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The Facebook Stock Index

We all have "Liked" something on Facebook (FB). Whether it's your favorite TV show or car company, it appears companies are trying to catch the train of the social media machine. Does stock performance have any correlation to the popularity of a brand on Facebook? Some even doubt it would make hardly a difference in the company's growth and earnings. "What about fake accounts that 'Like' products?" they would say. This is a somewhat valid and decreasing argument. But what about someone who "Likes" Ford (F) or Chevy (GM)? Isn't the point of investing long-term gains? Studies have proven that loyal customers are much of an organization's consumers.

"Like" This!

The "currency" of the social media site Facebook has become the "Likes" that a page has acquired. If your Keurig from Green Mountain (GMCR) is your savior every morning, or you can't live without your Discover (DFS) card's cash-back, you'll probably give them your "Like" on Facebook. Making a new friend or courting a new girl/boyfriend? See what their Likes are. Very soon you will know what kind of music they like, what TV shows they watch, their eating habits, and even their religious and political stance. You can learn more information this way then reading a credit report, and it's free for everyone to see.

Become More Interconnected

Company's come more interconnected within the social media community by creating ties that guide visitors to and from multiple sites with the social media world.

Coke already has many promotional strategies such as the Olympic Games, NASCAR, Live Nation (LYV), and many others. They take advantage of these existing partnerships on social media sites to strength traffic and exposure, and this leads to an increase in customer's for both Coke and it's chosen partners.

Increase Exposure to Future and Current Promotions

The implement of a more active social media presence will let prospective customers more aware of the current promotions that are running, and create anticipation and excitement for future promotions. Promotions may even be social media specific, such as like or sharing the love of Coke through photos to win a year supply of coke.

Games can also be created that promote the sharing of a brand with friends and the general social community.

How many of you know what Farmville (ZNGA) is? Everyone.

Untapped Consumers

Many companies advertise primarily on television and printed media. What about the large amount of consumer's that do not watch a lot of TV or read magazines? One of the few remaining ways to reach these consumers is through social media. Games, printable coupons, and scholarships are just a few ways to reach the digital media audience. The list below is the most "Liked" brands on Facebook.

Increase ROI of marketing and find new niches.

Facebook, Twitter, and LinkedIn (LNKD) has the ability to find out the demographics of visitors to the respective social media site. Age, sex, occupation, college education, income, zip code, and much more information is readily available. Manually retrieving this information would cost the company a vast amount of time and energy, making the ROI of social media great indeed.

The demographic information retrieved may even be used for the distribution of future promotions. Example: 25% of Southern Iowa drinks Coke, but 65% of Northern Iowa drinks Coke. Assuming demographics and population are equal, there is a great opportunity to increase consumers in Southern Iowa and yield a higher ROI by concentrating more advertisements in this area.

Un-candid Feedback

Getting the true feelings of consumers can be difficult and expensive. On Facebook, the consumer can simply comment. This comment may be on a new product, a current promotion, or even on a competitors post such as Pepsi (PEP). Are fans and likes increasing more for Pepsi then for Coke (KO)? With some data analysis, the company can find out if it is due to bad publicity of Coke, current promotions, or goodwill efforts.

Happy consumers breed happy consumers. And angry consumers breed even more angry consumers…

Gone are the days that a company can ignore bad publicity and wait for it to simply go away. Social Media is an opportunity to find the unhappy customers and make them brand advocates once again, especially before an anti-Coke video is re-tweeted by millions, greatly to the joy of Pepsi.

Ø Google "soft drink." First result is Wikipedia. If you click on the page, the first image is none other than coke in Coke's trademark glass. The internet already loves Coke. Maybe it's time to return the favor.

An example of Facebook "Likes"

As of 11/30/2012 at 8:39PM

Coke: 55,670,201 likes

Pepsi: 9,180,029 likes

Ratio: 6.06:1

03/15/2013 at 7:44PM

Coke: 61,226,438 likes

Pepsi: 9,576,134 likes

Ratio: 6.39:1

Difference between 11/30/2012 and 03/15/2013

Coke: 5,556,237 likes

Pepsi: 396,105 likes

Ratio: 14.03:1

At the current rate, for every "Like" Pepsi receives, Coke has received 14 Likes over the same period. At this rate, I would expect the stock of Coke to outperform the stock of Pepsi, as loyal consumer equal paying customers.

(click to enlarge)

Below is a list of the most liked Brands on Facebook.

Brand

"Likes"

Company

Coca-Cola

61,120,185

Coca-Cola Co.

Disney

42,835,730

Walt Disney Co.

Red Bull

36,784,861

(Private Company)

Converse

35,613,220

Nike Inc.

Starbucks

34,006,673

Starbucks Corp.

Oreo

32,355,544

Mondelez Inc

PlayStation

30,963,908

Sony Corp.

McDonald's

27,624,207

McDonald's Corp.

Walmart

27,529,070

Wal-Mart Stores Inc.

iTunes

25,510,837

Apple Inc.

BlackBerry

25,340,637

Research In Motion Ltd

Skittles

24,824,860

(Private Company)

Pringles

22,958,184

Procter & Gamble Co.

Samsung Mobile USA

22,726,165

Samsung Electronics Co. Ltd.

Victoria's Secret

21,813,067

Limited Brands, Inc.

Target

21,721,204

Target Corporation

Monster Energy

21,290,555

Monster Beverage Corp

Subway

21,091,488

(Private Company)

Xbox

20,930,711

Microsoft Corp.

adidas Originals

19,275,476

adidas AG ADS

Intel

17,768,692

Intel Corp.

Ferrero Rocher

17,554,658

(Private Company)

Amazon.com

17,325,824

Amazon.com Inc.

Nutella

17,180,993

(Private Company)

Levi's

17,001,334

(Private Company)

Nike Football

16,991,016

Nike Inc.

ZARA

16,561,704

Inditex S.A.

Samsung Mobile

16,143,602

Samsung Electronics Co. Ltd.

Disneyland

16,110,530

Walt Disney Co.

Windows Live Messenger

15,997,662

Microsoft Corp.

Kit Kat

15,015,843

Hershey Co.

Google Chrome

14,899,260

Google Inc.

Burberry

14,892,923

Burberry Group

Dr Pepper

14,670,295

Dr Pepper Snapple Group Inc.

Mozilla Firefox

14,180,486

(Private Company)

H&M

13,987,524

H&M Hennes & Mauritz

Dove

13,252,600

Unilever

Louis Vuitton

12,965,406

LVMH Moet Hennessy Louis Vuitton

BMW

12,945,625

Bayerische Motoren Werke

Tata Docomo

12,906,744

(Not listed on US Exchanges)

Victoria's Secret Pink

12,826,864

Limited Brands, Inc.

Disney Pixar

12,567,085

Walt Disney Co.

Nike

12,386,953

Nike Inc.

Sprite

12,321,891

Coca-Cola Co.

Starburst

12,037,117

(Private Company)

Walt Disney World

12,002,462

Walt Disney Co.

Heineken

11,849,988

Heineken N.V.

Windows

11,818,009

Microsoft Corp.

Dior

11,497,519

Christian Dior S.A.

Lacoste

11,215,531

(Private Company)

I will be tracking this custom made Facebook Index. The weighting that I chose was by the number of Facebook likes, not equal weighting like I normally allocate portfolios. The weighting by Market-Cap encourages of "buying high and selling low." I do not believe this is the case with the "Like" weighting of a "Facebook Index." Could Facebook "Likes" be a different way to measure a company's Sustainable Growth Rate?

Description: http://static.cdn-seekingalpha.com/uploads/2013/3/16/3642491-1363458666591931-Stock-Market-Joe.png

Rank

Company

Ticker

"Likes"

Weight

1

Walt Disney Co.

DIS

83,515,807

10.18%

2

Coca-Cola Co.

KO

73,442,076

8.95%

3

Nike Inc.

NKE

64,991,189

7.92%

4

Microsoft Corp.

MSFT

48,746,382

5.94%

5

Samsung Electronics Co. Ltd.

SSNLF

38,869,767

4.74%

6

Limited Brands, Inc.

LTD

34,639,931

4.22%

7

Starbucks Corp.

SBUX

34,006,673

4.15%

8

Mondelez Inc.

MDLZ

32,355,544

3.94%

9

Sony Corp.

SNE

30,963,908

3.77%

10

McDonald's Corp.

MCD

27,624,207

3.37%

11

Wal-Mart Stores Inc.

WMT

27,529,070

3.36%

12

Apple Inc.

AAPL

25,510,837

3.11%

13

BlackBerry

BBRY

25,340,637

3.09%

14

Procter & Gamble Co.

PG

22,958,184

2.80%

15

Target Corporation

TGT

21,721,204

2.65%

16

Monster Beverage Corp

MNST

21,290,555

2.60%

17

adidas AG ADS

ADDYY

19,275,476

2.35%

18

Intel Corp.

INTC

17,768,692

2.17%

19

Amazon.com Inc.

AMZN

17,325,824

2.11%

20

Inditex S.A.

IDEXY

16,561,704

2.02%

21

Hershey Co.

HSY

15,015,843

1.83%

22

Google Inc.

GOOG

14,899,260

1.82%

23

Burberry Group

BBRYF

14,892,923

1.82%

24

Dr Pepper Snapple Group Inc.

DPS

14,670,295

1.79%

25

H&M Hennes & Mauritz

HNNMY

13,987,524

1.70%

26

Unilever

UN

13,252,600

1.62%

27

LVMH Moet Hennessy Louis Vuitton

LVMUY

12,965,406

1.58%

28

Bayerische Motoren Werke

BAMXF

12,945,625

1.58%

29

Heineken N.V.

HINKF

11,849,988

1.44%

30

Christian Dior S.A.

CHDRF

11,497,519

1.40%

820,414,650

100.000%

Source: The Facebook Stock Index: "Likes" Are A Wise Investment