Making investment decisions based on insight from Twitter

Predicting individual shares and stock market movements is one of the oldest professions and there are people far better qualified than me to assess the validity of the models used. Automating this process is also not new.

Tech-savvy traders have been sourcing data from reports, press releases and corporate Web sites for years. Genuine advocates of automated predictive models use powerful computers to speed-read content and then letting the machines decide what it all means for the markets.

However, using Twitter is still a relatively new phenomena. In this and my next blog, I will explore how two studies I have come across can inform our thinking on social media and share price.

Twitter mood predicts the stock market. (Johan Bollen, Huina Mao, Xiao-Jun Zeng)

The Bollen et al study results indicated that the accuracy of DJIA predictions from Twitter can be significantly improved by the inclusion of specific public mood dimensions. They claimed an accuracy of 87.6% in predicting the daily up and down changes in the closing values of the DJIA and a reduction of the Mean Average Percentage Error by more than 6%.

The study investigated whether measurements of collective mood states derived from large-scale Twitter feeds are correlated to the value of the Dow Jones Industrial Average (DJIA) over time.  They analysed text content of daily Twitter feeds with tracking tools that measure positive vs. negative mood and mood in terms of 6 dimensions (Calm, Alert, Sure, Vital, Kind, and Happy).

Now I’m not convinced by this study.

It seems to me, if the mood is being reflected in the Twittersphere, everyone probably already knows how it will move markets, so there isn’t a whole lot of competitive advantage. Unless of course, it’s insider information, in which case and putting aside the regulatory and moral minefield that comes with this hypotheses; Investors would need a high risk tolerance to act on it without verification and the opportunity cost of seeking verification would render the Twitter news obsolete.

If that isn’t enough to be wary of, as a researcher posted on Quora “There's also a paradox: once there are enough tweets about the inside information it's no longer really inside information. Twitter is probably best used for assessing the herd mentality. One strategy might be to look at all the dumb stuff people are saying and then bet the opposite.”

In my next blog, I will look at the sales effect of the volume of positive, negative, and neutral online communications captured by social media monitoring technology and classified by automated sentiment analysis.

Social business, not social media

A conversation that seems to repeat itself with my colleagues from our industry is: How many corporate twitter feeds or Facebook pages are the right number? It suggests a certain amount of indecision that it keeps boomeranging, which is never a good thing

More importantly that it comes up at all. The principle of marketing engagement, and indeed social is quite simple. It’s niche. Social is all about communities that share an interest, no matter how fleeting, coming together to discuss it. Successful marketing is based on focusing propositions to as specific customer group as possible. So the principle is simple, you need as many channels/feeds as there are identifiable, substantial and genuine interest groups.

The harder question then becomes: Should everyone be engaging with customers through social?

Well, probably not. Not everyone at my cable company answers my calls – that’s obvious by how long I have to wait on hold. However, we will all need to be able to engage with our colleagues, suppliers and other stakeholders using social media platforms.

Not everything is needed right here, right now, but as demand increases it will need to be.

A looming demand is increasing in our enterprises that mean that the whole business needs to be social. That is, have access and be adept as using the different tools and platforms. That means a single interface for managing multiple platforms, at the desk and on the go. With a single view of the customer, a simple robust access system with all the knowledge of the business at the user’s finger tips.

Now that’s what I call a really hard question: How do you build a digital business like that?

Delivering a fast customer experience isn’t everything.

Earlier in the week I headed to Vision Express for my bi-annual eye test. Having just come back from fabulous family holiday and dropped my daughter at her new ‘big’ school I was in a pretty buoyant mood.

The quality of the eye test, the price charged and the speed at which it was executed were exemplary. It should have been, the optician’s was empty and I was the only customer. My issue is not with the service, but with how it left me feeling.

Now my wife accuses me of being a demanding customer and expecting too much. You may agree, but before you do, let me explain why I don’t think I am.

During the whole time I was there, none of the staff I interacted with smiled at me. When I was asked how I was, the inquisitor wasn’t really interested in the reply. Beyond the factual questions about my spectacles, no one asked how I felt about them or how I chose them. No one asked me what I liked or disliked about them. I was treated like I was on a conveyor belt to be processed as quickly as possible. I was left feeling like an inconvenience, someone to tick off the list.

Treating customers quickly and efficiently is important, and I would guess that most customers would value it. I know some people that would value it above all else. However, I was looking for a little more. Some small talk, a little chat about my holiday, the weather - the whole back to school phenomena.

Customers are not just units to be processed quickly. They have feelings and if they didn’t branding wouldn’t work. Taking a little time to connect with me would have transformed how I had felt about my relationship with Vision Express and I would have considered them for my new sunglasses.

Consider how differently this blog would have turned out and the value of the order they have missed out on.

More of the 6 fundamentals of enterprise social media

                                            Part Two – 4 to 6

So to recap briefly on Part One; We have a shared understanding that our enterprise is in social media so we put in place our governance team. The first thing the governance team was articulate the endpoint and how it is measured and set out their road map. We defined what we wanted from a social media platform and procured it.

Managing expectations

While all this was going on we were managing eh expectations of the business.

This means explaining to the senior leadership team what is going to happen next, how you will report on it and what their role is in this. It's worth working with the Corporate Affairs chief on this, they have been through it all before with Execs for PR.

You explain to your own staff what you are doing and how they are involved. This means setting out a simple social media policy. A paragraph should do it. Explain why what they say and do in social media can impact the brand and them in the long run. HR and Internal Engagement should be able to help with this.

Speak to your customers about what you are doing, what you are providing and why that’s good for them.

Make sure everyone on the social media leadership team understand what role social plays and ask them to articulate to each other, their teams and their senior sponsor how social fits into their channel strategy.

In all cases, ask for feedback and act on it.

Reporting and analytics
Firstly, these are two different things. Both have a place and both need to be addressed contentiously and with stakeholder involvement.

Reporting, or MI, is regular time based activity. Weekly or monthly reports that set out volume data how many etc. But most importantly, what are the most important topics, users, channels and how are they and their sentiment changing with time?

Analytics is still evolving and you may need external help to get your head around this to start with. Don’t let that put you off, this data is dynamite.

Social media analytics will help you to become conscious of the conversations about your brand that your organisation is currently unconscious of. It will allow your business to understand real sentiment around share price. Or, imagine tracking responses and views on an above the line campaign in almost real time.

Not just counting the conversations and reporting some sentiment like in the weekly reports, but analysing unstructured data to get behind how a social media crowd is responding the proposition, not just the presentation.

Analytics is not just an essential part of social media for enterprises; its power is going to help organisations that master gain a real and tangible competitive advantage in the 21st century. Maybe not in the next 2 years, but certainly beyond that.

Scale and depth
Now your enterprise has everything in place, it needs to scale it by embedding it in every part of the business and every market. This is what we call social business.

Social businesses that use social media to learn from and engage with their members will develop more consistent financial performance.

They will overcome reputation challenges easier, build more brand equity and customer loyalty through trust, see higher productivity through internal collaboration and continue to evolve to serve the communities around their brand: Customers, staff and shareholders.