Online annual reports are the future. But after this year’s reporting season, how well are they evolving? And will they ever see off their printed counterparts? Neil Gibbons reports

The death of print? Corporate communicators won’t stand for it. Amid today’s cold swarm of binary, the annual report is a tangible manifestation of the brand. Unlike the many collections of zeroes and ones, printed corporate reporting allows for a physical interface with the brand – its shape, size, weight, and texture help to embody and differentiate the organisation behind them. And more importantly, audiences will be loath to see the back of the printed annual report.

Actually, they won’t. A survey this summer among 50 global fund managers and brokers by SAS with Thomson Reuters determined the most useful ongoing source of company information among investors to be – guess what – the online annual report.

In fact, since the Companies Act of 2006 decreed that UK companies were no longer obliged to send a printed version to all shareholders, the bell has been tolling for printed annual reports. Expensive to design, print and mail, some expected them to go the way of dodos and Betamax videos. And yet they remain.

And instead of funneling all their resources towards the cutting edge of online reporting, companies’ appetites for innovation seem to be slightly muted as a result.

Readability is one factor, even today. In July, Jacob Nielsen of the Nielsen Norman Group tested three different e-book methods – the PC, the Kindle 2, and the iPad – and then compared them to reading a regular book.

Nielsen found that those reading the e-book version were as much as 10% slower than those who read the printed version. Those who read the story on the PC took even more time, and it universally rated by participants as the worst way to read. Some said reading on a PC felt like being at work.

Investment audiences have more specific hang ups about the move to online reporting. “The shortcomings of an online annual report are the same as for the web as a whole,” says Thomas Rosenmayr, CEO of Austria-based agency Nexxar. “There’s no commenting as on a paper report. There are work-around ‘notes functions’ but these will never be as convenient as simply taking a pen and putting your thoughts onto the paper you’re holding in your hand.”

But, says Richard Carpenter, managing director of reporting agency Merchant, online reports also pose headaches for the reporting company. “They are time consuming to put together and generally not the main focus of the reporting project. In terms of content, they are too big for the web, with the pervading online trend towards fewer words. They’ve become a commodity product which means they suffer from small budgets. They lack current technologies used in meaningful ways to improve the experience. And clients don’t understand the technology. They get hung up on things like ‘the fold’.”

Knowing what to focus their budget on is a clear challenge, agrees Henry Sanford, digital client services are tight the online report can be seen as an easy casualty, when actually it’s the most cost effective way of reaching a much wider audience,” he says. “A far better solution is to focus the online budget on the key parts of the report that add most value to the communication.”

The other natural driver would be demand from shareholders. “But there is still a challenge in terms of informing shareholders what their options are for receiving corporate communications,” says Sanford. “Many are perhaps unaware that there are alternatives to the printed report. Poor e-communication campaigns have meant shareholders have not been shown the benefits of signing up to e-communications.”

This combination of poor process, traditional constraints of the online medium and insufficient appetite means it’s too soon to administer the last rites to the printed report.

So how much longer can they last? “Hard to say,” says Carpenter. “Print runs have come down dramatically in the past four or five years which I believe is more representative of the volumes most companies now want to publish, so I doubt the next few years will see the printed report removed altogether. Print will always have its place not only as the document of record but also because designing an annual report only for online is an entirely new process, one that few agencies could do easily.”

At the end of the day, he adds, there’s been “little engagement from corporates to actually understand what form their stakeholders want the report in.” 

Yet a 2008 report by WithumSmith+Brown into the value of annual reports and how primary readers perceive them found that eight out of 10 investors and analysts prefer a printed annual report over the online version. 

The bottom line, WithumSmith+Brown found, is that investors and analysts prefer the printed annual report while also expecting the annual report to be online. 

Black Sun recently conducted a poll of business leaders and communications specialists that asked how long they thought the printed annual report would survive. Some 50% responded ‘indefinitely’; 36% gave it a decade; while 14% opted for five years.

“It would seem there is still a future for the printed corporate report, despite the myriad of communications platforms that are opening up all around us,” says Sanford. “The business community still likes the palpable materiality of a printed document, with all the security and integrity that this medium guarantees.”

Rosenmayr’s prognosis is even more positive. “I don’t think printed reports will die,” he says. “Each media has its advantages. I think we are just about to leave the status where people think only of print.” He believes that the question will be how to get the best from print and online at the same time, “each one influencing the other and each channel focusing on what it can serve best.”

Take a look around you this year, and you’ll see that the remaining years of the printed report – whether that be a death rattle or the start of a long dotage – haven’t actually dampened innovation in the online medium. In fact, recent reporting seasons have seen companies begin to grasp its potential.

Carpenter has observed better use of technology, a better understanding of audiences and what they actually want, a greater focus on digital (and realistic budgets to improve the product) and greater innovation from agencies to come up with better ideas about how to distribute the content.

More specifically, while encouraged to see “HTML conversion of annual reports now well established as the best choice for implementation of annual reporting information”, Rosenmayr has seen even greater innovation with the integration of social media (using video and share-it tools) and multimedia such as Flash and video.

Sanford also welcomes this. “The use of supporting information outside the printed report is being used to support the reporting information,” she says. “These are great ways of presenting contextual information alongside the reporting information.”

But not all changes are welcome. Rosenmayr has been surprised by the rise of ‘hybrid HTML reports’ in which important parts like Notes are incorporated just as in a PDF.

“This is a development that took place exclusively in the UK and USA and comes from bad advice by vendors who want to maximise their income along with existing budget constraints. Of course it is convenient to leave out a big portion of content and add some cool features like video that dazzle users and clients.”

But at the end of the day, he says, the online annual report is a piece of communication that professionals like to work with: searching, downloading tables, simply getting information. In many hybrid reports, this information is missing. Search is also hampered as the PDF notes are not included in the HTML search.

Communications consultancy The Group produces an online reporting directory, which provides links to the annual reports of the largest companies in the UK, Europe and the US for the last three years. The directory also indicates which format companies have used so users can see who offers flexible, functional web-based reports and who simply provides a PDF version for download.

It has found that, between 2006 and 2008, the number of HTML reports offered by FTSE 100 companies increased by almost 100% – from 31 to 60. As HTML reports increased, PDFs fell correspondingly, from 57 in 2006 to 30 in 2008 – a reduction of 90%. (And it appears that the UK is at the vanguard. A study last month by Nexxar found that 67% of UK companies think HTML is the best format for online annual reports. Only 2.5% of French companies felt the same.)

The Group puts this down to a combination of regulatory circumstances, environmental imperatives, the benefits offered by online reporting and, despite the vocal traditionalists, pressures from investors and other stakeholders.

“And about time too,” writes Frank Harkin, content strategist at The Group. “This increase in HTML reporting means that companies will no longer stand out simply by having a web-based report and will need to be increasingly creative about how they report online.”

Indeed, as companies emerge from post-crunch budget crackdown, expect to see them explore the boundaries of online reporting and see where innovation lies.

As well as a greater emphasis on social media integration, Rosenmayr expects online reporting to go quarterly. This will likely signal the end of ‘line in the sand’ reporting, making the annual report a live account of corporate performance.

And the introduction of XBRL looks likely to be the real spur for innovation. “This is gaining momentum across the world now that the US has mandated its company filings and the UK HMRC requires the tax filings to be filed using XBRL,” says Sanford. “The next step will be, how can non-financial information be tagged in a similar way?”

Perhaps we won’t mourn the eventual death of printed reports at all.

 

 

 

Tullow Oil (UK)

Recognition: Winner of the IR Society Award for best annual report

Containing key messages from the report and supporting links to relevant information, the home page is “working harder” as a portal which allows users to go directly to the information they want.

Additional tools and functionality include a print basket, PDF Download centre and Excel downloads.

Throughout the report, related links are provided to give the user supporting information both within the report and from the corporate website. “This is an effective way of directing users to other supporting information such as the sign up for ecommunications and glossary content,” says Black Sun’s Sanford.

 

 

 

 

Bursa Malaysia (Asia-Pacific)

Recognition: Ranked #1 for Asia-Pacific in the IR Global Rankings

“The rankings helped us benchmark ourselves against the best out there,” says Zul Mustafa, head of strategy management at Bursa Malaysia. “We saw a big gap, comparing our then PDF-loaded copy to some of the bigger names’ online annual reports. So we first moved away from PDF to a simple HTML version, before moving to a site version featuring both Flash and HTML.”

Next year, Bursa Malaysia is hoping to build in

greater interactivity. “We want our readers to be able to play with our numbers, turn them into charts. Our

objective is to ensure it is user friendly and interesting. While we may want to incorporate the bells and whistles, we need to ensure information is communicated in an efficient manner.”

 

 

 

 

 

 

TUI Travel (UK)

Recognition: Winner of 2008 Strategic Value award for best online annual report

TUI Travel wanted to ensure the user experience was in line with its brand values.

“Key to this was the structuring of the report in such a way that users were never faced with overwhelming quantities of text,” says corporate communications director Lesley Allan. “Instead we chose to invest greater resources in the functionality of the site (concertinas, for example), so users remain in control and can explore the report at their own pace – a user-driven journey through the report.

“TUI Travel’s reporting suite for 2009 was the first in the FTSE 100 to genuinely treat the online report as a primary comms tool. It was a natural step to prioritise the online annual report and align our reporting with our sustainable development agenda by reducing our print run.”

 

Nexen (North America)

Recognition: Ranked #1 for North America in the IR Global Rankings

“How do we take a large document that’s written for print and repurpose it for the web in an engaging, fresh and user-friendly way?” asks Paula Onysko, communications consultant for Nexen. “And how do we put the web user in the driver’s seat?”

Working with Nexxar, the company converted the report into HTML format on a microsite with tools to enhance usability including searches, download and print managers, graphing tools, and Excel downloads of all the numeric tables. “These tools put users in control of the information they wanted,” says Onysko.

She promises even greater online emphasis in the future. “The ultimate goal with the annual report is to design our processes from the start thinking ‘web first’.”