As an investment opportunity, social media companies
began picking up speed last year. After the highly publicized
Facebook IPO debacle in 2012, investor sentiment shifted
as management teams focused on profitability. The
challenge for these companies is monetizing their user base.
Do you charge a monthly fee and risk users switching to
the competition? Most social media platforms have opted
to generate revenue through push advertising, whereby
companies pay to have their updates displayed in users’
news feeds. Over the years, advertisers have found social
media to be a cost-effective way to reach their target
audiences, and many have increased their social media
marketing budgets. The key for any social media company
will be to maintain the right balance of advertising revenue
and content that appeals to users.
The future prospects of social media companies look bright,
but valuations remain extremely elevated by any metric.
Investors are willing to pay a premium for the potential
that companies will monetize their user base in the
future. Given the higher risk/reward trade-off, investors’
best bet may be to gain exposure to social media stocks in
a diversified manner through an ETF, such as
Global X
Social Media (SOCL)
.
Are you capitalizing on social media?
Apart from the
investment possibilities, social media presents an
opportunity for advisors to connect with a broader
audience, including younger investors. If you haven’t
already incorporated social media into your practice,
Commonwealth makes it easy with daily preapproved
status updates and tweets you can use on your
Facebook, LinkedIn, and Twitter pages. (Find them
on COMMunity Link
®
at My Practice > Marketing >
Marketing to Clients > Online Marketing > Website,
E-Mail, & Social Media Marketing > Posts for Your
Social Media Sites.)
As you look to build relationships with the next
generation of clients, social media can be a great way
to start the conversation.
Brian McCormick is a senior investment research analyst. He
is available at x9367 or at
.
Michael Cornacchioli is an investment research analyst. He is
available at x7130 or at
.
Most social media platforms have opted to
generate revenue through push advertising,
whereby companies pay to have their
updates displayed in users’ news feeds.
Wealth Management
/ Investments & Research
28
For Advisor Use Only
March/April
2014
While millennials have been hit hard by the
recession, they also make up a larger percentage
of those with $2 million+ in assets than Gen X.
— Nielson
