Social media has exploded in popularity over the last two decades, but which stocks still have huge growth potential?
Facebook currently has around 3 billion monthly active users making it the biggest social media company in the world. However, the company is maturing and Facebook’s CFO David Wehner stated that he expects growth to decelerate in the coming quarters.
Despite Facebook’s market dominance, there’s an air of uncertainty around the stock, partly due to the antitrust allegations made against the company this year and advertisers boycotting it this summer over the company’s handling of harmful information. Investors interested in social media stocks may want to consider buying shares in smaller companies that still have huge growth potential.
Snap Inc (SNAP) owns Snapchat, a social media platform that connects users through visual communication and storytelling. It uses a broad range of video content and games that are beloved by millennials. Snap Inc is broken up into three separate divisions — Snapchat, Spectacles, and Bitmoji.
Snap is trying to compete with other platforms by distinguishing itself from its rivals. It launched Spotlight in November 2020, its reimagined way to reward viral content to take on TikTok. What makes Spotlight different is its vision of creating a culture that benefits an endless amount of people by removing likes, follower counts, and comments and replacing them with a lottery-like system where users can win $1 million by simply posting videos on Snapchat.
Spotlight could represent an innovative change for social media platforms by providing financial rewards for simply using the app as intended. The Spotlight feature will also give the company more destinations to sell ads. Over four billion Snaps are being created a day by 249 million daily users and now Spotlight can show these videos to a much wider audience.
In the third quarter of 2020, Snap reported revenue of $678.67 million, up 52% (YoY), which was largely driven by advertisements. Snapchat offers news and media channels for consumers to watch content with ad breaks in between. While we have been stuck at home, SNAP’s daily active user numbers have grown 18% (YoY) to 249 million. At the beginning of December, Snap shares were up over 238% year-to-date.
Twitter (TWTR) is a microblogging and social media platform where users interact with each other by sharing opinions on news, politics, finance, entertainment, and many other subjects. The social media app has gained relevance by being many celebrities and political leaders’ go-to form of communication. Twitter has a wide following, including users like Donald Trump, Bill Gates, and Ellen DeGeneres.
Twitter’s advertisement revenue for the second quarter fell 22% (YoY) to $562 million due largely to a pullback by brands between May to June during civil unrest in the U.S. Twitter’s ad revenue improved in Q3, up 15%, driven by the return of sports and the launch of previously delayed products and events. Major discussion points including the pandemic, vaccine news, the U.S. election, the economy have all been trending globally this year which has kept users glued to Twitter. In 2020, Twitter’s share price reached a 5-year high at around $50 a share.
Critics say that the social media company needs to utilize its new ad infrastructure and improve execution if it wants to keep up with the other tech giant’s advertisement platforms.
Pinterest (PINS) is an image sharing and search discovery platform used for saving pictures and information through visuals called ‘Pinboards.’ The social media company is often used by marketers to get higher brand engagement with users.
For the second quarter ended June 2020, Pinterest reported revenue of $272.5 million, up 4.3% (YoY). The company’s global monthly active users soared 39% (YoY) to 416 million. Pinterest’s CEO, Ben Silbermann, explained “in these tough times, we’re seeing more and more people rely on Pinterest to cook at home, plan kids’ activities and set up a home office.”
In November, Pinterest was spotted testing out the online event space with dedicated ‘class communities.’ If trials are successful, Pinterest users will be able to use boards to organize class materials and communicate with others through the chat option. Pinterest has become very popular with teachers looking to organize remote-learning classes, using it as a tool for sharing resources and tracking lesson plans. This addition would turn Pinterest into more of a social application, and help shake off opinions of it simply being a search tool.
Pinterest also benefited from the #StopHateForProfit ad boycott targeted at Facebook over the summer. In its third-quarter report, the company boasted an impressive 442 million monthly active users as advertisers turned to Pinterest for ad space instead of Facebook.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.