It’s been a busy week for social media in financial services…and it’s only Tuesday.
For years I’ve been an advocate of using social media in a B2B/financial services setting. I recently spoke in London at the Finextra conference about our experiences. It allows you to educate, build advocacy and monitor for issues. There is clearly no doubt that social media has made its mark with consumer brands and in breaking news. But who is lagging and why? Many have pointed to the financial services industry as being the late adopter. In some cases this is true, but in others it is not (e.g. at CME Group we’ve been using social media since mid-2007).
But in the past few days there has been a flurry of news surrounding social media and financial services. Why now? Before I answer that let’s look at what’s been written:
Financial Times: Embracing trends in social networks
Reputation is one of the most valuable assets companies possess, but controlling it amid the rising influence of social media is a growing challenge. Financial services personnel who naively think their company has no presence on social network sites are sadly mistaken, according to Mark Park, head of digital at MHP, a London-based public relations consultancy.
Financial Times: Twitter research promises trading success
However, because these tweets are effectively broadcast for global consumption they can be data mined.
Gorkana: To tweet or not to tweet
Current and potential clients of asset managers increasingly consume their news and conduct their research into new products on the web. The frenetic blackberrying of business people on commuter trains, in airports and by the pool on holiday are reminders of this trend.
Asset managers need to start experimenting and take some steps into the world of social media. At the very least, it is clear that social media is becoming an increasingly important communications tool for journalists and offers asset managers additional ways of communicating with its stakeholders in a very personal and interactive way.
Measuring investor sentiment has long been used by financiers as a tool to divine the future direction of stocks. But traditional tools are decidedly low-tech and less timely, such as the weekly polling of individual investors and financial newsletter editors to see how many are bullish and how many are bearish.
The skyrocketing use of chatty and highly trafficked sites such as Twitter, Facebook and YouTube has created a fresh, massive and useful warehouse of new data. Sophisticated investors view the mining of digital chatter via machines as a way to gain an edge.
Derwent Capital Markets, a London-based hedge fund, was so taken with Bollen’s findings that it will soon launch a fund based on the methodology in his paper.
In these terms, all of Twitter generates only a sand castle of quality data a day. While some of that data is very valuable, such as tweets from CME Group (@CMEGroup), most of it simply tells us about mass sentiment. And because its open and available to everyone, it doesn’t provide an unfair advantage to the computers of Wall Street. On the other hand, the talk about Twitter does reveal the opportunity and challenge of big data.
CNNMoney will begin pulling content from StockTwits’ network of 55 independent bloggers, Lindzon told Wired.com by phone. “Our goal is to make our stream richer with great content, not just tweets,” Lindzon said.
As Twitter has insinuated itself into so many aspects of our lives — as well as major industries, institutions and companies — Wall Street and the broader finance world have been somewhat behind the curve on harnessing social media. With its new redesign and partnership with StockTwits, CNNMoney clearly hopes to change that.
So what’s changed?
First, we’ve had an enormous amount of media attention given to social media companies and its use, from LinkedIn’s up and coming IPO to Facebook talking to Baidu of China to the Royal Wedding in London (infographic), it’s been difficult to escape the usefulness as well as widespread use of social media. In fact, many will argue social media is now the norm.
Second, we’ve seen the financial services industry show an interest in investing in social media companies. Clearly they see value in these organizations.
Third, I think as an industry we’ve had good direction and guidelines set by regulators that have helped define what is acceptable.
But those three reasons alone don’t necessarily justify the recent uptake and interest in using social media by the industry. The real reason as nearly every story above indicated comes down to one word: data. Information, sentiment, links and more on social networks are creating a mountain of data. We’re finally at a point where we have so much data about economies, companies and markets that it can be useful. For instance, just look at this chart generated by LinkedIn at the rise in the number of links shared on its network.
While some may think that the recent firehouse of data is just too much, smart companies will be able to wade through the information and data. Google Analytics is one way of doing this. Using StockTwits to follow your company is another way. Hootsuite also has recently updated its tools for users to better refine and measure effectiveness. And PR firm Cognito has recently launched its own tool for financial services companies to help monitor social media.
So what can a B2B company — not just a financial services company — do to navigate the data? First, have a plan. The best way to do this is to conduct a social media audit. Know what you want to achieve from using social media and more importantly what you want to find out. Second, search for the right tools. You will need to take some time to do this but a good place to start is searching through the Mashable site. In addition, make sure the tools you use fit into your overall branding efforts. Third, build your own social network. Connect with people at the companies you want to emulate and see what they are doing. I’ve always felt that benchmarking — not copying — against others in a variety of industries will help you think smarter. Finally, always remember the focus is on giving your followers what they want. This may take some experimenting but don’t be afraid of failing.
We’ll see in the coming months and year what other changes financial services firms make to their social outreach. Not only will the results of Derwent Capital be followed closely, but I think we’ll see an evolution (not a revolution) of financial services firms being more active in social media. Some great destinations to watch these trends unfold include The Financial Brand, IR Web Report, StockTwits and Visible Banking.
Let me know your thoughts, but more importantly your questions, on this this topic.
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