Stock Markets and Social Media? Absolutely!
This year, global social media users swelled to a record-breaking 4.9 billion. Statistics like these suggest that social media stocks may be a great investment opportunity — but what are the best social media stocks to invest in?
Social media is big business. One recent report valued the industry at a whopping $231 billion.
It’s also an incredibly complex market, with countless platforms, technologies, and companies all doing their best to stay competitive in this rapidly evolving space.
This article explores how to invest in social media stocks, what social media can tell us about the broader economy, and which are the top social media stocks to watch in 2023.
What are social media stocks?
Should you invest in social media stocks?
What Social Media Stocks Tell Us About the Economy
Social Media Stocks to Watch
What are social media stocks?
Of course, to craft an effective social media investment strategy, it’s important first to understand what a social media stock is.
The social media landscape is constantly evolving, but at a high level, social media refers to any digital technology that enables users to share ideas through virtual networks and communities, whether via text, images, videos, or some combination.
Some of the most widely-used platforms today include TikTok, Snapchat, Instagram, and X (formerly Twitter) — but new platforms emerge constantly, always looking to compete with incumbents and capture new market share.
Because of its massive user base, social media is a major component of many companies’ marketing strategies.
Many firms create their own social media presence on top platforms to promote their brand and engage with existing and prospective customers through comments, reposts, and more.
Clearly, social media is a critical part of the broader tech ecosystem and global economy. As such, it’s hardly a surprise that social media stocks are now crucial to many investment strategies.
Specifically, many investors may look to social media stocks to buy shares in some of the most cutting-edge, rapidly growing companies.
Should you invest in social media stocks?
While there’s no one-size-fits-all approach to investing (and never any return guarantee), many experts have suggested that social media stocks can be a solid option for today’s investors.
For example, stock market expert Josh Dylan argues that investing in social media stocks is an “attractive proposition” for two reasons.
“Firstly,” he notes, “social media usage continues to climb, creating a vast and growing market for these platforms.”
Secondly, he continues, “the digital advertising market, a key revenue stream for social media companies, is also on a growth trajectory as businesses increasingly shift marketing dollars from traditional channels to online ones.”
To be sure, social media stocks aren’t without risk.
Dylan points out that the social media sector is “subject to changing user preferences, significant regulatory scrutiny, and intense competition among platforms.”
He says, “As with any investment, potential investors should conduct thorough research and consider the risk factors unique to this dynamic and highly visible sector.”
It’s always important to be aware of the risks associated with any form of investment.
However, according to a recent research report from Market Research Future, the global social media industry is expected to continue to experience “healthy growth” over the next decade.
So, it’s worth considering investing in social media stocks as part of a diversified investment portfolio.
What Social Media Stocks Tell Us About the Economy
In a recent report from the Carnegie Institute, market experts Claudia Biancotti and Paolo Ciocca suggest that social media has become increasingly intertwined with the broader global economy.
As they explain, “Discourse on social media increasingly affects personal financial decisions…the influence of social media on financial markets is here to stay, as younger generations start saving and investing.”
In other words, as social media continues to grow, it’s likely to have more and more influence on the broader stock market.
Especially since the social media industry is particularly relevant to younger generations, this market will likely have an increasingly large effect on the global economy as younger demographics grow and gain buying power.
Indeed, studies have shown that growth in social media may correlate with broader economic growth across sectors and geographies.
One recently published study found that increased social media penetration corresponded to a boost in economic growth across 177 countries worldwide.
Conversely, analysts have reported that when one social media stock falls, it can have substantial ripple effects on other firms’ stock prices.
For example, when shares of the popular image-sharing platform Snapchat dropped substantially in 2022, Piper Sandler analyst Tom Champion suggested that the drop was reflective of broader trends, arguing that “at this point, our sense is this is more macro and industry-driven versus Snap specific.”
Clearly, social media stocks can tell us a lot about the state of the broader economy. In fact, according to the Pew Research Center, more than 80% of Americans aged 18-49 use at least one social media site.
These platforms have become a massive part of the global economy, so it’s only natural that social media stocks have become closely connected to more significant economic trends.
Social Media Stocks to Watch
In light of the importance of social media stocks in the broader investment landscape, which are the top stocks to watch in 2023?
Below, we’ve listed some of the top social media stocks based on past performance, current metrics, and projected short- and long-term growth.
Alphabet, Inc. (NASDAQ:GOOG)
What They Do
Alphabet, Inc. is Google’s parent company, which operates several social media platforms such as Google Meet, Blogger, and YouTube.
Alphabet also ran Facebook competitor Google+, but this platform was shut down in 2019. Today, YouTube alone boasts more than two billion active users and more than half of global internet users access the site at least once a month.
Why They’re Worth Watching
Google has long been one of the major players driving growth in the tech sector. Today, analysts are particularly optimistic about Alphabet’s prospects for a few key reasons:
First, Google’s ad revenue has remained strong in recent months despite fluctuations and market disruptions.
In addition, while Google’s investment in AI may be somewhat overshadowed by Microsoft-owned OpenAI’s recent successes with ChatGPT, analysts have largely argued that Alphabet remains well-positioned to leverage new AI technology.
Finally, Stifel analyst Mark Kelley has argued that YouTube’s core product and YouTubeTV likely represent substantial opportunities, contributing to his “buy” rating for Alphabet in March of this year.
Meta Platforms, Inc. (NASDAQ:META)
What They Do
Meta is behind the leading social media apps Facebook, Instagram, Messenger, and WhatsApp. This family of apps represents a huge global revenue base, with a market share of more than 16% in Q2 2023.
Beyond its well-known platforms for sharing posts and sending direct messages, Meta has made substantial inroads into cutting-edge technologies such as Virtual Reality and wearable devices.
Why They’re Worth Watching
In its most recent annual investor letter, investment management firm Davis Advisers expressed confidence that while Meta has hit some stumbling blocks,
David Advisers says its “growing user base, as well as the continued growth in the amount of time users are spending on these platforms, is a far more important indicator of Meta’s relevance and value.”
In particular, Davis Advisers pointed to Meta’s ad revenue per user being up more than 30% since 2019, as well as its three billion active users (which represents one of the largest user bases of any company in history), as indications of its enduring success.
Match Group, Inc. (NASDAQ:MTCH)
What They Do
Match Group focuses on a specific niche within the social media space: online dating. Best known for its popular apps Hinge, OkCupid, and Tinder, Match has grown steadily (and produced double-digit revenue growth) for years.
In addition, unlike most other social media firms, Match derives most of its revenue from user subscriptions rather than ads.
This makes it an excellent option to consider if you’re looking to diversify your investments across different social media business models.
Why They’re Worth Watching
In 2023, Match expects to achieve year-over-year growth of up to 10% overall and direct revenue from its market leader, Tinder. In addition, Hinge is projected to generate $400 million in direct revenue in 2023.
The company also made headlines for its $1.725 billion acquisition of Korean social and video platform Hyperconnect, indicating its appetite for growth and expansion into new markets.
Microsoft Corporation (NASDAQ:MSFT)
What They Do
While Microsoft might not be the first company that comes to mind when you think about social media, Microsoft Corporation is, in fact, a major player in this space.
LinkedIn, Microsoft Teams, and Skype all fall under its purview.
LinkedIn has over 930 million members in more than 200 countries worldwide, while Skype and Teams account for more than 40% of the global market share for video call platforms.
In addition, Microsoft also owns Yammer and Flipgrid, which offer enterprise social networking and educational video-sharing services, respectively.
Why They’re Worth Watching
According to analysts from Morgan Stanley, Microsoft has “favorable fundamentals” and is “increasingly well positioned” in 2023.
Moreover, the most recent CIO survey revealed “several forward-looking indicators that indicate Microsoft’s strong relative position,” which suggests that Microsoft may continue to be a strong player in the global social media market.
Tencent Holdings Limited (OTC:TCEHY)
What They Do
Any top social media companies analysis would be incomplete without mentioning Chinese tech giant Tencent.
Tencent is the parent company of well-known apps like QQ, Weibo, and WeChat, and its consumer businesses extend beyond instant messaging and social networking to various online gaming, video streaming, music sharing, and other services.
While its market penetration remains limited outside Asia, it was the world’s tenth most valuable company by market value in February 2022, and it was the first Asian technology company to cross the $500 billion valuation mark.
Why They’re Worth Watching
Especially if you’re looking to broaden your portfolio beyond U.S.-based companies, Tencent is one of the best social media stocks to consider.
Indeed, as global investment bank, brokerage, and advisory firm Loop Capital explained in a recent research note, Tencent’s “core gaming and payments engines show promising signs for valuation, as well as a positive outlook for advertising revenue growth.”
The research note argues that this stock is expected to continue performing well thanks to positive macroeconomic trends and expected revenue growth across Tencent’s core segments.
What You Need to Know
Importantly, this article is for informational purposes only. It is not intended as personal financial advice, and risks are always associated with any investment or financial decision.
However, if you want to learn more about the best social media stocks to invest in, the data-driven, expert-approved tips outlined above may be a helpful starting point.
From Alphabet’s YouTube to Meta’s Facebook to Tencent’s WeChat and countless others, the social media industry is booming around the world.
As such, social media stocks can tell us a lot about the broader state of the economy, and they can represent a substantial investment opportunity for anyone looking to buy shares in a high-growth, rapidly evolving industry.
