In today’s hyperconnected world, social media has become an indispensable tool for monitoring public sentiment and identifying potential risks. Social media platforms like Twitter, Facebook, LinkedIn, YouTube, and Reddit are not just hubs for individual expression, keyboard warriors, and armchair psychologists but also arenas where corporate reputations are built or broken in real time. A prime example of this dynamic is the recent PayPal Honey controversy. The release of a single YouTube video plunged the company into disrepute almost overnight, highlighting the critical role of social media monitoring in managing corporate credit risks.
The Honey browser extension controversy explained
Honey is a free browser extension that claims to automatically search for and apply coupon codes and discounts to a shopper’s cart at checkout with a single click. Launched in 2012, the company’s free-to-use status and promise of potential savings made it a popular browser extension with online shoppers. It quickly amassed millions of users and millions in venture capital funding before being acquired by PayPal in 2020 for $4 billion. The company’s marketing strategy relied heavily on being promoted by popular content creators and influencers on various social media platforms. The influencers were compensated for their promotions. Shoppers were saving time and money. Merchants were happy too since the extension reportedly helped reduce shopping cart abandonments. In short, a win-win scenario for everyone.
Or, was it?
In a now-viral video released in December 2024, MegaLag, a YouTuber known for his investigative exposés, accused the company of ripping off influencers and shoppers alike. The video accused Honey of hijacking affiliate links, redirecting credit (and compensation) from influencers who drive traffic to products on a website to links that attribute the credit to Honey instead. In other words, Honey was allegedly pocketing affiliate commissions that belonged to influencers. The video further alleged that Honey collaborated with merchants, enabling them to dictate which coupons were displayed to users. Supposedly, this practice concealed coupons that offered higher discounts to shoppers.
The fallout from the video was swift with many high-profile creators dropping the company as a sponsor, vowing never to work with them again, and editing out Honey-sponsored segments from previous videos. More alarmingly for the company, it reportedly lost 3 million subscribers almost instantly and is now facing two class action lawsuits. Although the backlash is still in its early stages, it has the potential to cause long-term financial repercussions for PayPal, which was already grappling with a decline in stock prices.
Social media monitoring – why it matters, opportunities, and challenges
We live in an age where reputational and financial damage can occur at the speed of tweets. Silicon Valley Bank was on the receiving end of this reality when viral online panic led to its collapse in mid-2023. On the other end of the spectrum are companies such as AMC, GameStop, and Hertz that have benefitted from this phenomenon. Here, viral online support sent these company’s stocks surging, bringing them back from the brink of collapse. So, it is clear that social media has the power to make or break a company.
This represents both an opportunity and a challenge for corporate credit risk managers.
The opportunities
Detect Early Warning Signs
Social media monitoring helps identify early indicators of financial distress or reputational damage. For example, Pink Energy, a former powerhouse US solar energy provider, shut down in September 2022. However, in the two years leading up to this event, the company struggled with a significant increase in customer complaints and critical discussions on Reddit. These paved the way for several adverse news reports and state investigations. As such, the company’s social-media-related turmoil was a precursor to its financial troubles, and monitoring these sites would have helped risk managers anticipate the fallout sooner.
Understand consumer sentiment and industry trends
Platforms like Twitter and Reddit are often where consumers voice their opinions about companies. Negative sentiment can lead to reduced consumer confidence, lower sales, and ultimately financial instability. This was the case with companies like Laurel & Wolf, an online interior design marketplace that collapsed in 2019. The company faced a barrage of complaints from both customers and employees who expressed their frustrations on social media and other review platforms. Combined with unrestrained marketing efforts, this ultimately led to the company's downfall.
Proactive risk management
Social media monitoring can provide real-time insights into corporate credit and counterparty risks. Traditionally, such insights could otherwise only be gained from past financial statements – a time-lagged approach that often leads to delayed risk detection. It also provides valuable insights that traditional monitoring would have otherwise missed. For example, factors such as leadership stability and workplace practices can greatly impact a company’s future creditworthiness but are hard to gauge through financial statements. Digital data monitoring can uncover such insights, giving risk managers the information needed to take proactive steps that safeguard their corporate portfolios.
The challenges
Data volume
According to the latest Data Never Sleeps report, over 350,000 tweets are posted on X and almost 300,000 status updates occur on Facebook every minute. And these are just the numbers generated from 2 social media sites. For corporate credit risk managers overseeing large portfolios with thousands of companies, sifting through this mind-boggling amount of data and looking for relevant information can be overwhelming, even with keyword searches. And, for smaller organizations, the time-and-resource-intensive nature of the task may outweigh the benefits.
Data quantification
‘If you can’t measure it, you can’t manage it’ is an oft-quoted management principle. Social media data is unstructured and comes in various forms making standardized measurements and comparisons tough. The data is also often subjective, biased, and incomplete. Extracting meaningful information from all the noise requires time and domain-specific expertise, resources that may be scarce for risk personnel who are usually time-crunched and more familiar with financial jargon.
How can corporate credit risk managers leverage social media?
First comes smoke, then comes fire. Social media monitoring can alert a risk manager of this smoke. With Honey, the MegaLag video wasn’t the first instance where the company's practices were scrutinized. Old tweets, videos, and forum discussions on the topic have since resurfaced, signaling underlying issues for the company. So, integrating this analysis into existing risk management frameworks can help a risk manager stay ahead of the curve.
Given the complexity of the task, the best way to do this is to use AI-powered tools such as TRaiCE that can easily track mentions of specific companies, products, or individuals across social media platforms. The TRaiCE algorithms are trained to identify financial contexts within this unstructured data, providing valuable insights for risk analysis and uncovering emerging risks. It also quantifies this data based on sources into time-series-based scorecards that risk managers can use to detect subtle changes in sentiment over time or make comparisons.
Conclusion
Ultimately, leveraging social media analysis is all about giving corporate credit risk managers a holistic and proactive view of portfolio risks. The PayPal Honey controversy highlights the growing need for this in an increasingly interconnected world. By leveraging advanced tools and integrating social media insights into broader risk management frameworks, risk managers can protect their organizations from potential crises and gain a competitive edge.
Need help leveraging social media? Contact us at info@traice.io or schedule a demo with us today! Our team would be happy to talk to you about implementing a pilot project at your organization or give you a free walkthrough of our platform.
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