How Social Media Can Shape Investor Activity
Many companies see social media as a channel meant solely to promote their products and services or to communicate with customers. But in today’s world, social media plays a much bigger role. Not only is it a make-or-break point for a company’s reputation; it’s also the lens through which many investors will be evaluating your company—whether they’re aware of it or not.
Understanding the relationship between social media and investor activity can help ensure that your company’s stock price continues to rise—and mitigate potential volatility.
Fundamental vs. Technical Analysis
While many investors make their decisions based on pure numerical analysis, looking at a company’s assets, liabilities, revenue, and stock price to make an investment decision, others look at more qualitative factors, like the strength of the brand and the company’s prospective future. These are known as technical analysis and fundamental analysis, respectively.
There isn’t much a company can do to improve its technical makeup, short of long-term institutional changes and/or differences in reporting, but there’s plenty you can do to make your company seem better to the public. Social media is the perfect tool for the job, whether you’re trying to show how much you value your employees, demonstrate the lasting power of your brand, or otherwise show off your longevity.
Consumer Expectations
Social media is also the perfect place to set and manage consumer expectations, whether you’re building hype for a new product, or explaining why you’re closing down a third of your stores. On your own social media pages, you control the narrative; you can use sneak peeks to build suspense for a new product launch or keep things quiet as you try to reset your company vision in the wake of a new CEO’s leadership.
In any case, this is your place to set expectations for both consumers and investors. Set them appropriately, and you can reap the rewards of positive anticipation while mitigating the potential for backlash in the wake of unmet expectations.
Customer Relationships
Some investors will use social media to see how your company responds to and interacts with its customers. If your company has a ton of followers, many of whom engage with the brand regularly, you’ll be seen to have a stronger, more loyal customer base. If you frequently ignore customers who ask questions or complain about your services, you might be seen as weak in the customer service department. This is a public, transparent platform, so every interaction here counts.
News Circulation and Responses
News spreads fast on the internet, thanks to social media. Whether it’s a press release about a new feature in your software or the revelation that your CEO has committed a major crime, if people care about the news, it’s going to travel fast—and all eyes will be on your company’s account in the wake of that news. Investors will be watching to see if and how you respond, and if you respond appropriately, you could easily soothe investor concerns. But if you fail to respond, or respond inappropriately, it could send your stock price spiraling in a nosedive.
Tips for Success
So what actionable steps can companies use to take advantage of this phenomenon?
- Get ahead of the news. Don’t react to news as it comes out; instead, try to report on it before anyone else does. This gives you control of the narrative and prevents trying to play catch-up as other online sources report on whatever happened.
- Be transparent. Work to be as transparent as possible—it’s becoming a more important quality for consumers and investors alike. Disclose anything that might be of interest to them, and don’t try to cover up details about your company (excluding proprietary information).
- Carefully manage public expectations. It’s usually good to build customer hype over a new product, but you can definitely go too far. If you set expectations for your performance too high, consumers and investors can only be disappointed, causing your stock price to plunge. Set expectations accurately, and you’ll minimize stock price volatility. You can’t always predict consumer behavior, but you can control the stage you set for them.
- Firmly reinforce your reputation. Make an effort to establish and grow your reputation on social media. Acknowledge your efforts in corporate social responsibility (CSR), talk about your core values, and express how you’re working to make the company better on a regular basis.
Social media won’t be able to single-handedly redeem a bad company, or allow you to recover from an especially volatile period. However, it’s a powerful tool in your toolbelt that shouldn’t be neglected. Consider its effects on your company’s reputation and stock price when planning your online strategy.
