Originally published on The Trade, April 2017.
With the rise of social media as a political tool, it seems elections may never be the same again. Social media has become a vital tool for political campaigns in pushing messages out as widely as possible, but can also be a campaign’s biggest stumbling block if they get it wrong.
This shift to social has fundamentally changed the way investors approach political events. While traditionally the data distributed by major polling companies were a key way to determine which party or individual would win an election, and thus which investments may be more likely to benefit, recent events have shown the weakness of this approach.
Going back as far as the UK general election of 2015, polling companies have experienced a series of failures. In the UK, it was widely predicted that there would be a second hung Parliament, with no outright winner, though the Labour Party under Ed Milliband was predicted to be the largest party by pollsters. But in the end, Labour suffered a crushing defeat, with the Conservative Party taking a majority. The pollsters had failed to predict the rise of the Scottish Nationalist Party in many of Labour’s traditional safe seats.
It happened again with the UK’s referendum on leaving the EU in 2016. Predictions indicated that the country would vote to stay in the EU by a comfortable margin, but on the day it narrowly voted to leave.
“The ability to leverage social media, specifically Twitter, to help gain insight into the probable results of major elections is an incredible advantage for leading financial institutions,” said George Goldman, vice president and head of finance sales at alternative-data provider Dataminr.
Polling companies would again be embarrassed later that year when Donald Trump swept to victory in the US presidential election. While his opponent Hillary Clinton won the popular vote by over three million ballots, the pollsters did not account for her losing key industrial states which enabled Trump to win the electoral college.
It would be wrong to think of social media metrics as a pure replacement for polling, but they can provide a view into blind spots that pollsters may miss. While the Clinton campaign was distracted with Trump’s anti-immigrant rhetoric, real voters on social media were bemoaning the loss of factory jobs in their cities and their stagnant standard of living.
Social media can also give us some of the most up-to-date information as soon as it happens. Many polling stations will post their confirmed results on social media before they reach any traditional media outlets. This was seen extensively during the recent Dutch elections. Indeed, many of these media outlets simply regurgitate what they have seen on social media already, so investors may be better off going straight to the source.
“Services such as Dataminr provide a unique perspective into the views and beliefs of the local electorate,” Goldman said. “If, as a financial professional, you can have your finger on the ‘pulse’ of events as impactful as the most recent Presidential election or British Referendum vote, then you have a critical edge.”
The latest big political event is the French Presidential election, with first round voting yesterday putting two outsider candidates who have driven their campaigns with a significant social media presence making it into the final poll. The two candidates, the right-wing populist Marine Le Pen and independent centrist Emmanuel Macron, are not affiliated with the major parties yet have used social media to get their message out there. As a potential early predictor of a decision that will dictate both the future of France and the EU, social media is something investors cannot afford to miss.