Social media and social networks are nothing new anymore, but they are still a fast-growing industry. According to analyses, around 4 billion people worldwide now use social media and further growth is expected in the coming years. In addition to the well-known names in the industry, young companies are also constantly creating new opportunities to network and thus offer interesting investment opportunities for investors. In this article, we present a selection of social media stocks.
Social media is a collective term for online platforms that enable the exchange and creation of information between users. This includes not only social networks such as Facebook, Instagram and Twitter, but also blogs, forums, review portals and multimedia platforms such as YouTube and TikTok.
The social media industry has become a central element of our global culture. With its rapid expansion, it has fundamentally changed the way we communicate, inform ourselves and do business. The industry has also paved the way for innovative business models and new revenue streams, such as influencer marketing and social commerce, which have been instrumental in transforming traditional advertising strategies and redefining business success in numerous industries.
The importance of social networks
Social networks have not only changed the way we communicate with friends, family and acquaintances, but also influence how we obtain information and form opinions. They have become an important part of our everyday lives and their importance goes far beyond personal networking. Companies from a wide range of industries use social networks to increase their brand awareness, attract customers and market their products and services.
History of the social media industry and its development to date
The origins of the social media industry can be traced back to the 1990s, when the internet gained popularity and the first online communities emerged in the form of forums and chat rooms. Websites such as SixDegrees and Friendster laid the foundations for what we know today as social networks.
The founding of Facebook in 2004 marked the beginning of a new phase in the social media industry, which was characterized by intensive growth. Facebook brought a new level of networking and personalization to the online environment and quickly attracted millions of users. Other platforms such as Twitter, Instagram and LinkedIn followed, each with their own focus and user base.
The introduction of smartphones and mobile apps has further changed and increased the use of social media. Today, social networks are more than just platforms for communicating and sharing content. They have become places for news, shopping, learning and even professional networking.
In recent years, we have also seen the rise of new forms of social media, such as TikTok, which has popularized short video content, or Clubhouse, which relies on voice chat. It shows that the social media industry continues to be innovative, dynamic and constantly evolving.
Key players in the industry
The social media industry is dominated by a few large companies. These include Facebook, Twitter, Snapchat, Pinterest, LinkedIn and TikTok. Each of these companies has a unique business model and serves a specific target group. They all benefit from the so-called network effect: the more users a platform has, the more attractive it becomes for other users and advertisers.
How do social media companies earn money?
Most social media companies earn their money through advertising. They collect data about the behaviour and preferences of their users and use this information to place personalized advertising. Some platforms also offer premium services or virtual products that users can pay for. There are also platforms such as LinkedIn that offer paid premium features for professionals and companies.
The role and value of data in the social media industry
Data is at the heart of the social media industry. By analyzing user data, companies can identify trends, better understand user needs and place personalized advertising. This data is also of great value to other companies who are willing to pay money for it. However, these practices also raise data protection and ethics issues.
Current trends and challenges
The social media industry faces the challenge of meeting both data protection and security requirements, while at the same time regulatory requirements are increasing. This requires constant adjustments in order to not only meet legal requirements, but also to maintain the trust of users.
At the same time, new trends are driving the industry forward. One of the most striking is the rise of influencers, who are using their reach and influence to promote brands and products, redefining the advertising landscape and opening up new marketing opportunities.
The increasing popularity of live streaming is another important trend. Live streams on platforms such as YouTube, Instagram and Twitch allow users to interact directly with their audience, creating a new level of engagement and interaction.
The integration of e-commerce functions is also playing an increasingly important role. Many social media platforms have started to integrate shopping functions directly into their platforms, enabling a seamless connection between the discovery of products and the purchasing process. This trend opens up new opportunities both for the platforms themselves and for companies that sell their products via these channels.
The following table provides an overview of some of the best-known and largest shares in the social media industry. In addition to companies that are exclusively active in the social media sector, these include Google and Microsoft, which operate two important social networks with the platforms YouTube and LinkedIn, even if these only make up part of the overall business. Below we present a selection of social media stocks in detail.
| Company | Symbol | Country | Market capitalization |
| Microsoft | MSFK | USA | 2491.04 billion USD |
| Alphabet (Google) | GOOGL | USA | USD 1557.34 billion |
| Meta Platforms | META | USA | USD 739.94 billion |
| Tencent | 0700 | Hong Kong / China | USD 403.93 billion |
| Baidu | BIDU | USA / Headquarters: China | 49.36 billion USD |
| Spotify | SPOT | USA / Headquarters: Sweden | USD 30.46 billion |
| PINS | USA | USD 17.94 billion | |
| Snap | SNAP | USA | USD 17.33 billion |
| Match Group | MTCH | USA | USD 11.48 billion |
| Etsy | ETSY | USA | USD 10.57 billion |
FACEBOOK (META PLATFORMS)
- Company: Meta Platforms Inc.
- Symbol (TWS): FB
- ISIN: US30303M1027
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 739.94 billion
- Turnover (TTM) in USD: 117.35 billion.
When social networks are mentioned, Facebook is one of the first companies that comes to mind. With approximately 2.5 billion monthly active users, Facebook remains the largest social media platform in the world. The company allows users to connect through cell phones, computers and other devices. On Facebook, users can share opinions, photos and activities online and communicate with each other. Ongoing pressure from politicians and regulators have caused the company some difficulty recently; however, Facebook remains well-positioned to capitalize on the ongoing industry trend. The group name was recently changed from Facebook to Meta Platforms, and shares have been trading under the new name ever since. In addition to Facebook, Meta Platforms includes Instagram, Messenger and WhatsApp, among others.
Brief analysis & outlook
Between September 2021 and November 2022, the Meta share price plummeted. The share fell from a high of more than USD 380 to around USD 90. The price loss of over 75 % thus significantly exceeded the level of the broad market and the Nasdaq 100. The favorable buying prices are now history and although Facebook shares are not yet trading at new all-time highs, the share price has already tripled and is at a 52-week high.
In addition to the strong share price performance, Meta has impressed in recent months with solid financials, sustainable user growth and a proactive approach to cost management. The company has implemented successful cost-cutting measures that have enabled it to sharply reduce its expenditure forecast for 2023. Meta's financial strength is also evident when looking at its balance sheet, which shows liquidity of USD 37 billion compared to long-term debt of only USD 10 billion. This gives the company a high degree of flexibility and the option to make further share buybacks, having already repurchased USD 28 billion worth of shares in 2022. Another encouraging sign is the positive development in the advertising business. Meta recently recorded an increase in advertising revenue and a significant rise in ad impressions.
MATCH GROUP
- Company: Match Group Inc
- Symbol (TWS): MTCH
- ISIN: US57667L1070
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 11.48 billion
- Turnover (TTM) in USD: 3.18 billion
Finding a partner online has been an ongoing trend for many years. With Tinder, the Match Group operates the world's most downloaded dating app. It also appeals to additional target groups with other dating apps (OkCupid and Hinge). The company is headquartered in Dallas, Texas, and has been recording strong revenue growth for years. Compared to other large social media companies, Match has a unique business model. It generates the majority of its revenue from subscriptions paid directly by users, rather than from advertising. With the increasing prevalence of online dating, particularly in emerging markets, Match is forecasting continued strong revenue growth.
Brief analysis & outlook
Match Group shares also fell sharply during last year's bear market, but have not yet achieved a turnaround compared to Facebook shares. The company is currently focused on reinvigorating its Tinder brand through new marketing efforts and feature additions to improve the user experience and increase monetization. New features announced in Tinder include new profile descriptions, improved recommendations, a premium subscription, weekly subscriptions and a new ad format.
Another focus is on the Hinge brand, which is growing strongly in English-speaking European countries and is now expanding to other markets. Hinge has gained strong popularity in France and launched marketing activities in Spain, Italy and the Netherlands in the second quarter, as well as introducing new subscription levels to boost monetization.
Match's share performance is likely to depend heavily on Tinder's growth in the short to medium term. The CEO, Bernard Kim, emphasized in a discussion of first quarter earnings that these new features will initially have only a small impact on revenues, but will grow over time.
BAIDU
- Company: Baidu Inc
- Symbol (TWS): BIDU
- ISIN: US0567521085
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 49.36 billion
- Turnover (TTM) in USD: 126.41 billion
Baidu is a Chinese multinational company founded in 2000 and headquartered in Beijing. Through its baidu.com search engine and mobile devices, Baidu connects users with relevant online information such as web pages, news, images and documents. The website is one of the most visited websites in the world. In addition, Baidu offers other services, such as Baidu Knows, an online community where users can ask other users questions, Baidu Wiki, Baidu Healthcare Wiki, Baidu Wenku, Baidu Scholar, Baidu Experience, Baidu Post, Baidu Maps and several others.
Brief analysis & outlook
In the first quarter of 2023, Baidu posted stronger-than-expected earnings thanks to increased advertising spending. Total revenue increased by approximately 10 % year-on-year to RMB 31.14 billion (approximately USD 4.54 billion), while adjusted net income increased by 48 % to RMB 5.73 billion (USD 834 million). Baidu's digital advertising business revenue increased by 6 % year-on-year. Adjusted operating margins also increased to 23 % compared to 17 % in the previous year, driven by better cost recovery and lower content and bandwidth costs.
Baidu shares are currently trading at about 12 times expected 2023 earnings and about 11 times expected 2024 earnings, well below the nearly 40 times multiple the company reached in February 2021. Baidu had a net cash position of over $15 billion at the end of the first quarter of 2023, which is more than a third of the company's current market capitalization. This means that the company's price-to-earnings (P/E) ratio for 2023, excluding cash, is just 8, making the stock even more attractive.
In addition, the reopening of the Chinese economy could benefit Baidu's core advertising business, and the company is also making progress in the field of artificial intelligence (AI). Baidu has launched its ERNIE Bot, a generative AI tool, and plans to integrate this into all of its businesses, which should benefit the company's valuation.
- Company: Pinterest Inc
- Symbol (TWS): PINS
- ISIN: US72352L1061
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 17.94 billion
- Sales (TTM) in USD: 2.83 billion
Pinterest is a social media platform on which users mainly share photos. In contrast to other social media platforms, Pinterest users are much more receptive to advertising, which aligns the company's success with user satisfaction. This focus has led to strong revenue growth in recent quarters. The company already has more than 450 million monthly active users worldwide, although there are still major opportunities for growth, particularly outside the USA.
Brief analysis & outlook
In the long-term picture, Pinterest shares are still trading well below their former all-time highs from 2021 and have been unable to benefit from the recent upward trend in the broad market and tech stocks in particular. This is despite the fact that reported earnings recently exceeded expectations. The other fundamental key figures are also strong. Pinterest generated revenue of USD 602.6 million in the first quarter of 2023, an increase of 5% year-on-year and above consensus expectations of USD 594.2 million. Earnings per share (EPS) amounted to USD 0.08, exceeding the forecast of USD 0.01. The number of global monthly active users was 463 million in the first quarter, an increase of 7% year-on-year, beating the consensus forecast of 454.6 million. Despite these strong numbers, investors reacted negatively to the company's future revenue guidance. Pinterest expects its revenue to grow "roughly in line with the growth we saw in Q4 2022 and Q1 2023", suggesting that it does not expect revenue growth to accelerate in the second quarter of 2023.
ETSY
- Company: Etsy Inc
- Symbol (TWS): ETSY
- ISIN: US29786A1060
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar
- Market capitalization: USD 10.57 billion
- Turnover (TTM) in USD: 2.63 billion
Etsy is a company that combines e-commerce and social media. The etsy.com platform specializes in particular in vintage and handmade goods. It is also an online discovery platform where buyers can get in touch directly with sellers and artists. Etsy provides various tools for communication on its platform for this purpose. With more than 7.5 million sellers and about 100 million active buyers, Etsy is one of the largest e-commerce platforms with a social focus. Etsy has grown in part through acquisitions. The company owns vintage music gear and reseller site Reverb and recently purchased Depop, the used clothing marketplace that has tens of millions of users worldwide.
Brief analysis & outlook
Etsy shares are currently (June 2023) around 70 % below their all-time high from November 2021. While some investors see this as a potential bargain, others are concerned that the company is struggling to survive in a weak economic environment. While Etsy was still able to achieve considerable growth in Gross Merchandise Sales (GMS) of 107 % and 31 % in 2020 and 2021 respectively, the company recorded a decline of 1 % in 2022. This trend continued in the first quarter of 2023, with GMS falling by USD 5 % year-on-year to USD 3.1 billion. However, on a positive note, Etsy was able to increase active buyers by 1 % in the same quarter, indicating high user engagement despite less money being spent. In addition, revenue increased by 11 % to 641 million US dollars, although this is due to increased transaction fees.
In terms of future prospects, Etsy certainly still has great potential in the long term. The company operates in a huge market with an estimated total addressable volume of almost half a trillion US dollars. Currently, the annual GMS is less than 12 billion US dollars, which shows that Etsy has only reached a fraction of the potential market. The uniqueness of Etsy's offering could continue to be attractive to customers. The company has also shown a willingness to expand beyond its core business by acquiring other platforms such as Elo7 and Depop.