Like all things Internet - like search, like e-commerce - social networking is a technique. It's not a place. As Stephen Sondheim wrote, "Having just a vision's no solution, everything depends on execution."
Contrary to how you may think this means “first mover advantage” means little. It's “second advantage” that counts.
What do I mean by that? Yahoo (YHOO) had first mover advantage in search. Google (GOOG) had second mover advantage. The first mover executes on the idea. But it's the second mover, the one who focuses relentlessly on execution, on “tweaking” (to quote Walter Isaacson's biography of Steve Jobs) the model, who wins in the end.
It sounds unfair. You'd think someone would be able to patent the idea of grouping together discounts by merchants, as Groupon (GRPN) has done. But that would be bad for everyone. You want to be forced into hanging out at Myspace?
Sometimes the first mover does become the second mover. Amazon.com (AMZN) did that. They did it by focusing relentlessly on operations, on investing ahead of need, on driving out costs, on using every innovation they could find that might make sense. Thus they seem, to many, to have second mover advantage in the cloud, a technology Google actually invented.
Thus, investing in a "social ETF" like EIPO or SOCL is a fool's game. What will happen here is what happened in every other area. Leadership will be established, it will be challenged, and either the leader or the challenger will win over time.
What I'd look for in the space is a niche that can survive long enough to pay off. LinkedIn (LNKD) does not have such an advantage, in my opinion. It is too easily replaced by a second mover such as Google+. I won't invest in Facebook because, in the end, they're a game company, a platform for Zynga (ZYNG). I might want to take a flyer on Angie's List (ANGI), however. Getting money from users creates a moat which, if it can be defended, can hold a lot of cash inside it.
Social networks are a technique for organizing people behind the screens in some common endeavor. They're not a place. They are a capability many can use, as Box is demonstrating by trying to organize developers.
Everything depends on execution and, until you see it demonstrated on the bottom line, keep your money in your pocket. And even when you do invest, stay on top of performance and be ready to jump quickly.
Disclosure: I am long GOOG.
