Will your portfolio ‘like’ social media stocks?
Anthony Ginsberg, Manager of HAN-GINS Innovative Technologies UCITS ETF explains why a handful of companies should like these social media stocks, as all of these four companies featured, stand to gain from the huge shift of advertising online.
Indeed by 2019, close to 50% of the world’s ad spending is expected to take place online, according to Zenith and eMarketer forecasts.
Most of this growth is taking place on mobile, with mobile alone growing 25% in 2018. Mobile represents 60% of all internet ad spending and 24% of total advertising spending.
Snap, the parent of Snapchat, is recovering from a disappointing 2018 during which its shares slumped to an all-time low. So far, in February alone (up to 12 Feb) they have soared upwards of 20%, following a fourth-quarter 2018 earnings surprise.
The social media company earned $390 million (£303 million) in revenue, and posted far smaller losses than expected, while global daily active users also beat estimates after reaching 187 million.This latter figure was crucial as it ensured that the firm had stopped seeing its user base decline.
As a result of the positive update, the group has been able to add more advertisers keen on using its automated tools.
Weibo is a Chinese microblogging website, often described as China’s version of Twitter, although it is actually more like a combination of Twitter and Facebook.
The users of Weibo interact far more than users on Twitter, and most of the topics going viral on Weibo originate on the platform itself, unlike Twitter, which relies on news or events.
Weibo's long-term outlook is attractive thanks to a backdrop of online advertising industry growth in China, and consumer discretionary spending, which is expected to see strong gains.
With Chinese tech stocks experiencing a tough 2018, Weibo stock trades down roughly 50% from its all-time high in early 2018, and at these discounted levels it is a buy.
With more than 445 million monthly active users, Weibo surpassed a $30 billion market valuation level at the start of last year.
Users are encouraged to use emojis, or attach their own images, music or video files in every post, and it is an incredibly effective site for reaching Chinese consumers and millennials.
Despite the well-known privacy scandals surrounding Facebook, it is enjoying record advertising sales across its portfolio of apps. The share price is starting to recover, but at levels of $160, remains well below record highs above $200. Much of the negative news is already priced in for Facebook.
Meanwhile, the company has increased limits on outside use of its data, while ratcheting up its own data collection practices. The new California Consumer Privacy Act, expected to take effect within the next year, will ensure tougher privacy protection laws, and US Congress is expected to pass a similar law that has features resembling the European Union’s GDPR regulation.
Instagram is now its fastest-growing app, although WhatsApp has not become a huge cash earner yet.
Facebook Inc. is working on making a cryptocurrency that will allow users to transfer money via WhatsApp. The focus is likely to be on the remittances market in India, with Facebook developing a stablecoin - a type of digital currency pegged to the US dollar - to minimise volatility.
Facebook has 2.5 billion global users, with more than $40 billion in annual revenue, and it would be the first large tech player to launch such a coin.
Interestingly a new plan involves merging the background messaging functions of the various apps that Facebook owns (Instagram, WhatsApp and Facebook Messenger), allowing users to send chats among services. Facebook will encrypt the messages so that only senders and receivers can see them.
The Meet Group’s portfolio of social entertainment apps helps millennials connect. Valentine’s Day is expected to be among its busiest days of the year.
Its primary apps, MeetMe, LOVOO, Skout and Tagged, keep millions of mobile users entertained, resulting in chats, friendships, dates and marriages.
Its innovative products allow users to stream live video, send gifts, chat and share photos, while its newest game app, Battles – offers live competitions for the best dancer, musician or comedian.
As mobile usage soars worldwide and grabs an ever increasing slice of advertising spend, Meet’s share price recently hit a high of $6, almost doubling in 12 months.
Overall, it has a diversified revenue mix consisting of in-app purchases, subscription and advertising, which is an attractive combination.