What's the damage?

Measuring the impact of fake news on corporate reputation can act as a guide for companies to navigate a post-truth landscape.

 

The majority of the coverage around fake news has focused on its political influence, but this has begun to seep over into the corporate world. In the lead-up to the US presidential election, Trump supporters called for a boycott on Pepsi products over a quote its CEO never actually made. Twitter uses claimed Indra Nooyi, CEO of the soft drinks manufacturer since 2006, told Trump fans to “take their business elsewhere.”

In order to uncover more about the potential damage fake news can cause, we analysed the response to the Pepsi incident to understand: what effect does fake news have on corporate reputation? Can fake news impact on a company’s stock price? And how should media monitoring and analysis companies handle fake news?

What effect does fake news have on corporate reputation?

As this specific fake news story was very US-centric, we can analyse the immediate impact it had in Pepsi’s home market. During Q4 2016, Pepsi’s average sentiment score was slightly above neutral (5.5*), indicating that the company was generally perceived positively in this market.

However, on 13 November The Last Refuge published a widely shared piece stating that Pepsi’s CEO had told Trump supporters to “take their business elsewhere”. The timing of these reports directly correlate with a sharp dip in public sentiment towards Pepsi. This trough represents a 35 per cent fall below the average US sentiment score during Q4 and shows it was significantly ahead as the single most damaging incident for Pepsi during this period. This shows there was a clear impact on Pepsi’s domestic reputation, but how did the issue filter through to the company’s international reputation? If we extend the timeframe to look at Pepsi’s global sentiment trend across the full year, it is clear that despite the fake news incident only relating to a political issue in one country, it had such a significant impact that it was still the most negatively impactful event for the company throughout 2016. To put this into context, the second worst dip in sentiment was on April 18, when Pepsi announced their sales had fallen for the sixth straight quarter, which might be expected to draw more widespread concern and negative coverage. Due to the geographically targeted nature of the fake news incident, the global negativity on November 13 was softer compared to the impact in the US alone. However, the fake news related lowest point in Pepsi’s year was still 19.5 per cent below the company average. This shows that not only can fake news affect reputation; it can actually be the biggest single driver of negativity towards a company.

Daily US sentiment score for Pepsi Q4 2016

Aaron Reid

Aaron Reid is marketing director at alva, a business intelligence company that analyses millions of pieces of content every day, to help the world’s leading companies understand their key stakeholders’ concerns. Aaron worked in publishing for 10 years, with spells at the Financial Times and Thompson Reuters before moving into the brand insight and media analysis sector. At alva, he works with a team of content analysts to investigate and highlight the issues which represent the biggest reputational risks and opportunities for companies around the globe.