Companies like Twitter, Facebook, and YouTube have found a way to attract these massive userbases, while the revenue was mostly driven by advertisements as these companies’ services are free, and “always will be”, as Facebook says.
Despite massive success in the market, there are still some regulatory uncertainties tied to some of these social media giants, so how profitable is investing in social media stocks?
Weibo Corporation (WB)
Microsoft (MSFT) [LinkedIn]
Social Media Industry: How Profitable is Investing in Social Media? As social media networks are booming ever since the late nineties with social media giants like Facebook counting billions of users across the globe, this online social phenomenon has slowly become a great part of our everyday lives.
Moreover, these social media startups soon turned into multi-billion corporations, turning a massive userbase into billions in revenue, which very soon attracted great interest from investors focused on social media stocks.
How Profitable is Investing in Social Media Companies
Despite the fact that Facebook was involved in a drama revolving around selling users’ data to third party companies, while EU imposed regulations that made the company ask users in the European Union whether they are allowed to use the information they need also legally bound to explain for what and how this data is used, interest that investors have in social media doesn’t seem to be declining.
During 2017, Facebook reported 499 billion dollars in revenue, with Twitter weighing 13 billion dollars within the same time period, with great odds of showing further progress in the growth rate.
Both companies are also showing immense progress a year later as well, as Twitter is recording 650 million dollars in revenue growth through advertising, and with Facebook reporting 33% of growth in revenues during 2018 with 13.37 billion dollars, we might see a difference between the two social media giants if we add the fact that Facebook missed its estimates by 40 million dollars for the year.
Facebook stocks might have seen a decline after the data selling drama, however, this social media giant is still attracting users with finding new ways to keep them returning aside from making excessive profits from advertising.
According to Fool, Stock for the two social-media companies is being affected by new data points, changing expectations in 2019.
Social-media stocks have been in the crosshairs over the past couple years, as privacy and safety concerns have investors rethinking the risks associated with these former highfliers. Still, social-media stocks continue to post solid revenue growth, as they build on their efforts to steal advertising dollars away from traditional media. The crosscurrents have made these stocks battlegrounds among investors.
This earnings season, two social-media companies — Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) are moving in opposite directions. Facebook soared over 10% after its fourth-quarter earnings release, while Twitter declined by a similar amount following its own report.
So what’s making one zig while the other zags?
Driving in opposite directions
While fears over user declines plagued Facebook last year, recent results showed no material effect on users, paving the way for the stock’s recovery. Meanwhile, Twitter’s surging revenue last year has now been called into question, as the company’s total addressable user base now seems more uncertain. These new data points relative to prior expectations are what’s driving Facebook and Twitter in opposite directions.
Snap, Twitter, and Yelp overvalued, Weibo and Facebook show potential
Suredividend.com advises this:
Microsoft and Google only have limited exposure to the social media industry. While phenomenal businesses in their own right, they shouldn’t be potential social media investor’s first option due to their diversified business models which limit their social media exposure.
Snap, Twitter, and Yelp all appear overvalued currently. Additionally, all 3 have lingering concerns about slowing growth or unpredictability.
That leaves Weibo and Facebook. While international investing comes with additional risks, we rate Weibo as our second choice for social media exposure based on the company’s somewhat reasonable valuation and exceptionally strong growth prospects.
Our top choice for social media exposure is Facebook. The company’s price-to-earnings ratio is under 20, it has proven its monetization abilities, and is the gold standard in the social media industry.