Social media is seemingly everywhere all the time. Your friends are tweeting and blogging, your inbox is filling with invitations from LinkedIn, your kids are constantly on Facebook (and so’s your mom!), your spouse can’t wait to "check in" as you as sit down at a restaurant, you find new music on MySpace and your smartphone texting and instant messaging bills are starting to get out of control.
Clearly, the social media revolution is in high growth mode; it’s crossed the chasm as they say! Everyone’s connecting, talking, sharing and learning from each other online. In fact, according to Forrester Research, consumers make more than 500 billion online impressions annually to one another about products and services. New companies are launching exciting new services and applications seemingly daily. Lots of money is pouring into the sector.
That’s great — but how can you profit from this explosive rise in social media?
Obviously starting the next Facebook is ideal but unlikely. The ways the so-called "smart money" invests is through early-stage venture investments into such companies. However such investments are virtually always limited to large, institutional investors and are not publicly available.
But you know and read about the companies that are hot and growing: Facebook, Twitter, Foursquare, LinkedIn and others. You very well may use many of their services and applications. However, virtually all of these "pure play" social media companies are private, meaning there are no shares generally available in which you may invest.
But this doesn’t lock you out of this burgeoning sector. It simply means you need to be a bit more creative about how you find companies that are benefiting from this growth that you can invest in.
As these companies mature and decide to go public (if not acquired beforehand, which often happens by larger companies looking to add high growth units and talent to their existing businesses), there will certainly be opportunities to add social media investments to your portfolio.
While none of the leading players have any imminent announced initial public offering plans, rumors swirl about companies like Facebook, LinkedIn, social gaming site Zynga (maker of Farmville and Mafia Wars among other hits) offering shares to the public within the next 12 months. Smart investors will stay tuned and look carefully when these IPOs hit. Many of these offerings are likely to be heavily subscribed, but you need look no further than Google’s highly successful IPO to understand the potential gains.
There are investing opportunities that can yield big investment gains from the social media networking world. You can invest in public companies that have bought some of these fast-growing social media pure plays and are building and investing themselves in related businesses and public companies that stand to benefit from the explosive rise in social media-driven traffic, ever increasing time spent online and changing online behaviors.
The following are a number of companies that can benefit from the explosion in social media, grouped by sector. Bear in mind that many of these companies are quite large, and thus their fortunes can also be impacted by all types of company and industry and market forces.