Twitter has been on the minds and in the workflows of intelligent investors, IROs, and financial service providers for the past few years. Many have found it to be a useful tool for measuring market sentiment, gathering stock news, learning about competitors, and communicating with their professional peers. Unfortunately, the benefits of this medium are tied to many frustrations - after all, Twitter's goals are different than those of financial decision-makers. This disconnect leads to a few key challenges that create a barrier for many investment professionals who lack the time to foray into the depths of this data repository.
Although it is possible to uncover insights using Twitter's search function, it is often a messy and frustrating process. Obtaining clean and valuable results using this method requires a lot of time, effort, and knowledge about both social data and finance.
Let's take a look at some of the shortcomings of using the Twitter platform on its own.
1. Communication Confusion
One major problem arises due to tendency for people to use many different words and phrases to refer to the same company. Tweeters can use any of the following attributes when they communicate a message concerning a company.
- company handle
- company name
- product or service
Let's elaborate on the challenges with monitoring or publishing using each individually.
Only a small minority of tweets mentioning a company will include it's official Twitter handle. IROs and marketers will track their company's social media efforts by relying on this tag. Investors and consultants are using similar methods to monitor their clients' social media presence and that of the companies on their radar. Unfortunately, it is practically impossible to draw any conclusions from this exceptionally small sample of data. Often this is where those new to social media and finance will give up and make the mistake of concluding that Twitter isn't for them.
While a company handle is sometimes too exclusive of a criterion, typing the company name into Twitter's search box often results in the opposite problem. Search for the word "Lululemon" and it is clear that Twitter caters to a large audience of people with many different messages to convey. This presents a challenge to financial professionals who wish to monitor the investment chatter for public companies recognized by their consumer products or services.
In order to streamline market chatter, finance professionals began communicating using cashtags (a company ticker symbol preceded by a "$"). The advent of the cashtag made filtering out consumer data possible and made it easier for investors to hear the signals through the noise. Unfortunately, many of those "signals" are false positives and much of that "noise" can actually be quite informative.
The $RT Problem
To appreciate the problem with false signals consider the cashtag for the public company Ruby Tuesday. On Twitter, the letter string "$RT" is mentioned at an alarming rate. As you might expect, few of these messages concern the company's finances. Most of these tweets are "followback" messages used by individuals who want to increase their Twitter follower count. The "$RT" in this case, stands for "Retweet". You will encounter a similar problem while monitoring any public company with a cashtag that spells a word when the $ is substituted with a "S". When you consider multiple languages, there are many examples of these! To name a few: Trip Advisor ($TRIP), Walgreen Co ($WAG), Exall Energy ($EE), Unilever NV ($UN), etc.
Conversely, solely considering cashtags may result in an over-simplified picture of securities in financial markets. Market moving news concerning a company often presents without inclusion of a cashtag. For example, take a look at the following tweets from activist investor Carl Icahn that do not include cashtags:
2. Filtering Out $pam
As Twitter's audience grows, so does the number of clever spammers who populate feeds with useless data. Although Twitter has security measures in place that detect and eliminate robot spammers, there are many simple ways to dodge this blacklist. While searching through the Twitter platform for financial information you are likely to come across these annoying messages. This problem is obvious while monitoring cashtags. Some opportunistic marketers will include the cashtags of trending stocks in order to increase the distribution of their spam message. Twitter attempts to identify and eliminate these accounts but with over 5,000 posts per second across multiple topics and interests, the task is largely unconquerable.
3. Difficult Historical Searches
Anyone who has tried using the Twitter search function to find a tweet from the past, knows how frustrating this endeavor is. Without being able to narrow down the publish date of your results, you can find yourself scrolling for hours through a seemingly endless stream of more recent tweets.
4. Limited Analytics
As every financial expert knows, conclusions can't be drawn from your Twitter research without the ability to quantify your results. This is where a powerful social media management tool becomes essential to your workflow. Twitter, on its own, is a terrific platform for collecting and sharing data but if you wish to understand the significance of that data through numbers, it is best to turn to other options.
5. Compliance Consideratons
Professionals working in regulated industries are sometimes hesitant to Tweet as this somewhat liberated communication medium has, in the past, been shown to clash with compliance laws. Those who have tried to post a tweet linking to an interesting article or press release, know that it is difficult to include a disclaimer on a post with less than 140 characters. Although there are a few workarounds like inserting a link or comment in a bio or on the profile page, they aren't infallible solutions. Unlike many social media management tools out there, Twitter hasn't addressed this problem and has left many would-be users disappointed.
Don't take this the wrong way!
Twitter is an excellent source of content, data, ideas, and commentary. It has changed the way we do business and how we interact with celebrities, politicians, and peers. With this revolutionary task at hand, Twitter hasn't been successful at integrating into the workflow of all active users. Fortunately, developers have been busy solving these problems and custom designing tools for various industries. Finance is no exception. Innovative tools are available to help you streamline your workflow, avoid the above-mentioned frustrations, and benefit from this exciting communication medium.