Is this Internet Bubble 2.0?
Social media companies are experiencing a boom as more companies go public, and new exchange traded funds are being launched targeting the nascent sector.
However, the rapid rise in social media stocks has some observers questioning if valuations are already getting out of hand.
According to Barron’s, the market prices of Facebook, Groupon (GRPN), Zynga (ZYNG), LivingSocial, Twitter, LinkedIn Corp. (LNKD), Pandora Media (P) and Zillow Inc. (Z) reflect a growing bubble, reports Ilaina Jonas for Reuters.
Combined, the total worth of the companies are calculated to be $200 billion, and the companies generated $3.5 billion in revenue for 2012. In comparison, Google (GOOG) has a market-cap of almost $200 billion, and the company generated $29 billion in revenue and earned over $8 billion. Barron’s notes that Google has not traded more than 29 times sales and its median price-to-sales ratio is 11.
Tony Perkins, founder and editor of AlwaysOn, believes that the the current environment favors social media companies,however, writes Robert Hof for Forbes.
Bill Cleary, founder of marketing firm Cleary & Partners and founding partner of CKS, also agrees that the cultural and social changes are being pushed by the growing use of the Internet.
Global X, purveyor of several interesting niche ETFs, recently filed with the Securities and Exchange Commission to launch the first ETF focused on social media companies. Global X Social Media ETF will track the Solactive Social Media Index. [ETFs Target Internet IPOs, Social Media.]
Max Chen contributed to this article.