The years of existence that the online media industry has seen are a stark contrast to the wide spectrum of customer engagements that the sector enjoys. The civilised world is tuned into one or the other social application 24X7 and a recent study by PEW Internet shows that more than 41% of the users are connected through portable devices like mobile phones and e-tablets.
The current bottomed out scenario definitely makes the equities from this sector quite attractive. Stocks like ZYNGA, INC., GROUP ON or even heavy weights like GOOGLE INC. and Facebook Inc. are all pretty close to their 12 months low and are clearly hinting at a fresh rally from here on, especially in the wake of the new earnings announcement. Although a Solactive Global Social Media Index fund, SOCL ETF has yielded quite smartly with a 15% annual return, but even the broader arena shows a promising upside from here particularly as the India and China prepare to manifold their contribution to the online socialising networks.
The youngest avatar of mass media has been bombarded into our lives to a level where an average person today almost feels socially obliged to have an account on either face-book or twitter and this is just a snapshot of the coming times, when even small decisions of an individual's life may be influenced from his or her online social experience. Investors who are more than keen on tapping on this absolute trend must look at the industry from a global perspective and if investing in social media companies, choose only choicest of the global picks.
For tapping in social names like Facebook and Instagram, LinkedIn and their likes, ETF investing seems to be an ideal decision for many, For starters, one has to think beyond international borders and that would mean different investment regulations for different exchanges. Even tax policies for foreign investors vary from land to land.
NASDAQ listed ETFs or equity traded funds pack up an asset kitty that will include the usual American bigwigs, but simultaneously will provide exposure to Chinese social media scene through Ten-cent Holdings and DINA Corp Ltd. Along with ADRs of their national counterparts like Sina Corporation and Youko.com, these stocks have heavy weight age on the benchmark that tracks the industry and have a visible and higher growth potential as the internet penetration in the native countries is much lower when compared to the user percentage in America and other developed nations.
Social giants like Facebook (NASDAQ:FB) though a young venture enjoys a wide user base. In a filing it had a whopping 800 million active users as of 31st December 2011 and a calculated yearly growth of about 40%. In the financial year 2011 alone it generated revenue of $3.7 billion. Also it is an active social media marketing tool. Facebook revealed current estimates of its users extending over 845 million members.
The global Solactive benchmark for the Social Media market stands true to its global characteristic in terms of its portfolio's diversification. It includes companies based in the United States (26.3% weightage) and Asian countries such as China (36.9%), Japan (19.5) and Russia (9.5% weightage). The main services that include social networking, file sharing and web based media applications are constantly increasing their user base, but somehow the Index still suffers from issues like exposure to volatile emerging markets. Capital markets are well aware of this socio demographic impact and are buzzing with Social Media Company IPO and broader market schemes like NASDAQ listed pure play funds that make investing in the top global social media companies an easy possibility for foreign investors.
The current market valuations should discount for a lot of negatives including the receding investor interest of the last year due to the weak performance of the Face Book IPO. Future will definitely witness record growth from the sector and investments in the Social Networking and Marketing Zone and its key global players are strongly recommended in 2013 on account of a stable forecast for most equity exchanges.
Global X Social Media ETF [SOCL] is a true to its benchmark fund and an absolute pure play on this industry. The fund charges annually as per 0.67 basis points post the expenses. Facebook with 14.61% of allocation is the biggest asset and makes up for 52% of the holdings along with the other top five equities namely LinkedIn Corp [10.61%], Ten-cent Holdings Ltd [9.74%], Sina Corp.US [8.79%] and Dena Co. Ltd [7.34%].