The behemoth of social media, Facebook came into existence 10 years back this week. Google become a public company that very year following the novel IPO after the dotcom imbroglio during late 1990s. Investors in the world’s largest search engine would have been quibbling since prices rose with the entry of shares into the market. Auxiliary IPOs have had mixed results with potential future profit scope and the strength of a perfect global branding for buoyant share prices. However, real world numerics like profit or loss are not that remarkable in this regard.
As the gravy train speeds on without halting, experts wonder whether small private investors should put their hard-earned money on technology and social media platforms. Manager of AXA Framlington Global technology fund, Jeremy Glesson thinks that social media is a composite pack. If LinkedIn is considered to be a social media ambit, it is indeed a great investable domain for some time. However, it is categorically perceived as a business implement, especially in the recruitment fold. It is used extensively by recruitment consultants and executive search companies, who pay to obtain access to data on the avenue. AOL’s procurement of Bebo and News International’s investment in MySpace have been broadly documented as both eventually proved to be poor or futile investments.
Other glitches elucidated by Mr. Gleeson include Groupon and Zynga. Facebook’s own path was controversy ridden. It went public in 2012, with a “much touted deal”, which enhanced price ranges and constituted countless errors made by the company for their floatation. This includes delivering profits warning between a deal road-show or belligerently pricing a deal which eradicated the prospect of near-term upside and propelled missing expectations in their first quarter as a public limited corporation, he said.
He however asserted that Facebook has become “investable.” Several results establish the fact that they were able to monetize and concretize on mobile traffic without affecting the experience of by mobile users. Gauging subscriber growth alongside revenue growth concurrently gives a solid backdrop for investments. Twitter’s IPO provided a smoother passage to consumer market than Facebook. This shows in share price generation. The key to social media’s triumphant march had been advertising. As technology manager of Polar Capital, Colin Moar puts it, “Facebook’s cost-per-click growth and ad load increase between quarter two and quarter three last year were huge, and the numbers were the sign bulls had been waiting for to prove the case for social media.” Most interestingly, social media, through the expansion of twitter Vine and YouTube will snatch advertising from television, he adds. As of now, both Facebook and Twitter are making a fraction of the income made by long-established, big-shot companies. Advisor at Chase de Vere, Patrick Connolly opines that this sector is still ripe and unproven. It will not be feasible for private investors. They are conscious of the social media stocks getting over-hyped. Investors might get ensnared and end up dishing out money that company fundamentals can never justify, he said. Hence, experts urge caution.