Social media is an integral part of everyday life, and the companies behind the most popular platforms could present investment opportunities.
The world’s largest social media platforms have revolutionized the way people connect on the internet, and the companies behind these platforms can offer major investment opportunities.
The impact of this year's early February selloff of Meta Platforms (NASDAQ:FB) is a clear example of the huge presence social media companies have in the stock market. In one day, shares of the social media giant fell a whopping 20 percent on lower-than-expected earnings and a drop in monthly active users (MAUs). The news temporarily shook investor confidence in other social media stocks as well.
However, social media stocks, and Meta itself, still have the confidence of analysts. “(Meta) is still a fabulous company, people continue to have lots of profits in this company, but misses and downward guidance are being brutally punished by investors,” Michael Farr, CEO of wealth-based management firm Farr, Miller and Washington, told Reuters. He believes the selloff might be considered an overreaction given Meta's strong balance sheet.
For his part, investment guru Kevin O’Leary told CNBC he plans to buy the dip in Meta, pointing out that the company’s flagship brand Facebook is one of the world’s biggest ad platforms.
According toStatista, the number of MAUs on social media platforms worldwide will “grow as mobile device usage and mobile social networks gain traction in previously underserved markets.” While the social media platforms with highest MAUs are largely US-based, social media companies in China are also quickly gaining market share.
Below is a list of the top five publicly traded social media companies based on MAU data from research firm Kepios. These social media stocks offer investors exposure to growth in the social media industry.
1. Meta Platforms
MAUs: 7.38 billion
Despite its recent difficulties, it’s no surprise that Meta Platforms leads the pack on this top social media stocks list. Based in Menlo Park, California, the company controls four of the top-ranked social media platforms. In addition to Facebook (2.91 billion MAUs), Meta’s core social media products also include WhatsApp (2 billion MAUs), Instagram (1.48 billion MAUs) and Facebook Messenger (988 million MAUs).
Following the late 2021 announcement that Facebook would be rebranding as Meta Platforms in a bid to become a market leader in the metaverse, many wondered about the company's new direction, particularly as CEO Mark Zuckerberg pledged to spend US$10 billion a year over the next decade.
After reviewing the company's patent applications, the Financial Times said that along with seeking to patent multiple technologies that will harness users’ biometric data to create realistic digital avatars, “the patents also indicate how the Silicon Valley group intends to cash in on its virtual world, with hyper-targeted advertising and sponsored content that mirrors its existing $85bn-a-year ad-based business model,” as per the news outlet.
MAUs: 2.56 billion
Next on this list of top social media stocks is Alphabet (NASDAQ:GOOGL), the parent company of Google. While Google+, an attempt at a Facebook rival, never really took off, Alphabet’s subsidiary YouTube ranks as the second most popular social media app in terms of MAUs and is the world’s largest video platform.
The world’s first YouTube video was uploaded in 2005. Alphabet, then Google, purchased the video-streaming site for US$1.65 billion in 2006. More than a decade and a half later, YouTube has nearly 2.3 billion users who generate billions of views each month. Nearly two-thirds of YouTube views happen on mobile devices.
In Q3 2021, YouTube generated a quarterly record of US$7.21 billion in advertising revenues, up 43 percent from the same period in the previous year.
3. Tencent Holdings
MAUs: 1.84 billion
Chinese multinational technology and entertainment company Tencent Holdings (OTC Pink:TCHEY,HKEX:0700) owns China’s largest messaging app, WeChat (1.26 billion MAUs), as well as the smaller but popular QQ (574 million MAUs), which is a messaging software service. Aside from that, the company publishes many of the world’s most popular video games, and offers cloud-computing and fintech services.
WeChat has more than 1.2 billion users in China and across the globe. Bloomberg News points out that the app’s popularity and profit-generating capacity is still experiencing impressive growth despite recent crackdowns on Big Tech companies by Chinese regulators.
Taking a cue from Meta Platforms, Tencent Holdings is transforming its QQ chat app by embedding the video game engine Unreal Engine and launching a new feature called Super QQ Show, a 3D interactive space that allows users to connect socially, watch shows and play games.
MAUs: 557 million
Top social media stock Snap (NYSE:SNAP) joined the stock market scene after its initial public offering in 2017. The company’s social media app Snapchat launched in 2011 and allows users to send messages and images that only stay available to the recipient for a short time. While Snapchat is a highly popular app among Millennials and Gen Z consumers in the US, it is also gaining attention in India and Europe.
In early 2022, Snap announced the renewal and expansion of content deals with Disney (NYSE:DIS), ViacomCBS (NASDAQ:VIAC) and Comcast's (NASDAQ:CMCSA) NBCUniversal Media; the deals include short-form video offerings created for Snapchat’s Discover area.
5. Kuaishou Technology
MAUs: 573 million
The last top social media stock on this list is Beijing-headquartered Kuaishou Technology (HKEX:1024), which went public in 2021. It operates the country’s second largest short video-sharing app for mobile devices, Kuaishou.
In January 2022, Kuaishou signed a global licensing agreement with Paris-based Believe (EPA:BLV), which operates TuneCore, a DIY digital music distribution platform. Kuaishou inked a similar agreement in 2021 with the third largest recording company in the global music industry, Warner Music Group (NASDAQ:WMG).
Private social media stocks
All of the companies listed above are publicly listed, but some of the most popular social media apps are run by privately owned companies. Here are a few behemoths:
- ByteDance — Beijing-headquartered ByteDance is the owner of video-focused social media platform TikTok (1 billion MAUs). The company also owns Douyin, the original Chinese version of TikTok (600 million daily active users).
- Sina — Chinese tech company Sina has four business areas, one of which is Sina Weibo (573 million MAUs). The microblogging tool is one of China's largest social media platforms.
- Telegram — Telegram (550 million MAUs) is an online messaging app created by brothers Nikolai and Pavel Durov. It has gained popularity because it prioritizes speed and privacy.
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, currently hold no direct investment interest in any company mentioned in this article.