Companies Learning to Fear Online Rumor Mill
The music world was saddened to learn earlier this month that folk-pop pioneer Gordon Lightfoot had died at the age of 84. However, fans had practice mourning the loss of the Canadian crooner. In 2010, a hoax began circulating on the internet that the singer of hits such as “Sundown” and “The Wreck of the Edmund Fitzgerald” had passed away, which came as a surprise to Lightfoot when he heard the news while driving to a dental appointment.
Lightfoot is one of a long list of celebrities – Eddie Murphy, Sylvester Stallone, Julia Roberts – whose lives have been incorrectly ended by online pranksters, a testament to the power of virality. Now companies are also learning to be wary of rumormongering on social media.
Recently, a working paper by researchers at Stanford University and the University of British Columbia demonstrated that social media platforms, specifically Twitter, pose a potential risk factor for public companies. Another study cites the collapse of Silicon Valley Bank as an example of the phenomenon and recent Wall Street Journal reporting shed light on the role of Twitter in the financial institution’s downfall.
According to the Wall Street Journal article, negative tweets about the bank began to circulate in the months leading up to SVB’s collapse. As the volume of negative tweets increased, the bank’s stock price began to decline. Some postmortems have gone so far as to zero in on one February tweet from technology blogger Byrne Hobart about SVB’s capital position as the starting point for SVB’s eventual failure.
Members of the media can shoot down the latest Facebook report that Morgan Freeman has died (again) with a call to his publicist. Unfortunately for businesses, the mere existence of rumors they’re in trouble can be fatal. The threats go beyond runs on banks like SVB: Consider the role of social media in pumping and dumping meme stocks, for example.
Given the lessons we’ve learned recently about the capacity to spread misinformation online, it’s easy to see how falsehoods allowed to fester could impact a company’s ability to raise capital and maintain confidence among investors. It comes as little surprise, therefore, that the Securities and Exchange Commission has started monitoring social media platforms for signs of market manipulation and other illicit activities.
But for companies that fear getting caught up in the online gossip mill, they can’t afford to wait for regulatory authorities or Elon Musk and Mark Zuckerberg to intervene and separate fact from fiction. Virality fueled by social media can cut both ways. As quickly as misinformation spreads online, social media channels offer nimble tools for combatting it. Proactive companies will undoubtedly refine their best practices for detecting online trash talking and mitigating its impact on their reputations and bottom lines going forward.
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