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Is the New Generation of Financial Content an Opportunity or Threat for Investor Relations?

by: David Jackson March 26, 2008 | about stocks: ETFC / TSCM / YHOO

David Jackson

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Articles about stocks written by money managers, industry experts, or smart retail investors -- namely "non-journalists" -- pose opportunities and challenges for investor relations professionals. IR expert Elaine Stattler asked me about these issues in an interview to be published in the upcoming issue of Investor Relations News. Here's the full text:

Getting Visible:
An Interview with Seeking Alpha CEO David Jackson
Seeking Alpha is the largest source of stock market opinion and analysis on the Web. It covers more than 5,000 stocks, publishes over 160 articles per day, and has more than 400 regular contributors.

After only two years, Seeking Alpha is catching up to sites like TheStreet.com (TSCM). It’s the main provider of stock market opinion pieces to Yahoo! Finance (YHOO). It also just rolled out a partnership with E*Trade (ETFC), and is expecting increases in readership as the year progresses. From an IRO’s [investor relations officer's] perspective, this means that Seeking Alpha is heavily read by institutional and sophisticated retail investors - and they move stocks.

To find out how IROs can best take advantage of this expanding resource, IRN recently interviewed Seeking Alpha chief executive officer, David Jackson.
IRN: How can IROs use Seeking Alpha proactively for investor relations?
Jackson: There are two ways to get your story out using Seeking Alpha. First, each quarter, we publish transcripts of more than 2,500 companies’ conference calls for free to readers. Those transcripts appear on Yahoo! Finance and are searchable by sector, by theme, and by keyword. If we don’t publish the transcript of your company’s quarterly call or investor conference presentation, and you want to raise your visibility in the investment community, call us. Second, we offer online question and answer sessions with our readers. We’ll ensure a courteous atmosphere where readers can interview management about their company.
IRN: What is Seeking Alpha’s relationship to blogs?
Jackson: We publish two types of content: our own news and transcripts, and articles from our contributors about stocks and the market. Many of our contributors are money managers, industry experts, or smart retail investors who have their own blogs. As a result, we’ve become the largest source of stock market blog content on the Internet.
IRN: Most IROs are extremely suspicious of blogs. Bloggers are often anonymous, they don’t perform proper fact checking, and they might publish negative articles to manipulate a stock.
Jackson: Those concerns are legitimate, but they need to be seen in context. The financial media landscape is changing. For years, journalists working for the leading financial Web sites have pumped out huge volumes of articles in an attempt to cover thousands of stocks. Those articles are often rewrites of press releases that add insufficient value. Many readers are sick of that. They want something more thoughtful, opinionated, and actionable. That’s why our opinion and analysis articles, some of which are from blogs, are so popular.
IRN: Just because blog content is popular doesn’t mean it’s safe or admirable.
Jackson: Correct. The key challenge is: How do you find the blog articles that are high quality and high integrity, and filter out the articles that are low quality and low integrity? This challenge is exactly the focus of Seeking Alpha. We have a team of editors who review every article submitted to us. We ascertain that the authors are legitimate, that they disclose positions in stocks they’re writing about, and that their articles are high quality.
IRN: Isn’t it a problem that your contributors may own the stocks they’re writing about?
Jackson: We like the fact that our contributors have “skin in the game”. Investors who own stocks they’re writing about have typically done a ton of research, and they care a lot about whether they’re right or wrong. They write articles that are opinionated, actionable, and help other investors to interpret the news. As long as an author discloses that he or she has a position in the stock under discussion, isn’t trying to manipulate the stock, and isn’t misrepresenting the facts or spreading baseless rumors, the risks are limited. We think that our contributors take positions in stocks because they believe the arguments in their articles, not the other way around. This, by the way, has long been recognized by the financial media industry. That’s why most Barron’s articles are based on interviews with money managers, and why CNBC frequently interviews investors.
IRN: Seeking Alpha often carries negative articles on stocks. What can a company do if Seeking Alpha publishes a negative article about its stock?
Jackson: First, check the article for any material inaccuracies. If you find any, contact us immediately and we’ll correct the article. Second, if you think the article has simply failed to do justice to the great things about your company and your stock, consider submitting an article in response, or request one of your shareholders to submit an article to us outlining the bull case for the stock. Our mandate is to be a neutral platform for the intelligent discussion of stocks, and we want to provide our readers with a range of opinions on each stock. Third, think about using Seeking Alpha more proactively for investor relations.
IRN: Thanks David. IRN will get the word out!
Jackson: Thank you!

Full disclosure: short TSCM. But not because I'm bearish on the stock; I think TSCM is a great company, I like the way Jim Cramer thinks about stocks, and I think they've done a great job growing their business. Rather, I'm short TSCM because I've spent the last three years building Seeking Alpha, and I want to hedge my stake in it. TSCM is the closest publicly-traded proxy to Seeking Alpha. Here are my views about hedging your job exposure.

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Related Stocks:

ETFC, TSCM, YHOO

This article has 22 comments:

Mar 26 12:19 PM
Maybe the success of Seeking Alpha is behind the decline in value of my TSCM shares. Which makes me wonder, who owns Seeking Alpha and would they consider a sale to TSCM?
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Mar 26 12:39 PM
PAD, I'm actually short TSCM (please see the disclosure at the bottom of the interview), so I'm not qualified to comment on this. But I think TSCM is a great company that has grown its business tremendously over the last year.
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Mar 26 01:36 PM
Once this site gets really big, I think it's inevitable that Seekingalpha.com will start to limit who can post stories on here. I really like the approach this site has taken...very democratic. Many times the comments following the article are better than the article.
I visit this site dozens of times/day! Keep up the good work SA people!

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Mar 26 01:38 PM
David,

You've done a great thing here. I know you're proud (as you should be). I just hope that you and your staff will never cave in to the pressures that bigger money will inevitably present.
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Mar 26 01:40 PM
Regarding the concern that some IR and investors have about Seeking Alpha's content, over time content from respected and objective authors rise to the top, while garbage sinks. As SA pushes to for massive readership, the community in theory will be self-governing.

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Mar 26 02:00 PM
David, is there any concern in regards to this commentary section? It's often filled with pretty venomous rants. Not that you want to edit peoples opinions, just wondering what your thoughts are about this section of your site?
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Mar 26 02:52 PM
Thank you all for your comments!

Zenalgorith and Mark -- thank you for your kind comments. Seeking Alpha is now 40 people, and this sort of feedback makes a big difference to us all.

David -- I think you're right that the community becomes self-governing. We're already seeing that in comments: the weaker articles get an immediate critical response from readers.

Wez -- Negative articles on stocks are a shock for many people, because the mainstream websites usually publish only news and positive stories on stocks. People just aren't used to an article saying that a company is in trouble or its stock is overvalued. But we want to publish those articles because (a) investors need to know when there's a case to sell as well as when there's a case to buy, and (b) if you're never negative, then your positive comments don't carry weight. Perhaps these reasons are why Elliot Spitzer forced the sell-side analysts to publish percentages for their buy, hold and sell ratings -- because he realized they never rated stocks a Sell.
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Mar 26 04:00 PM
David, I wasn't referring to negative articles on stocks, I appreciate those. I was referring to this commentary section, where people can post their thoughts, like we are doing now. I've seen some pretty ridiculous statements made by people who obviously have nothing constructive to add, other than to pan someone else's opinion.
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Mar 26 06:19 PM
Wez, sorry I misunderstood your comment. You're right -- comments can be a problem. The overall quality of comments on Seeking Alpha is excellent; readers often write a few paragraphs of really smart thoughts in response to articles. The high overall quality then makes what you called "the venemous rants" stand out even more.

You should see some interesting developments with comments on Seeking Alpha in the near future. One of the things we're developing is a system for readers to report abusive comments which we hope will go a large way to solving the problem.
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Mar 26 07:29 PM
I enjoy posting here and I take it as a compliment when I get comments. The comments here are generally very thoughtful and constructive. If you want negative comments, go to some of the message boards and mailing lists.

When I write about stocks, I often wish I could call companies for comments, but I don't bother because I figure the IROs won't talk to bloggers, even if I say I'm writing for SA as well as for my blog. And I'm not authorized to say I'm writing for SA. Is there any way you could create a class of contributors who are authorized to call and use SA's name to get in the door? I'm a professional business journalist, for example. And others here have similar credentials.
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Mar 26 09:29 PM
David, one of your contributors - Brett Steenbarger - taught me a grad class in counseling at Syracuse University almost 10 years ago. I thought it cool to see him writing articles for your website! I have an account with E-Trade and have owned shares of TSCM for 4 or 5 years. It's been a good money-maker for me. I also enjoy your writers' stories and beleive they are on par with the quality stuff I read at TSCM. Keep up the good work!
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Mar 27 03:01 AM
Donald -- that's a thought-provoking suggestion. In the meantime, what's to stop you calling an Investor Relations person and saying "I'm a Seeking Alpha contributor; here's a link to my author page on Seeking Alpha so you can see the my articles on the site"? That describes the relationship exactly as it is, and shows them that you are influential because you have a large readership on SA.

veckknows -- Brett Steenbarger is absolutely terrific, and I feel honored to have him as a contributor to Seeking Alpha. For those who don't know him, his bio and articles are here:
seekingalpha.com/autho...
and his blog is here:
www.traderfeed.blogspo.../

It's characteristic of what's going on in financial media that someone of his talent and experience is writing articles about stocks and the market. Investor Relations people are starting to realize that people like Brett are excellent writers with deep expertise, but don't fall into the traditional category of professional journalists.
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Mar 27 07:12 PM
"I'm short TSCM because I've spent the last three years building Seeking Alpha, and I want to hedge my stake in it."

Are you for real? That seems like a terrible way to hedge your SA long as the two are far from correlated. SA falls apart for one of a zillion reasons, your TSCM short won't save you. Plus you better have a HUGE short position if you want to hedge your full time job in a meaningful way. A better way to hedge would be to take money off the table and sell a stake to a strategic investor that can add value via distribution or some other way.
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Mar 28 03:35 AM
Yazz, I totally agree: TSCM on its own is a very imperfect hedge. I'm less concerned about SA falling apart than TSCM's stock doing fantastically well. The last year has been bumpy to say the least. :-)

Ideally, you want to short an entire sector to hedge your job exposure (or at least strip out your own sector from any broad index funds you own). In my case, I want to hedge against the risk of a sharp and prolonged downturn in the online advertising market. The problem is I can't find many stocks that do that for me, let alone a sector ETF.

Any suggestions?
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Mar 28 11:34 AM
David,
Thanks for the reply. I'd thought of linking investors relations folks to SA, but I can't guarantee that what I'll write will be published, which is OK. I'll try your suggestion now that you say it's appropriate. We'll see how it goes.

As for your hedge, isn't GOOG about as pure a hedge against online advertising declines as you could get? The problem with GOOG as a hedge is that it's like oil, it's enjoying a huge speculative premium, which means it might keep going up despite a collapse in online advertising. On the other hand, if online ad revenues begin to drop sharply, the stock could lose it's speculative support overnight, making it the perfect hedge.
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Mar 29 04:51 PM
Donald, thanks for your comments. On GOOG versus TSCM as a hedge: TSCM has the advantage that it's a much closer proxy to Seeking Alpha, because it's a publisher like SA and has exposure to the same advertisers as we do. (At least in theory -- if we do a better job selling advertising!) The downside is it's a relatively small company, and its performance can be moved dramatically by factors other than the ad market which are company-specific.

GOOG has the advantage that it's a better proxy for ad spending rather than company specific factors. The downside is that it's leveraged to the entire pay-per-click ad market, rather than the subset of advertisers who appear on TheStreet.com and our sites. And as you point out, GOOG might be carrying a significant speculative premium.
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Mar 31 11:13 PM
Not feeling the new TSCM look whatsoever -- too much clutter, too much emphasis on video. Seeking Alpha still has the cleanest, easiest interface around.

Also, anyone notice how Barrons revamped their look; they clearly took their cue from New York Times and Seeking Alpha as they were trying to figure out how to view articles in single page mode and make for clean printing....

Disclosure: contributor to SA.
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Apr 07 07:41 AM
David,

Great to see a thoughtful discussion on IR departments and financial blogs. Especially timely with the panel sessions about the web as a research source at last week's AQ Research conference (London) and today's Investorside Independent's Day conference (NYC).

On the buy-side, we find that our customers - analysts and PMs -generally feel some mixture of opportunity if they do, and exposure if they don't, when it comes to using web results and blogs in their research process. On the corporate side CFOs, IR, and even CMOs are also waking up to this opportunity. For every Jonathan Schwarz (Sun) releasing results to his blog before putting them on the wire, there are hundreds of CEOs trying to figure out how to leverage the web.

Penny

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Apr 07 03:52 PM
Thanks for your comment, Penny. Just read your blog post about FirstRain's deal with CapitalIQ and the value of financial blogs. Can you say more about what FirstRain does, and how it compares to Seeking Alpha?
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Apr 08 10:56 AM
Sure thing, David. FirstRain finds our subscribers (institutional PMs and analysts) qualitative data points and trends that they would not otherwise see -- from the web. We do this by generating daily reports that are personalized to the universe of each subscriber and collecting a database of searchable web results cetagorized by investment topics. More recently, we've added the ability to extract and graph trends in events like executive departures, refusals to comment, etc.

In terms of comparison to SeekingAlpha, we author no original content ourselves. We address the need for unique, pertinent data and perspectives with research models (software developed by our analysts) and technology to automatically glean unique data from the entire web in a bottom-up fashion. Whereas I believe SeekingAlpha approaches the problem by selecting the best of the best, and organizing it to make it impactful to the reader.

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Apr 08 11:07 AM
Thanks Penny, that's helpful.

On Apr 08 10:56 AM PennyHerscher wrote:

> Sure thing, David. FirstRain finds our subscribers (institutional
> PMs and analysts) qualitative data points and trends that they would
> not otherwise see -- from the web. We do this by generating daily
> reports that are personalized to the universe of each subscriber
> and collecting a database of searchable web results cetagorized by
> investment topics. More recently, we've added the ability to extract
> and graph trends in events like executive departures, refusals to
> comment, etc.
>
> In terms of comparison to SeekingAlpha, we author no original content
> ourselves. We address the need for unique, pertinent data and perspectives
> with research models (software developed by our analysts) and technology
> to automatically glean unique data from the entire web in a bottom-up
> fashion. Whereas I believe SeekingAlpha approaches the problem by
> selecting the best of the best, and organizing it to make it impactful
> to the reader.
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Apr 10 03:59 PM
i would short tscm because crammer is a self advertising, money squandering, schill. all he wants to do is sell his books and his subscriptions.
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