TruthyPR

Investor Communications Strategies in the Age of Online Activist Shareholders

[This article originally appeared on April 30, 2008 on PRNewsOnline.com]
By Shabbir Imber Safdar (Virilion) and Jeff Connaughton (Quinn Gillespie and Associates)

Background
On April 30, 2002, Walter Hewlett announced that he was abandoning his proxy campaign to block the HP-Compaq merger.  Our client, Hewlett Packard, had hired us as part of a team that waged a campaign both online and off to convince shareholders to approve the deal.  Hewlett’s campaign was formidable, well-funded, and effective.  He rallied dissatisfied HP and Compaq employees, skeptical investors, and a hungry financial news cycle to make his case.  His online campaign was formidable, and he heavily relied on blogs and his anti-merger website to get the word out.  We suspect his biggest expense was the costs needed to mail out proxy ballots to investors.

Thankfully, Walter Hewlett lost and the market seems to agree that his vision was the wrong one.  HP’s stock, which closed around $17 when he ceased his campaign in 2002, is trading in late March at over $45.

Today, there are many Walter Hewlett’s and there’s going to be many more in the future.  The SEC announced last year that company may now distribute proxy ballots electronically, lowering the bar for a campaign like Walter Hewlett’s to be much cheaper than ever.  The overall drop in the stock market has created buying opportunities for hedge funds that now routinely agitate for management changes that will increase the value of the stock.

The model of the new online activist shareholder
The model “what’s to come” is Eric Jackson and his 2007 campaign against Yahoo!
On December 2, 2006, Eric Jackson was agitating on his blog (“Breakout Performance”) about Yahoo!.  “Yahoo! has no requirement for directors to buy stock. They should.”  Putting his money where his mouth was, Jackson bought 45 shares of the purple giant a month later, in January 2007, and began his campaign, “Plan B For Yahoo!”

Jackson said that within a week of the campaign launch, “there were articles in Dow Jones, the New York Times, and the Red Herring.  The financial media picked up on it right away.”  Jackson’s criticisms of the company had found fertile ground, and though he wasn’t leading an investor revolution, he was most certainly giving voice to widespread discontent with the company’s performance.

Activist investors are typically either individuals with a separate political agenda (like divestiture) that buy one share in order to influence the board vote or powerful, like Walter Hewlett, who from the HP board itself waged a savvy web based and media campaign to fight his fellow board members in opposition to the HP-Compaq merger.  They control large blocs of shares and their ability to sway board elections is usually not in doubt.

Eric Jackson is a new form of activist shareholder.  His stake is small, he bought only 45 shares of Yahoo! in January when he began his campaign, and his stake has never been larger than 96 shares, but his media reach speaks volumes.  In his most highly-trafficked months he says he gets five or six thousand visitors to his website.  The pressinterview him relentlessly.  As an actual shareholder, instead of an analyst, he seems to be the second number financial reporters dial after Jerry Yang or Sue Decker.  “I got my share of phone calls just to present the other side” Jackson has told us.  “Though other shareholders told me privately they were upset, not many people would come out and say that.  Because I was, the press came to me.”

Yahoo!’s lack of attention to Jackson was a huge mistake.  Not until he filed papers to run for one of Yahoo!’s board seats did he really get the attention of Yahoo!’s management.  Ignoring him for so long while he amassed a stack of press clippings had made him a personality, the media’s “go to” guy for thoughtful criticism on Yahoo!’s lack of a strategy. 

By April of 2007, Jackson’s campaign was in full steam, and with the annual meeting approaching, investors were beginning to agitate for change at Yahoo!.  The board was up for re-election and Yahoo!’s human rights problems in China and CEO Terry Semel’s bloated pay package were getting plenty of criticism. 

Eric was quietly called in for a meeting with Yahoo!’s management.  He was hoping for some give and take with management.  Point by point he laid out his plan for Yahoo! to succeed.   “They responded to each point explaining why they didn’t agree,” said Jackson.  At the end of his presentation, with absolutely no movement forward, the meeting ended.

Jackson says that the meeting was the beginning of his campaign to oust the current directors.  “I was hoping we’d get to a constructive dialogue with Yahoo! but after they rebuffed me, the campaign got negative.  I then began to lobby other shareholders to vote against the directors at the annual meeting.”

By all accounts the annual meeting in June of 2007 was a low point for Yahoo!.   The media had spent the previous week talking about how CEO Terry Semel’s pay package of $71 million was inappropriate given the languishing stock price and the company’s poor performance.  Along with Jackson, two different proxy advisory firms were urging shareholders to vote against the re-election of the Yahoo! board because of the disparity between the company’s performance and Semel’s pay package.  With some of the board only approved with 66% of the vote, the agitators had made their point.  By January of 2008, Semel would be gone, Sue Decker would be put in charge of the firm (a Jackson recommendation), and a suitor offering to buy the company would emerge while the “Yahoos” in charge tried to convince shareholders that they really did have a plan.  Yahoo!’s action to convince people of their potential value are viewed by most as too little too late.  Eric Jackson’s campaign to unlock Yahoo!’s value with an outside bidder may very well succeed.

Analysis
There are a number of mistakes that Yahoo! committed that you can avoid:

1. Don’t ignore critics, especially if they channel overall discontent
2. Engage the activists carefully, be careful you don’t create a more motivated opponent
3. Once you recognize you have a problem, use time-tested political campaign techniques to isolate your critics and amplify your supporters

Every Fortune 500 company has learned that the Internet changes everything about the way you deal with consumers and consumer opinion online.  The next few years of history in investor communications will be written about companies whose investor communications program fail to adapt to the Internet as well.

Conclusion
Walter Hewlett used web and communications techniques very effectively to oppose unsuccessfully the HP-Compaq merger.  Eric Jackson, small fry though he is, began a campaign that ultimately toppled Yahoo!´s management.  Whatever the power activist shareholders bring to the fight, the Internet amplifies that power multi-fold and must be countered effectively by corporate management in the new age of activist shareholders.

About the authors: Shabbir Imber Safdar and Jeff Connaughton were part of a cross-agency team that provided strategic and digital communications consultation to Hewlett-Packard during the proxy fight over the Compaq acquisition.

Shabbir Imber Safdar is the founder of Virilion Inc., a digital communications firm headquartered in Washington, D.C.

Jeff Connaughton is vice chairman of Quinn Gillespie and Associates, a strategic communications and government affairs firm headquartered in Washington, D.C.

Boeing vs. Northrop Grumman: YouTube battle examined

I am watching the conflict between Boeing and Northrop Grumman over the Air Force Refueling Tanker contract with great interest.  Not only are there serious policy issues at work here for how procurement works in the future, but there's so much money at stake that you expect to see some interesting tactics employed.

Generally people in public affairs don't ask me if they're doing enough online for their client. Either because of a lack of knowledge or a lack of money, they know they're ignoring some important elements.  While a full analysis of the conflict in every channel online is too much to do now, let's just take a look at YouTube and it's 62 million visitors (Mar 2008).

My general rule when someone says, "Should I be on Twitter/YouTube/Facebook/mobile ?" is to ask them two questions:

1. Are people talking about you or your topic/business/brand there?
2. Are your competitors/opponents there?

If either answer is 'yes', you need to adopt a combination of organic and paid online tactics to help get your message out in that channel.

Today I went to YouTube to examine it for presence of the fight over the tanker contract.  With a combination of videos by their proxies (some sympathetic and some possibly paid), Boeing owns the message in this channel.  To see what I mean, go to YouTube and search on "tanker contract" and sort by relevance.  Of the first ten videos, eight of them are pro-Boeing, one is neutral, and one is pro-Northrop Grumman.  The pro-Northrop Grumman video is actually a video put up by a TV station in the area, WALA, talking about the economic benefit to the region. The neutral video is also put up by a news website.

However the 8 pro-Boeing videos have been put up by a combination of Boeing employees (1 video), Boeing-friendly legislators (4 videos), and what appear to be Internet operatives working on Boeing's behalf.  The most prolific, a user named "demorra", has only five videos uploaded to YouTube, all of them pro-Boeing, and demorra's title on their profile page is "Internet Strategist".* 

If you'd like to follow this conflict more, you can check out the online presence from both Boeing and Northrop Grumman.

* I called and e-mailed Boeing to ask whether this person was compensated for uploading videos to YouTube, but they didn't respond in time for this article.

[Disclosure: Neither I nor my firm, Virilion, is currently working on behalf of Boeing, Northrop Grumman, or any entity with a stake in the outcome of this conflict.]

Stop ignoring Twitter, it matters now.

I have a somewhat well-earned reputation for being a technology curmudgeon.  The reason my personal style is "fast follower" instead of "bleeding edge" is because I see so many people pursue technology that has no inherent purpose except hype long before a critical mass of users are on it.

So it was with Second Life.  All last year, when people were running around excitedly building islands for their brands, you could always count on me for a discouraging word about the concept.  The empty corporate islands in Second Life continue to feed my schadenfreud.

I said the same thing about Twitter, and until it reached a critical mass of use, it was the same self-indulgent waste of time.  Fortunately, or unfortunately, Twitter use has finally reached a point where there are enough people on Twitter that it's not going to die in 2008, but be around for several years to come. 

As a general rule when a technology finds a use for itself outside of the hype bubble, and that use hits the echo chamber of the news cycle, it matters.  Many technologies hit the media bubble during launch hype when people cheerlead it just because it's new.  But a quick look at what's happening with a few large corporations will convince you that Twitter is way past launch now.

This year a few select brands, Comcast and H&R Block, have discovered Twitter and been using it for Customer Service.  They're looking at Twitter for their customers complaining, and dispatching service accordingly.   Check out the backlog of their Twitter conversations and you'll instantly see the benefits they're providing to their customers.

• Comcast on Twitter: http://twitter.com/comcastcares
• H&R Block on Twitter: http://twitter.com/HRBlock
   

Somewhere, somebody is writing an article for "Customer Support Monthly Magazine" about how nowadays you need to go where your users are complaining, instead of waiting for them to call you.  Until that article comes out, I suggest you go check out a mini-case study that Virilion colleague and co-author Jason Alcorn and I wrote for PR News about how Comcast is using Twitter.

Read our article now at PRNewsOnline.com.

Twitter's here to stay, time to add it to your monitoring toolbox.

What Comcast Can Teach You About Customer Service -- Really!

[This article originally appeared on PRNewsOnline.com on April 17, 2008]

Go to where the customers are complaining about you

By Jason Alcorn and Shabbir Imber Safdar, Virilion, Inc.

Customer service at large corporations is a cultural joke.  Customer service from a major phone or cable company is an entire subgenre in and of itself.  So it is particularly ironic that we should tell you that a major cable company is in fact on the forefront of customer service. 

What Comcast is doing is to go where people complain about them online, instead of waiting for their customers to call and complain.  Right now the digerati complain on Twitter, the current web darling that allows people with no internal conversational filter to vent their every thought moments after it is formed in their head.  “I’m going out for coffee”  “I got coffee”  “I want another coffee” is a typical 10 minute series of updates on Twitter.

Twitter can be easily searched, and at least one enterprising person at Comcast realized that people were using it to complain about bad service.  Comcast started monitoring the complaints and set up their own Twitter account, “ComcastCares”.

How Comcast’s Advanced Customer Service Program Was Discovered
On April 6, 2008, Michael Arrington, editor of the highly-influential TechCrunch blog, finally had it with the customer service he was receiving over the phone from Comcast after 36 hours of downtime on his Internet connection.

He posted three times on Twitter:

1. comcast has been down for at least 36 hours now. http://twitter.com/TechCrunch/statuses/783963377
2. Comcast says it's Calif wide. After 30 minutes of hold time and trying to upsell me on some premium cable channel. FUCK YOU COMCAST http://twitter.com/TechCrunch/statuses/783963377
3. oh, just to be clear, I know they lied about calif wide - i asked some friends. wow, my cable company lied to me. surprising.  http://twitter.com/TechCrunch/statuses/783965175

Comcast responded.  In fact, Arrington writes, “Within 20 minutes of my first Twitter message I got a call from a Comcast executive in Philadelphia who wanted to know how he could help. He said he monitors Twitter and blogs to get an understanding of what people are saying about Comcast, and so he saw the discussion break out  around my messages.”
How Comcast Got It Right

First, it wasn’t just Comcast, the big faceless organization that reached out to Arrington.  It was Frank Eliason from Comcast Customer Outreach who manages the @comcastcares Twitter feed.   .

Second, Comcast didn’t do this just because Arrington is a famous blogger with a 13,000 followers on Twitter.  Kent Zimmerman  did the research and found out that Comcast does in fact monitor Twitter and respond.  Zimmerman writes, “Yes, they are indeed monitoring Twitter for customer service issues. And yes, they would have taken the same action were it me bitching about them on Twitter and not Michael Arrington. He even went so far as to give me a personal email address to use if I ever did have a problem (not knowing that I wasn't a current customer).”

How Should You Protect Your Brand?
There is no reason at all to not monitor Twitter and other channels on the social Web for your company name or brand trademarks.  Go to Tweetscan (http://tweetscan.com/) and subscribe to the feed for the words and phrases that you want to monitor.  For Do It Yourselfers, Social Media Firehose (http://pipes.yahoo.com/update_maker/social_media_fire_hose) is a Yahoo! Pipes application that you can copy and modify that covers not only Twitter but also Digg and many others.  There are also a host of services that have opened up in the last year to monitor what people are saying online about you, including Radian6, Scoutlabs (still in development) and many others.

Taking the next step – participating and responding – is more difficult, but as Comcast’s experience shows, can be of immense value.

Conclusion
Consumers want to dictate the terms of their communication with corporations more than ever.  The successful corporations will respond on consumers’ terms and in the channels that consumers use.

For your company or client, it may not be customer service.  It may be convincing voters to support a candidate, it may be correcting the record on an important issue, or it may be something else entirely.

The lesson remains: you don’t control all the channels any more.  Listen, first, and you might just hear something that is worth responding to.  The payoff will be immeasurable.

A view from the Wireless show, Las Vegas, April 2008

The largest wireless industry trade show in the world happened last week in Las Vegas, and since there are over 250 million wireless subscribers running around this country, it should have been of interest to anyone who communicates for a living. While the new gadget announcements were thin, there are plenty of things that you should be doing in this medium, none of them obvious.  I've divided up the interesting things at the show up by audience. 

For communications professionals
This is the year that you need to figure out what your brand's relationship is with your supporters through their cellphone.  Second only to the ability to make telephone calls, the standard unit of communication you will be using will undoubtedly be the text message, a function that appears to be universally available on every phone sold.  Your brand's relationship with its supporters is going to happen in bite sized snippets of 140 characters or less and you need to figure out what you can offer them to make them follow you on their cellphones.

You might say, "Hey Shabbir, haven't you been saying this for three years?"  Yes, I have, but this is the first year in a long while that all the tools to publish to people's cellphone are free and plentiful.  Between Twitter and TextMarks, anyone from the adequately-funded American Red Cross down to the Wichita Theater and Opera House can create a list and encourage people with cellphones to sign up.  Startup and ongoing costs to operate this list are basically zero dollars plus your time, which means that at this time next year, there will be a plethora of success stories that cost $0 to create.

Remember this is an experiment, and you need to be searching for answers to the following questions:

1. Frequency: What do I have to offer my supporters that is of such value that they will carry a cellphone that receives my messages 24/7?  How many messages a day or week will they tolerate?
2. Content: What is of interest to my audience?  Do they want timely 'breaking news' from me, or simply a reminder when there's something new on my website?  Do they want me to let them know when something relevant happens that I'm not directly writing about?
3. Action On-phone: How successful can I be in driving people to call a specific phone number, such as a donor phone bank?
4. Action Off-phone: What are the triggers that spur action away from the cellphone?  What level or urgency do I have to communicate before they go to their computers to act?  What do I need to do to put people at a volunteer or protest site?  How much notice is sufficient?

By this time next year leading organizations will have had 12 months of experimentation to figure this out.  The trick is that I don't think the answers are going to be particularly universal, and your mileage will vary significantly unless you're just wholesale stealing the ideas of direct competitors.  If you don't want to find yourself me-too'ing it, start a free Twitter or Textmarks list now and figure out what makes your audience tick.

For nonprofit professionals:
Apart from the advice above, which you should go and read over twice, my main focus at the CTIA show for my nonprofit clients was to track down representatives from the Mobile Giving Foundation.  The Mobile Giving Foundation staff were all over the NTEN show a few weeks earlier raising interest that they had a solution for nonprofits to raise money over cellphones without paying 40% processing to the wireless carriers and without giving up access to donor names.

I couldn't find any evidence of the Mobile Giving folks at the CTIA show because they didn't have a booth.  My staff said that they thought that an application link on the Mobile Giving website had disappeared off the website.  I contacted Mobile Giving directly and was told they are in a "startup mode", but they didn't answer my query about the disappearing application link.

If I were you, I wouldn't be holding my breath waiting for the Mobile Giving foundation to be the answer to your nonprofit's cellphone fundraising prayers.  I am still convinced that this will be the most powerful medium for fundraising over the next ten years, but I'm also a realist who's seen the wireless carriers kill many a pilot project that posed a threat to their business model.  Today many partners sell content over premium SMS and give the carriers 40% of that money back to the carriers.

For thousands of nonprofits to suddenly start processing donations at 10% or 15% instead of 40%, and receive mobile subscriber names would fundamentally change the business model for Premium SMS that the carriers have built. It could happen, but that would be such a sea change in how the carriers work that telecomm analysts across the country would all simultaneously snort soda out their nose.

I am hopeful and supportive of the Mobile Giving Foundation's goals, but history has taught me well.  Please refer to my advice above for how to spend time this year experimenting with mobile fundraising and mobile audiences and be ready to fill out the MG Foundation's application should they ever open their doors to the nonprofit world.

For the gadget freaks and new-ness junkies

The show was thin for new technology, a sentiment echoed in all the coverage, but I recommend three must-not-miss items from the show:

Yahoo! oneSearch with voice

Multiple mobile power users have told me they like Yahoo’s mobile search portal more than anyone else’s. Yahoo! unveiled their voice-input for search at the show and a review suggests it’s pretty good. Look for it to come out in the next few months, unless the Yahoo/Microsoft transaction gets too distracting.

Cradlepoint portable hotspot

If you’ve ever sat down somewhere with your phone and a laptop and thought, “If I could just get myself online through that cellphone I could be so productive…” then this is the product for you. It’s a portable wifi hotspot that gets you online through your cellphone. Speed is so-so, but when it’s that or nothing, you take so-so. (Read the Cradlepoint review at Engadget)

Everyone has an iPhone, and everyone wants to copy it

I’ve never seen so many iPhone owners in one place as I did at the wireless show, and that includes the time I had lunch in the Apple cafeteria with a buddy who works there.

Pretty much every hardware maker at the show that has an iPhone competitor coming out with a touch screen. However if you’ve seen the Apple SDK presentation you know that an iPhone is a complex device with loads of thought and hundreds of man-years of operating system architecture put into the operating system to drive the state of the art hardware. Adding a touchscreen to a clunky handheld device does not make it an iPhone, any more than adding a Ferrarri logo to a Prius makes it a racing car.

These phones will eat away at Apple market share a little, but the enthusiasm of independently developed iPhone apps later this year will make these me-too products suddenly unattractive. After all, who wants to write specialty applications for 20 handsets with 25,000 users each when instead you can just write for the iPhone and have an instant customer base of 10 million with a single application? 

The answer, of course, is nobody.

Still, some of these phones look pretty cool, and there will be interest in them for some time. Check these out at:

1. The Nokia Tube [Engadget review] 
2. The Samsung Instinct (Sprint)
3. The CECT T5

Conclusion
A number of businesses and human rights groups are pioneering Twitter and it's copycats to enable ongoing cellphone communication and a few companies are starting to experiment.  These experiments are costing them nothing except staff time and the lessons they are learning in the process are truly new and priceless.  2007 is the year you need to experiment with tools like Twitter that make it cheap and easy to reach people on their cellphone.

Everyone has something to say

I'm often heard telling clients, and prospective clients, that in today's media environment that you need to begin speaking, immediately, to your audience.  Your voice is unique, and everyone has something interesting to say.

If you were to tell me that a cheesemaker was going to start blogging, I would have imagined many things: details of food that goes well with their cheese, recipes, or slices of life from the dairy.  What I wouldn't have expected was video of watching cheese age.

And yet someone did exactly that and 1.7 million people watched it.  The video at cheddarvision is the 12 month time lapse of a wheel of aging cheese nicknamed "Wedginald".  The site trafficked 1.7 million viewers for the video over last year and most certainly gave the dairy far more brand recognition and sales volume than could have been purchased outright affordably.

Now that Wedginald has left the ageing room after being donated in a charity auction, the dairy has to find a new way of attracting attention.  Justifying a project to keep 1+ million viewers shouldn't be too hard.

Remember this next time someone asks you if you should start blogging.  Do you have less to say than a wheel of cheese aging?   Because if cheese aging is interesting to 1.7 million someones, then on your worst day you're probably scintillating.