Australian Markets Prep for Social Media Boom in Response to Investor Demand

The launch of the Internet, even in its earliest stages, revoked limitations of time and geographical borders in regards to communication, connecting the entire world in stunning, unprecedented fashion. Evolution of the global network was further accelerated with the widespread consumption of social media, which has grown far beyond personal use and now plays an integral role in every facet of the business world. Leading U.S. companies have long-recognized the power of social media and have employed it as a dominant tool for enhanced corporate communication and investor relations.

From small business start-ups to the world’s leading brokerages, social media tools opened the floodgates of personal and corporate communication. The new digital age connects companies with current and potential investors like never before, enabling the dissemination of up-to-the-minute corporate and industry news, product launches, financial results, and encouraging enhanced dialogue in a matter of seconds.

More and more businesses rely on the power of social media to feed information-hungry investors with timely and valuable trading and investment data.

Research shows that 63% of U.S. professional investors believe blogs and social networks will play an increasingly important role in investment decisions in the future; 47% of institutional investors read financial blogs for research and ideas; and 20% have used blog research to give a recommendation or investment decision. Additionally, 79% of the Fortune 100 companies are using at least one of the most popular social media platforms: Twitter, Facebook, YouTube, or corporate blog.

While social media plays a predominant role in the U.S. business and investment communities, the Australian marketplace has yet to fully realize and harness the powerful capabilities of digital media. A recent study commissioned by Melbourne-based public relations firm Nightengale said that a quarter of retail investors rated Australian companies a score of eight or more out of 10 in regards to their use of social media. Not a bad figure, though more than half the investors could not name a single company that is utilizing social media to its full potential in terms of investor communications.

“We conducted this research to find out directly from retail investors how important social and digital channels are to them when making investment decisions and how these compare with more traditional channels,” Nightengale partner Lisa Keenan recently told The Australian. “The results highlight that while the way in which investors access, discuss and share information is evolving, nothing beats getting clear and accessible information direct from the horse’s mouth.”

Australian investors are geared up and anxious for a digital revolution. In a Colmar Brunton poll of more than 4,000 Australian retail investors who own shares in ASX 100 companies, 12%-15% of investors rated social media as a highly influential source of information. Approximately six out of ten said they are already utilizing the Internet to buy and sell shares through online trading platforms.

While Australian investors rely less on social media than U.S. investors do when it comes to making investment decisions, the case could be made that Australian investors don’t know what they are missing yet. Until Australia corporations begin to accelerate and strengthen their use of social media, they too are limiting their value.

Long gone are the days when press releases or conference calls were sufficient communication between company and stakeholder. In an age of high demand and convenience, it is important that companies recognize and meet investors demand for information, creating heightened transparency, which lends itself to credibility. It seems it’s just a matter of time before Australian companies change gears and plow forward with social media outreach, and it’s no doubt the trend will spread like wildfire.

“While social media channels are currently viewed as less influential than traditional channels, more than 10% of retail investors place a high reliance on social media channels like micro-blogging services and social networking sites,” Nightengale partner Kate Inverarity told The Australian. “It appears inevitable that the importance of these channels will continue to grow, making them more difficult for companies to ignore.”

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