How Social Listening Could Have Helped Wall Street and GameStop
The biggest news in stock trading this past week was a community of Redditors who came together to send the stock price of GameStop, AMC and a couple others soaring. In the process, many professional investors lost a lot of money. (By a lot, we mean millions.) But could social listening have helped GameStop and Wall Street see this coming?
Before we answer that, let’s back up a couple steps. One, if you’re not super familiar with Reddit, it’s the seventh most popular site in the U.S. and essentially, it’s a massive collection of forums where people can share news and content or comment on other people’s posts. Reddit is broken up into more than a million communities known as “subreddits,” each of which covers a different topic. In this case, the community in the subreddit /r/wallstreetbets (about two million people) are the ones responsible for all the GameStop and Wall Street drama.
Two, if you’re still trying to understand what exactly happened with GameStop, here is an example of how Redditors influenced a surge in GameStop stock and why it caused such a problem on Wall Street. In a nutshell, the /r/wallstreetbets community banned together to buy up a bunch of GameStop stock at once, which quickly increased the stock price of GameStop. This, in turn, caused some professional investors to lose millions because they had “borrowed” the stock at a cheaper price betting the company wouldn’t do well, but now had to pay back the difference on the stock since it increased. There’s a lot more to it than that, but what you need to know is Wall Street is pissed, the SEC is confused on how to regulate this, and the /r/wallstreetbets community is celebrating because they think that betting on a company to lose is wrong.
Now back to our original question. Could social listening have helped predict this before it all happened? Yes, and it can help your company too.
How Could Social Listening Predict This?
Our experts took a dive into the data to see what has been happening on social media in the past seven days. We use a software that helps us track all online conversations and extracts data from those conversations that can alert us to spikes in conversation, customer sentiment and more. When we search “GameStop,” you can see the spike below in conversations starting Jan. 28 when all this went down.
Not only that, we can generate a word cloud that provides the most talked about words or “themes” as it relates to GameStop. You only have to glance quickly to see other trending key terms like “trading,” “stocks,” and “reddit.” The graph above shows that there isn’t normally a ton of conversation around GameStop, so if an alert was set up for them to be informed immediately of any irregular spike in conversation, GameStop would have known and would have been able to drill down into the data to see this subreddit conversation.
But what do you do with this information? Well, you can alert your senior leadership and PR teams and provide them with the highlights of the conversation so they can be armed with the best information to field any media inquiries, investor questions and more. Basically, it can help them save face and not be left scrambling.
Okay, cool, so it works with GameStop, but does it work with Wall Street? Let’s see.
Look at that spike in conversations on Jan 28 - 29. The theme cloud also shows “gamestop,” “wallstreetbets” and “stock.” So yeah, we think Wall Street could have used social listening to understand what in the world was happening with GameStop.
Could this intel have stopped all this from happening? Probably not, but odds are if Wall Street was using social listening to keep tabs on online conversations, they may have seen some of the conversations leading up to the massive GameStop buy and been more prepared. GameStop found themselves suddenly thrust in the news and this information could have also helped them quickly understand why and develop a strategy of how to react.
The main takeaway here? It’s extremely beneficial for a company to be actively using social listening to keep tabs on their brand. As you can see, it only takes one community (or sometimes even one tweet) to quickly throw your company in the internet spotlight. Knowledge is power, and social listening helps you be proactive instead of reactive so you can keep the upper hand and protect your brand.
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