Investors are returning to social media stocks in a big way. Social media stocks are relatively new - they did not even exist back in 2000, when the Nasdaq first topped 5,000.Now, though, they are here to stay and they're growing rapidly as investors flock to the space. Humans are social creatures, and naturally, social media companies stand to benefit from creating social platforms online. In today's world, social media companies are part of our daily lives - most people can hardly survive without them. The fact that they are relatively "new" bodes well for the space, and is very healthy for both Main St and Wall St.
I love innovation, and I believe that it's one of the strongest components of our economy. Social media stocks encompass that spirit. The fact that they are extremely popular bodes well for the space. My favorite names in the space are Facebook (FB) , LinkedIn (LNKD) and Twitter (TWTR). I also like the social media ETF (SOCL), for those that want broader exposure to the space.
LinkedIn: Business Networking Online
LinkedIn is the strongest stock in the group, and the company directly benefits from being the largest business-related social media platform in the world. The company is in a unique position, because it is the only major social media platform that is able to charge both its users and advertisers. Most social media platforms are free - their goal is to attract as many people as possible. Once they build a large "audience," they can sell ads to people looking to reach various demographics within that network. Since LNKD is a business networking site, it is able to offer a free service to get people in the door, but it is also able to charge premium services - for more advanced users. Personally, I have quite a few new people reaching out to connect with me on LNKD a few times a day (same with TWTR)! The service is great, and from where I sit, the stock is, too.
Facebook: Connecting The World
Facebook is firing on all cylinders. The company's CEO is brilliant, and is in fact the current generation's Steve Jobs - it's that simple. Facebook stumbled when they first went public in May 2012, but quickly made their way through the normal growing pains, and today they are trading at new all-time highs. The company, smartly, is expanding into other businesses and offering advertisers a great low cost solution to reach billions of people across the globe (at a very affordable rate). The stock clearly looks like it is heading higher from here. The FB LNKD relationship reminds me of Apple and Microsoft in the 80's and 90's. During that period, Apple positioned itself to reach consumers and Microsoft appealed to professionals.
Twitter: Let's Chat
Twitter is setting up nicely to breakout and rally back to its IPO highs. Twitter allows you to instantly join any conversation in the world without having to "share" too much personal information. Essentially, TWTR took Facebook's status update and created an entire platform that allows people to express themselves without showing pictures, or sharing too much personal info.
Human nature tells us that people love to talk about themselves - in essence, the primary reason why social media stocks are poised to go much higher from here.
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