The preeminence of the Web as an investor relations tool is indisputable. Surveys of investment professionals show high and increasing use of IR websites by analysts and portfolio managers. In late 2000, the Chartered Financial Analyst Institute found in a member technology usage survey based on the responses of 270 investment professionals that 56% used company websites at least monthly, with 28% using them weekly.

By late 2003, a similar survey by Rivel Research Group of 207 portfolio managers found that 89% were using company sites at least monthly, with 75% using sites at least weekly. The sharply higher usage likely reflects the fall from grace of sell-side research and a greater reliance by the buy-side on internal research and due diligence.

Meanwhile, retail investors continue to rely heavily on IR websites for information, albeit as secondary resources to other online sources like investment portals. According to the Voice of the American Shareholder study by the National Association of Investors Corporation (NAIC) conducted in the second half of 2003, 74% of retail investors spent some time online doing investment-related activities in the previous three months. Other surveys show that among those retail investors who do use the Web, 90% use company websites to confirm investment ideas and decisions.

IR Websites Are A Decision-Making Resource
However, knowing how heavily IR websites are used is not as useful as knowing why they are used. Retail and professional investors use company websites for similar reasons, and in both cases their visits can have a wide range of consequences for the companies concerned.

Usually, investors will rely on aggregated sources of general information to monitor their holdings, such as Bloomberg for investment professionals and Yahoo! Finance for retail investors. However, when circumstances require investors to take some form of action or decision in relation to the company, they will consult the company's website as a definitive resource for in-depth quantitative and qualitative information.

These action-oriented scenarios may be of an innocuous or mission critical nature, and anything in between. A less severe scenario might be a retail shareholder who wishes to vote online after receiving notice of an annual meeting. A more drastic scenario might be a portfolio manager who, needing to raise cash, is contemplating selling a large block of the company's securities.

Whatever the case, the point is that a decision or action is often on the cards when investors turn to IR websites. Furthermore, the experience investors have on an IR website will influence their behavior and their opinions of the company. A site which facilitates the retail investor's need to vote online will make a positive impression, and a site which reconfirms for the portfolio manager why the company's stock is a good investment might prompt him to consider unloading another holding instead.

But what if the online voting interface is confusing, or the site fails to prominently highlight the company's growth prospects? What happens then? The reality is that such scenarios play out on IR websites every day — and most companies have no clear strategies for dealing with them. Too much is being left to chance.

IR departments should not underestimate the importance of the Web to their relationships with investors. In a March 2003 report, Rivel Research stated that 44% of U.S. portfolio managers said they had bought stock as a result of information they obtained on corporate websites. Furthermore, 48% of U.S. portfolio managers, 43% of European portfolio managers and 43% of Canadian portfolio managers stated that company websites had a "substantial impact" on their attitudes toward a company and its stock.

Companies cannot afford to take such figures lightly. IR departments that do not master, monitor and manage their online communication channels are compromising their companies' valuation potential. They must make sure their IR websites emphasize the right types of information, are designed from the perspective of investors, and that the combined experience that investors have on the site supports or strengthens the company's credibility.

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