By Dominic Jones
A FEW months ago, there was a lot of hubbub in the technology blogging community about a new service called Twitter. The service asked people to write short messages about what they were doing, and then it delivered the one-liners to their friends in near real time via instant messaging, SMS and the Web.
Initially, my interest was in the platform and the infrastructure. I really wasn’t interested so much in following what my friends had for lunch or where they were. And I didn’t feel the need to use Twitter myself to tell anyone what I was doing. It would be boring. “I am on the Web reviewing IR websites. I am asleep. I am on the Web reviewing IR websites. I am asleep…” You get the picture.
But I was deeply interested in what Twitter could do for investor relations departments of public companies to get their information out to the market without having to use expensive proprietary newswire services. Twitter seemed like a good platform for that purpose. A company could use Twitter to notify investors about important information in real time, on their mobile phones, Blackberries or on their computers. It fit in perfectly with my idea from last October for a 25-word news release.
However, I didn’t think about this much more because of some issues with Twitter’s reliability (it was overwhelmed by early demand) and because the noise of people writing 140-character “tweets” (a Twitter message) kind of distracted me from thinking more about serious applications of the technology.
Then I read a post by David Berlind, Executive Editor at ZDNet, entitled Get ready for the ‘Twitterization’ of mainstream media. Buried in the middle of his long post was something I think you’ll find very interesting. I’m quoting liberally from the post, but it is a long one, so I think you will appreciate me pulling out the meaty stuff for you here:
A couple of days ago, I noted how Twitter is the sort of technology that could completely up-end subscription-driven outfits like Bloomberg or Reuters. Investors subscribe to these services and sit in front of giant consoles as editors from these organizations spit out one-liners at them — one-liners with material information to investors — in near real-time. In other words, if there’s a reporter at a financial briefing for some public company and an executive of that company makes an important forward looking statement, that statement will appear on the consoles of thousands of investors within seconds of it being uttered.
On the investor side, there’s a stream of these one-liners about everything that’s important to them flowing by their consoles like a river. The secret sauce is not just in the business process (a chain of talented writers and editors who feed the system), but also in the infrastructure that facilitates that process: a proprietary infrastructure that, as far as I can tell, has been completely cloned by the likes of Twitter and Twitter-competitor Pownce.
Publishing one-liners takes only as long as it takes to type the one-liner. Subscribing to a source of one-liners the way an investor might subscribe to Bloomberg’s information services takes only seconds as well. Whereas Bloomberg puts a sophisticated system in the hands of an exclusive group of people on a private network, Twitter and Pownce make such a system available to everyone on the Web. Bloomberg gives subscribers a means of instantly offering feedback to publishers. For example, as it was once described to me by a Bloomberg editor, “If we don’t get the information into the system in time for investors to make key decisions, it could cost them millions of dollars. When they lose millions of dollars, you hear about it right way. They’re very quick to tell you you’re late.” I haven’t played with Pownce yet (I’ve reached out to the folks at Pownce but have yet to hear back), but Twitter offers precisely the same private feedback capability.
Berlind goes on to say that he can imagine a world where experts who don’t work for Bloomberg or Reuters start to publish useful, timely, and material information using a tool like Twitter, and he can see investors and traders subscribing to those feeds to ensure they have an edge in the market.
When I read “experts” I think of companies themselves. Investor relations departments and company executives are the ultimate experts on their own companies. Companies using Twitter alongside their websites to notify investors of new material information could bypass intermediaries like wire services.
In essence, Twitter can be a notification system and an editorial system. It can tell someone news is available and provide a link to it. For example: “Sun reports Results for Fourth Quarter and Full Fiscal Year 2007 http://tinyurl.com/2h5osq “
It can also be an information system by delivering the news in a concise format: “Sun Beats Profit Target Q4 Revenues $3.835 billion, EPS $0.09 vs consensus $0.05 http://tinyurl.com/2h5osq “
Berlind is right. If traders can get information faster from companies than from Bloomberg, they will use companies’ Twitter feeds. So who does that hurt? I think the real losers are PR wire services, which right now charge companies to deliver their information to the same trading desks that Twitter can reach for free. Unless they can go to free, private PR wire services are in deep trouble as a market disclosure service.
Where the threat to Bloomberg may come from are experts who can add value by giving a very quick and accurate interpretation of the news. Something like, “Sun’s beat based on lower component costs. I question sustainability.” Now if that “tweet” is by a highly respected analyst, you will probably find that traders will be following his Twitter posts, too.
That could create big problems for Bloomberg and Reuters. They mostly employ journalists. Journalists interview experts, but are not normally considered experts themselves. So their first takes and their follow stories quoting experts will probably be slower in getting to trading desks than the Twitter announcements.
Twitter has already caught the attention of traders. Last month, Brett Steenbarger, author of The Psychology of Trading and Enhancing Trader Performance started posting real time market commentary and insights to Twitter. You can view his twitter page or see the twitter messages on his blog. Here are a few of his recent “tweets” to give you a flavor for what he’s writing.
- 9:14 PM CT – Nikkei down over 1%, Yen has bounced higher. Market update before the Friday open.
- 8:03 PM CT – The 3430 new 65 day lows is the highest level we’ve seen in this bear stretch, and it’s the highest since 2003.
- 8:02 PM CT – Candidate for momentum low: Thursday had 201 new 20 day highs; 4035 new lows. 105 new 65 day highs; 3430 new lows.
- 7:59 PM CT – Advance decline line for NYSE common stocks only slightly above the March lows; same for SPX AD line. Quite a retracement.
Others in the trading game have also seen how Twitter can be used in a trading environment, where IM is already well established. Andy Swan, founder MyTrade.com and a professional day trader, recently explained why Twitter is not a fad.
In a July 19 blog post announcing his Twitter experiment, Steenbarger invited other market traders to join him in using twitter to post news and insights. By “friending” one another, they could “create a valuable Web 2.0 resource for traders–a real time stream of market observations from multiple perspectives. It could easily evolve into a high-level conversation about markets as they trade. Cool.”
Cool indeed. It is just a matter of time before someone does indeed start aggregating real-time commentary of interest to investors and traders. And when that happens, the whole information distribution system for material news is likely to look completely different than it does today. Sun’s recent decision to bypass PR wire services for its earnings releases is but a baby step in what is coming.
I’d like to see someone integrate Twitter with an IR website. If anyone has done this, or is planning to, please let me know.
IRWebReport.com was founded by Dominic Jones in February 2001 to promote best practices for online investor relations communications. In July 2010, the site had more monthly visitors than IR Magazine and IR Alert combined, according to Compete. We would like to thank our readers for their continued support and interest.
Excellent post, thanks for doing all the legwork!
I see twitter as the bridge on these two continuum:
1. old media, website, blog, rss, twitter
2. letters, memos, email, IM, twitter
We are playing with the idea of using it in the IR space, and are trying to ally it with a mobile portal first.
I’d like to see Twitter have a better admin interface, and the opportunity to easily edit your posts (if you’re all nerves and thumbs, it could be disastrous)
Will the SEC see this as an issue in regards to regulation FD? Will all parties be informed and use this?
Do Institutional Investment Managers suddenly need experts in the management teams with both investment management and top notch social networking skills? If so, that is a pretty good scenario for my skillset.
Derek,
I like your continuum. I agree with you on the twitter interface. It’s not the easiest thing to understand, but that can be fixed. Hey, even RSS was once strange. Still is for many people…
David,
Twitter is just another way of distributing information. In combination with other things, such as RSS and website postings, it might well fully comply with Reg. FD requirements. Reg. FD precedes most modern web technologies by about seven years, so the SEC doesn’t address RSS, IM, podcasts or SMS directly. But they did say at the time that they could forsee a time when companies could use their “websites” for disclosure. But I doubt anyone had a clue about RSS or Twitter. Dave Lynn, who recently left the SEC, blogged about this on Tuesday.
Will institutional investors need social networking skills? Someone will make a small fortune dumbing it down for them
Thanks for another thought-provoking post.
I’ve been playing with Twitter for several months, and have found some industry-specific bloggers are using it as a very effective compliment to their blogs- of course there’s lots of garbage as well, especially on surface.
As for investment analysts, agreed that they need a better interface to restrict tweets to network of friends (i.e. clients) as no broker/analyst shop want to make their info so accessible that it is “jumping” paying clients.
Web, RSS, email, the wires, twitter/pownce, the more methods of distribution, the better, for empowering investors/keeping them informed- of course the more new complexity to the job, too.
Good points, Matt. There seems to be some agreement here that twitter needs lots of work around usability and functionality. But the basic concept seems to have people sold. Twitter is proof that you can use the Web to disseminate information to many points at the same time.
There are a lot of other potential applications beyond what I’ve written about, such as your suggestion of investment dealers using it with their clients. Of course, I’m on the anti-PR wire service “bandwagon,” according to Business Wire, so that’s top of mind for me. Simultaneity is the key argument from PR wires against companies being allowed to use the Web for disclosure. While I think the value of simultaneity is overblown for most investors, it is something PR wire companies can do that companies haven’t been able to do using the Web.
But now that there’s twitter, we see that there is a way companies can do what PR wires do.
There’s a lot that needs to be done before a system like twitter is ready for prime time with corporations or investment banks or traders. Allan Stern just posted a list of improvements he’d like.
My sense is twitter has legs. I say that based on people using it and talking about using it in a trading environment. That probably gives the technology a real chance of making it. But it has got to be dead easy to use, seamlessly integrated with the tools we’re already using, and involve as little extra work as possible.
Dominic,
Thanks for your follow-up thoughts. Stepping away from the investment/IR realm for a moment, the LA Fire Dept (LAFD) is now using twitter (285 followers): http://twitter.com/LAFD
No shortage of experimentation out there. Saw the LAFD Twitter mention here: http://www.micropersuasion.com/2007/08/the-cut-and-pas.html
Have a good week-
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