company releases to hundreds of different intermediaries such as a financial portals, there is little or no evidence that investors use PR wire releases.
The statistics also explode the myth that only large, widely followed companies’ websites can be used for disclosure under the US Securities and Exchange Commission’s (SEC) 2008 Regulation FD guidance, which states that postings on company websites can meet fair disclosure requirements if they meet certain standards, including that investors actually use the sites. The statistics indicate that even at small-cap companies, websites, email lists and social media accounts are the primary channels through which investors now receive investor relations information.
Disclosure dissemination practices fall behind
In the three years since the SEC issued its guidance on the use of company websites and blogs for disclosure, only a handful of companies have changed their disclosure practices to use their websites and SEC filings rather than PR wire services as the primary channel for their disclosures to investors. Those that have made changes include Google Inc., which no longer uses PR wires for its earnings releases, and small-cap BGC Partners, which uses an advisory release method to alert investors to full-text disclosures on its website.
The lack of progress towards so-called web disclosure is likely due to several contributing factors. US Stock exchanges still favor PR wire services in their rules and discourage companies from pursuing web disclosure, even though their rules do not expressly prohibit it. Nasdaq OMX owns PR wire service GlobeNewswire while NYSE Euronext offers subsidized press release services to its listed companies.
Another limiting factor is a general lack of awareness of new real-time web technologies among companies, their advisers and some web service providers. PR wire services have exploited this lack of awareness as they seek to preserve their lucrative disclosure dissemination franchises by sowing misinformation and creating doubt among cautious companies.
However, the biggest barrier to the adoption of web and social media channels for disclosure has been the widespread misconception in the industry that PR wire services are both the most effective means of disseminating disclosure information and that they meet companies’ disclosure obligations under Reg FD. Consequently, companies continue to collectively spend many millions annually on PR wire services even though SEC filings provide more certainty of compliance and many companies are in a position to replace PR wire distribution with website postings under the SEC’s 2008 guidance.
Click stats show where investors interact with company news
Now, publicly available information about investors’ use of links in news releases calls into question the effectiveness of PR wire service distribution and suggests that investors mostly access disclosure information directly from company websites, email alerts, RSS feeds and real-time messages on social media platforms.
The statistics are provided publicly by URL shortening services such as Bit.ly and Goo.gl. They enable anyone to view where investors are when they access and click on shortened links in press releases. The statistics these services provide are more reliable than the statistics that PR wire services offer to their clients because they are not affected by investors’ browser settings, non-human activity such as search bots, or by the format choices of the PR wires’ distribution sites.
Some companies use services like Bit.ly to shorten long links to webcasts and other information in their press releases so that the links don’t break when the releases are distributed in emails or posted on some websites. When investors click on these links the short link is decoded into the original long URL and a click is recorded by the shortening service. Anyone can access the click statistics for these shortened links by appending a + sign to the end of the URL.
Information recorded by the link shortening services includes referrer information, which is the location where investors viewed the release and clicked on the links. When the links are clicked on a public website such as Yahoo! Finance, the shortening service can easily track and record this information. However, if the link is clicked via a user’s email program, in one of a number of social media clients such as Tweet Deck, or if a user pastes or types the link directly into their browser, the referrer cannot be tracked and the click is recorded as a “direct” click.
For more than a year, we have been monitoring PR wire services for public company releases that contain links that have been shorted using the Bit.ly service. Unfortunately, very few companies shorten the URLs in disclosure releases using Bit.ly so examples are few and far between. However, in every case that we have looked at, few if any of the clicks can be tracked back to PR wire service distribution points, while company websites and direct access clicks from emails and the like are typically the most common referrers.
The finding that company controlled channels account for more click activity than PR wire service distribution holds true regardless of company size. This is an important point because it suggests that many more companies could be using web disclosure than was previously thought.
Below we provide information from three public company releases that included trackable Bit.ly links. Two are from small, lesser known companies and one involves Dow Jones Industrials constituent The Boeing Company (NYSE: BA)
Example 1: State Auto Financial Corp
On April 28, 2011, State Auto Financial Corp (NASDAQ: STFC) issued a news released via Business Wire announcing a webcast of its upcoming annual meeting. The second paragraph of the release included a link to the webcast registration page that was shortened using Bit.ly.
According to a Google search, Business Wire distributed the release to scores of websites including the most visited finance portals such as Yahoo! Finance, MSN Money, MarketWatch, Barron’s, Reuters, Bloomberg and Morningstar.
According to Bit.ly, of the 116 clicks on the short link in STFC’s release only 3 clicks can be attributed to Business Wire distribution points, namely Yahoo! Finance (1 click), StreetInsider (1 click) and SNL.com (1 click).
STFC’s own investor relations website, which is hosted by IR website provider InvestQuest.com, generated 10 times as many clicks (34 clicks), while clicks from direct sources such as email, Twitter clients and manual browser entries generated 75 clicks, or 65% of the total. STFC provides an email alert utility on its IR website for news releases and SEC filings.
These figures appear to show that distribution of STFC’s release via Business Wire was largely a waste of time and effort and that up to 94% of the audience reacted to information received from the company’s own website or email alerts.
This suggests that STFC, which has a market-cap of $650m, is well placed to use its website and SEC filings to comply with Reg FD and to communicate its essential information to investors.
Example 2: Sonus Networks, Inc.
On June 1, 2011, Sonus Networks (NASDAQ: SONS) issued a news release via PR Newswire announcing the date for its upcoming investor day in New York City. The release advised investors that they need to pre-register to attend the event and provided a Bit.ly link to a page on the company’s website where they can do that.
According to Google, PR Newswire distributed the release to about 144 finance and news websites, including Yahoo! Finance, Reuters, Business Insider, Barron’s and dozens of smaller news outlets.
Sonus uses a website from Shareholder.com that offers an email alert utility that distributes the full-text of releases to subscribers. The company also issued a message containing the bit.ly link on Twitter, where it currently has 487 followers.
According to Bit.ly’s click stats, the short link to the investor day registration page was clicked a total of 21 times, of which only 2 clicks can be attributed to PR Newswire partner Yahoo! Finance. More than 90% of the clicks appear to be from the company’s own web channels, including 15 clicks from email alerts and Twitter messages viewed in client software, 3 clicks from the company’s IR website and 1 click from the Twitter website.
Here again, there is negligible evidence that PR wire distribution is effective, with only one of PR Newswire’s distribution points registering clicks. The company’s own web channels appear to the primary way that investors get information from Sonus.
Example 3: The Boeing Company
On December 20, 2010, The Boeing Company (NYSE: BA) announced that it was increasing production of its 777 aircraft. The release, which was distributed via PR Newswire, included a Bit.ly shortened link to a video about the 777 program. As the only link in the widely distributed release, it was very prominent.
Boeing posted the release on its website and also distributed the full-text to its email list subscribers.
According to Bit.ly, the release generated a lot of interest with a total of 1,757 clicks. Boeing’s own websites generated by far the most clicks, with a combined 917 clicks across three sites, or 52% of the total. Email and the like generated a total of 610 clicks or 35%.
PR Newswire’s own website accounted for 32 clicks or 2% while Yahoo! Finance accounted for 15 clicks or less than 1%. The bulk of the remaining clicks were made up of traffic from industry publications.
Overall, the click statistics suggest that up to 87% of people who are interested in Boeing receive their information directly from the company rather than from PR wire distribution sources.
Summary and limitations
These click statistics and others that we have reviewed provide strong evidence that PR wire distribution is not as effective or as well used as companies’ own website channels.
This has potentially important compliance implications for how companies and their legal counsel approach their disclosure dissemination practices. Reg FD places the onus on companies to ensure that any alternative channels to SEC filings they choose to use are in fact reasonably designed to result in broad, non-exclusionary distribution.
Of course, there are limitations to using click statistics. By definition they track only those instances where people actually click on a link. They cannot tell us how many times releases are read but people don’t click on the links. Nonetheless, on a relative basis it is clear that company channels are likely being read much more often than releases distributed by PR wires.
Another limitation is that it is impossible to know the source of the emails and other direct sources of clicks. In addition to company email alert utilities, PR wire services also may have subscribers who received these releases via email. However, the relatively poor showing of the PR wires’ own websites in the click statistic suggests that their own channels are not widely used for company disclosure information.
Finally, while they are consistent with a number of other companies we have reviewed, these results are for a limited number of companies and may not hold true in all cases.
Next steps for companies
To comply with their regulatory obligations and best serve the information needs of their investors, companies should seek to understand what channels their investors are using.
Shortening URLs in releases using Bit.ly is the best way to do this because Bit.ly has invested heavily in systems and technologies to provide accurate statistics. PR wires’ own statistics are not reliable and are unable to track all clicks. Additionally, PR wires may be overstating traffic because they are less effective at stripping out non-human web activity, such as search bots.
Once companies have better insights into how and where investors are using their information, they can make informed judgments about moving to a web and social media disclosure dissemination system coupled with SEC filings.
This may include adopting new procedures such as relying on SEC filings for compliance, and using company owned web channels and new real-time technologies to effectively communicate information to investors in the formats they prefer and through the channels they actually use.
Note: I will be participating via video conference in a lunch & learn panel discussion hosted by Q4 Web Systems at the NIRI Annual Conference in Orlando on Tuesday June, 14 from 12:15 pm – 1:30 pm where I will be available discuss this and other topics.