Social Media Companies Disappoint Investors, with One Exception


When social media companies first went public, they were popular and seemed like a good bet to many investors. Indeed, some pundits called it a social media gold rush. Investors expected the companies to disrupt advertising and media to the tune of billions of dollars.

But in the last year, almost every single social media stock has fallen. Twitter stock rose 7% when co-founder Jack Dorsey was named CEO earlier this week, according to a USA Today article by Matt Krantz.  Twitter went public on Nov. 7, 2013 and shares closed at $ 44.90 apiece. But the share price has fallen 39% since then.

Yelp’s shares have fallen “a crushing 70% over the past two years,” writes Kratz. “Analysts are calling for Yelp’s adjusted profit to fall 35% this fiscal year to 43 cents a share.”

Linked in is down 16% in the last year. Kratz notes that social media stocks are fairing worse than the market as a whole. Indeed, Linkedin has fallen “four times as much as the 4% decline in the broader Standard & Poor’s 500.”

The one social media company that has grown in value on Wall Street is Facebook. “Shares of the giant are up an impressive 20% this year, which make it a standout not just among social media but the broad market,” writes Kratz. Facebook shares were traded for $ 94.01 on Monday and they have almost doubled since their first public offering. “Adjusted profit is expected to jump 17% this year at Facebook,” writes Kratz.

Why are social media stock prices falling? “The performances illustrate the way investors are questioning whether social media companies can keep their growth rates vigorous enough to justify their valuations,” writes Vindu Goel and Mike Isaac in the New York Times. “The stocks of all three companies [LinkedIn, Twitter and Yelp] had traded at relatively high levels, reflecting Wall Street’s giddy projections. Yet all three shattered that perception in their own way. And while many of these stocks are often volatile, with investors on edge about the weak economy, interest rates and other issues, shareholders increasingly have little tolerance for the slightest misstep.”

And why is Facebook fairing so well? “Facebook continues to pull away from competitors by adding users to its main social networking site, as well as its Instagram photo-sharing app and WhatsApp messaging service. The company also is making money off newer lines of business, like video advertising,” writes Goel and Isaac.

image by shutterstock

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Jack Dorsey Returns as CEO of Twitter. Will He Please Investors?


Twitter has named Jack Dorsey, one of the company’s original co-founders, as permanent CEO of the service. Dorsey has been the interim CEO of Twitter since Dick Costelo stepped down three months ago.

Dorsey is currently the CEO of Square, the online payment service, and will continue to serve in both roles. He will reportedly not be taking a salary as CEO of Twitter.

Dorsey takes the reins at Twitter in a moment of crisis for the company, with Wall Street in doubt about the service’s future as it fails to keep up with Facebook and Instagram in terms of exponential growth. According to the NY Times, in the second quarter of this year, Twitter had 316 million users, a number that has been “largely flat for some time.”

Twitter has been slow to embrace video and messaging, two features many believe to be the future of online communication. It has also struggled to find a mobile advertising scheme that works.

In one of his first moves as CEO this week, Dorsey is rumored to debut Project Lightning, a feature that would combine the powers of Twitter’s livesteaming app Periscope with news aggregation, presenting curated collections of photos, video, and tweets relevant to breaking news as it develops on the spot. It will also help advertisers who have been looking for a way to autoplay their video ads on the network.

Historically, Dorsey has had what some might describe as an on-again off-again with Twitter, a company he founded, along with Biz Stone and Evan Williams, in 2006. Originally inspired by experiences listening to police scanners as a childhood obsession, as well as his work as a taxi dispatcher, Dorsey brought microbursts of information to a whole new audience. He served as Twitter’s CEO in 2006, but was essentially forced out in 2008. He later became the CEO of Square, in 2009. His recent appointment as permanent CEO will largely revolve around the question of how Dorsey, one of Twitter’s original visionaries, will move the platform into longform publishing, competing with Facebook.

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