2. They are hard to read.
The standard resolution for images on the Web is 72 dots per inch. While images of higher resolutions can be used, these take longer to download.

While 72 dpi is adequate for most graphic images and photographs, it results in smaller details like text appearing blurry. This is a critical issue for online annual reports since much of the useful content is presented in the text of the MD&A, notes to financial statements and the financial statements themselves.

Furthermore, to save on the cost of paper, the text of the printed report from which the images are derived is often printed at 10 points or lower, making the image-based version even more illegible.

Neither PDF files or standard HTML text have these inherent problems. To see an example in a new browser window of to-scale blurry text taken from an image-based annual report click here.

3. They print poorly.
For the same reasons that image-based annuals are hard to read on a screen, they produce poor quality printouts. The best print quality is usually obtained from PDF files with standard HTML text your second best choice.

4. They exclude blind and sight-impaired users.
Blind and sight-impaired users rely on special software that converts text on the screen to a voice synthesizer or to Braille. But since the text of image-based documents is embedded in an image file, the software cannot read the information.

To overcome this limitation, the standard is to provide a text description of images through one of two HTML tags specifically designed to assist blind and sight-impaired users. However, neither of these tags is meant to provide entire pages of text as is required in the case of image-based annual reports.

The issue of accessibility of information to disabled users is becoming more widely recognized. Several governments have enacted legislation compelling all government websites to be accessible to users with disabilities. The next step may well be to require similar standards for companies that are suppliers to government or those in regulated industries, such as public utilities and banks.

5. They have poor navigation.
The navigation schemes of image-based annual reports typically don't provide enough detail to enable users to quickly find the information they want. The main navigation assistance of image-based annual reports usually consists of a drop-down menu for section by section navigation, and arrows that allow users to move sequentially page to page in the same way that you turn the pages of a book.

Drop-down menus are a poor choice for primary navigation. They make users work harder by requiring repetitive interaction with the menu. They discourage users from exploring your report by hiding the various options available until the user clicks on the menu. It's better for all section links to be visible at all times so that users can see at a glance where they can go in the report.

To keep drop-down menus a manageable length, there's a limit to the number of links that you can provide in it. However, in some reports the list of options is too short and vague to be useful. For example, Gillette's report does not have a direct links to the financial statements or to the MD&A, two of the most heavily used sections of any annual report (see picture below).

This pull-down menu is the only way to quick link to key sections of Gillette's report. But there's no direct links to the MD&A or the Financial Statements.

Page-by-page navigation using arrows is bad because it imposes a linear navigation scheme on the nonlinear Internet medium. Forwards and backwards arrows also don't provide users with clues for what information they will find when they arrive on the next page.

Going page to page like with a printed book is an inefficient way to navigate the Web. It wastes users time because they often have to click through several pages to get to the page they want, especially if the drop-down menu is inadequate. In the Gillette example, you have to click through 19 pages to find the MD&A if you chose to use the arrows.

Using arrows for page to page navigation wastes people's time.

Some image-based annual reports have a complicated navigation scheme which is set up to look similar to the menu bar in a standard software program. This requires people to adjust to, and learn how to use, a new set of user controls other than those in their browsers. This can be a significant burden for many people and it's likely that most people will never learn how to use the product properly given that they use it only occasionally.

Complicated interfaces that override brower functions make it hard for people to get around your report.

6. The search function doesn't work properly.
Vendors argue that any shortcomings in their primary navigation is offset by the inbuilt document search utility. This argument does not hold up for two reasons:

7. They exclude context sensitive links.
One of the advantages that online annual reports have over their printed counterparts is the ability to enhance the reader's understanding by providing links to related information and context.

This is typically done using hypertext links within the text itself. A common, and useful application of context-sensitive links is to link line items in the financial statements to their relevant notes. However, in image-based annual reports this is difficult, time consuming and hence expensive to do. This may be why none of the image-based annuals we've seen use context sensitive links.

Both HTML and PDF reports allow you to provide context sensitive links easily and cheaply.

Even PDF documents are easy to set up for linked notes as in this example. With image-based reports, this is almost impossible to do efficiently.

8. They take away the user's browser buttons.
Some image-based annual reports can only be opened in a new browser window in which the standard browser buttons are turned off. This is done to force users to rely on the report's built-in navigation, which, for reasons already explained, is inadequate for a document as a large and as complex as an annual report.

Users rely heavily on their browsers' "BACK" buttons so taking it away can stymie and disorient visitors to your website. According to research at Stanford University, difficult-to-navigate sites may be perceived as less credible.

BP's report appears in a new window coded so that none of the usual browser controls appear. Most users rely heavily of browser controls like the "Back" button.

9. The online version is an exact replica of the printed document.
Ironically, this is often touted as a benefit by the vendors who sell image-based annual reports. They make spurious claims about this being in line with SEC requirements, which is rubbish to say the least.

It's also nonsense to claim that mirroring the layout and content of the printed report is a benefit to your IR communications objectives. That's because anyone with even a basic understanding of online communications knows that what works on paper rarely if ever is effective online.

The two media are polar opposites - paper being a linear medium best suited to narrative composition, and the Web being nonlinear and best suited to categorical organization. In addition, screen-based layout and design must take into account a number of technical and physiological limitations - like monitor glare and confined posture -- which are not present when information is designed to be consumed from paper.

The result is that image-based annuals are highly inefficient at delivering their message on the screen. For example, many printed reports use a two-column layout because it is easier on the eye to read information on paper when it is run across narrow column widths. This is the reason newspapers and magazines run their stories in narrow columns rather than across the entire page.

However, the opposite is true of web pages. When narrative information is placed in two or more columns, users have to scroll down the page to read the first column then up the page to read from the top of the next column. The additional scrolling breaks the flow of the user's concentration and often will cause them to abort reading further.

Top of page

Halfway down the page

Because the info on this page is set in three columns which go deeper than a single screen, users have to scroll down, up, down, up and down again to read it. In a single column layout, users would need only perform the action once.

Sometimes annual reports are printed on oversized paper. When you convert these reports to an image-based annual, you either have to reduce the size of each image - in which case the already grainy text will become even harder to read -- or you have to rely on users to scroll horizontally to see everything on the page. Making people scroll sideways as well as up and down makes your report too difficult to use and people simply won't do it.

Another often overlooked consequence of duplicating the printed document on the web without any editing is that printed documents often contain references and terminology that are out of place online. Referring people to other page numbers - common in printed reports - betrays the linear structure of the printed report. Most printed reports include text advising readers to consult the company's website for further information. Printed reports also typically duplicate information that already appears elsewhere on your website, such as contact information, and director and officer bios. When these information types are included in an online version, they send the message that little forethought has gone into providing a useful experience for your online users.

Of course, you might say that this is an argument that doesn't just apply to image-based annuals but also to PDFs. And that would be true except for one important distinction. With a PDF report the format is the means of delivery not the intended medium of communication. In other words, the PDF format presents the user with an electronic version of a document which they know was originally designed to be read on paper.

This is not the case with image-based annuals. For them, the format is both the delivery mechanism and the communications medium. They are intended to be used online, and do a bad job of it.

10. They waste users' time with useless pages.
Printed annual reports often include full-page photographs and contents pages that have no value to online users and are obstacles to people being able to quickly get the information they want.

This page contains no useful information and so wastes users' time.

Fortunately, our research indicates that 90% of companies have so far resisted the marketing spin surrounding image-based annuals. Only 10 companies in our recent survey of 100 of the world's biggest enterprises opted to provide image-based annuals. Their decisions seemed to be driven by cost cutting since all had previously published more expensive HTML annual reports.

Of course, they would have done better to save even more money by using an optimized PDF annual report. Not only would they have save additional money, but they would have provided investors with a document that is much easier to use to boot.