Social Media Shares — Yes or No?

Social media sites and the online world have transformed into more than a means to interact or make a living. With Facebook already on the stock exchange, and Twitter preparing for flotation on the New York Stock Exchange (NYSE) with a valuation of $10 billion, they’ve now also become investment opportunities, which you can discuss as well as other investments with Interactive Investor.

The big question is, are they good investments? Shares in social media companies — should you invest in them? If you want to try social media marketing for your own business, then buy Youtube views and subscribers to start.

Growth in on the go

Facebook funds itself by offering advertising opportunities — Twitter less so — which can generate company growth. Actually, Facebook has just announced pleasing financial results in the third quarter of 2013, thanks partly to being able to capture a greater share of the mobile advertising market. Both Twitter and Facebook have reported increases in revenue thanks to cell phone users, with Facebook capitalizing especially on this as more and more people access social media from their cell phones.

There is also the general popularity of social media sites too that creates scope for growth, as platforms can invest in new ways to engage with users. Twitter itself has become the preferred communication channel for many celebrities, politicians and companies, thanks to its micro-blog style format. It also has the advantage of learning from the mistakes of Facebook’s disastrous debut on the NASDAQ — they’ve opted for the NYSE and a lower stock price.

When actions speak louder than words

One of the big issues that could affect your investments is the susceptibility of social media to (irresponsible) actions that are beyond the companies’ control. Both Twitter and Facebook have hit the headlines because of the actions of users rather than of the companies themselves: inappropriate content in the case of Facebook; controversial tweets in that of Twitter.

Then there are the actions of the companies which can affect share prices. A top executive at Facebook admitted recently that fewer teens were using Facebook — an observation that blew away approximately $18 billion in Facebook share value within minutes of escaping his lips. Meanwhile, Twitter, which is aiming to raise $1.6 billion with its flotation, is facing a lawsuit that could dent it as soon as it gets off the ground, having allegedly arranged a private share sale that it had no intention of executing, to underpin its $10 billion valuation.

There’s also the bottom line: whereas Facebook is making money from advertising — but still struggling to find the balance between enabling communication and advertising disruptively — Twitter doesn’t make full use of advertising as much and is a loss-making company. Although offering a more transparent, relatively advertising-free user experience, it could be sacrificing opportunities to increase revenue and grow as a company — not what shareholders want to hear, so many prefer to try at least another 3 ways to rank in searches with the help of SEO companies online as better advertising way.

Social media companies have exploded onto the online scene and hold considerable scope for growth, making them most attractive to potential investors. The jury could still be out, though, on their suitability as an investment. Funding issues, conflicts, and spheres of influence are all things to consider before you log in to tweet or update your status about how much money you’ve made from your investment.