Trading Social Media Stocks

by Amanda Harvey

March 02, 2015

Trading social media stocks is a relatively new phenomenon, as in fact social media itself has only emerged over the last 15 years or so. Social media is defined as computer-related tools which enable users to create and share content or to participate in social networking.

History of Social Media

While Facebook Inc (NASDAQ: FB) is now the undisputed king of social media, earlier forms of social media were launched in the late 1990s. These social media pioneers were primarily blogging platforms, such as LiveJournal and Bloggerwave Inc (OTCMKTS: BLGW). While blogging remains popular as a form of publishing, it is not considered to be a relevant form of social media in terms of networking.

The first site to be launched that was similar to current popular networking sites was Friendster, and it made its appearance on the net in 2002. This was followed in 2003 and 2004 by the launch of several other notable social networks including LinkedIn Corp (NYSE: LNKD), Myspace Inc. and Digg Inc.. 2004 also saw one of the most significant developments on the social media scene to date, which was the appearance of Facebook. Twitter Inc (NYSE: TWTR), another major presence in the social media arena, was launched in 2006.

Social Media on the Stock Market

Social media stocks have become a player on the stock market over the last few years. LinkedIn made its debut on the stock market on May 19, 2011. Facebook held its initial public offering (IPO) on May 18, 2012, and Twitter followed suit on November 6, 2013.

Since its IPO, LinkedIn stocks have risen from $93USD to $265USD, and Facebook stocks have doubled in price. Twitter stocks, on the other hand, are trading at almost the same price as they were on their IPO, after some dramatic highs and lows. Despite this, Twitter is generally considered to be in a good position within the market.

Trading Social Media Stocks

There is varying opinion on whether social media stocks offer a viable trading platform. While there is no question that it is possible to use varying strategies to take advantage of the market whatever its movement, the question is whether social media stocks are long-term players or not.

On one side of the fence are those who believe that trading social media stocks present a good opportunity for long-term investors, providing they can tolerate high volatility and are willing to stay with the investment for a sufficient length of time.

The contrasting opinion is that trading social media stocks, which primarily bases its revenue on advertising, does not have enough stable, inherent value to warrant long-term investment. Those who hold this opinion are more of the belief that social media stocks may offer some profitable short-term trading opportunities, but that investors would be best off steering clear of committing their long-term capital in this area.

In Conclusion

There is no doubt that social media is part of the new economy, and whether or not to trade or invest in social media stocks basically comes down to an investor’s own judgment, strategy and inclinations.

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