Facebook, Twitter, Google, LinkedIn: Four Who Dominate Social Media
Social media touches almost everyone’s lives today, either directly or indirectly. You can love it, you can hate it — but you definitely can’t ignore it.
Social media platforms have connected the world in a way that was almost unimaginable before. It has made the flow of information, thoughts and ideas seamless across the globe.
The social media landscape, like any other hi-tech space, evolves rapidly and it is generally considered a “winner takes all” market. Consequently, we are likely to see the current market leaders consolidate their positions in the industry through acquisitions. (See panel.)
The revenue models of social media companies are also more clearly defined now — with increasing potential for advertising revenue. Corporates have slowly started allocating a growing share of their advertising budget to social media, away from TV, radio and print.
Unlike TV and radio, where targeting specific audiences and measuring impact can be challenging, social media companies offer advertisers the ability to broadcast highly tailored messages to specific audiences and also measure response rates.
Here are four of the most attractive publicly listed social media companies that are dominant players in this space.
Alphabet
Alphabet is an American multinational conglomerate created in 2015. It is the parent company of Google. Based in Mountain View, California, it is headed by Google co-founders Larry Page and Sergey Brin, with Page serving as chief executive and Brin as president.
Alphabet is a web-based service aimed at organising information and improving the way people connect with information. It provides search capabilities across different media (web, images, video, maps, etc), cloud-based services, software technologies and online advertising to its users. Its advertising program, AdWords, is an auction-based program through which Alphabet generates most of its revenue.
Alphabet’s exposure to social media as a theme may not be high in the strictest sense of the term. Google Plus, which would be a direct competitor to Facebook or Twitter, never really took off. Nevertheless, many of Google’s businesses depend on the existence of a strong “network effect”.
YouTube is not the only video content publishing and sharing platform, but it is one of the most popular ones. One of the contributing factors is the network effect.
Alphabet’s portfolio involves companies active in technology, life sciences, investment capital, and research. Some of its subsidiaries include Google, Calico, GV, Google Capital, X, and Google Fiber. Following the restructuring, Page became chief executive of Alphabet while Sundar Pichai took his position as chief executive of Google.
Facebook is a multinational social media and networking platform. Through various tools, Facebook allows users to connect, share, discover and communicate with one another over computers and mobile devices. Facebook also provides developers with tools to build websites and applications.
Facebook’s position in the social media space dominates all others. Consider the numbers: Facebook has two billion registered users and 1.65 billion monthly active users. And 900 million of those use Facebook messenger regularly. WhatsApp now has more than 1 billion registered and monthly active users while Instagram just hit the 500 million active user metric. There are a number of factors (the introduction of video, WhatsApp, Instagram and Messenger monetisation, further platform improvements) that is likely to contribute to further revenue gains for Facebook over the medium term. Industry analysts expect Facebook to increase earnings by 175 per cent this year and 30 per cent in 2017.
Tencent
Tencent is one of the largest internet companies in the world. Its services include social networks, web portals, e-commerce and multiplayer online games.
Its offerings include the well-known (in China) instant messenger Tencent QQ and one of the largest web portals in China, QQ.com. Its mobile chat service WeChat has helped bolster Tencent’s continued expansion into smartphone services. Tencent also holds a 15 per cent stake of JD.com, one of the largest B2C online retailers in China.
Tencent has size and scale. Instant messaging platform QQ has more than 800 million monthly active users. Weixin/WeChat reaches more than 762 million registered users and 350 million monthly active users.
Tencent is well positioned to capture the rising mobile monetisation opportunities, leveraging its dominant position in the social communication platform of WeChat and Mobile QQ.
Twitter is a multinational social media and networking platform. Through various tools, Twitter enables users to connect, share, discover and communicate with one another over mobile devices and computers.
Twitter serves as a platform for public self-expression and conversation in real time. It can also be used as a marketing tool for businesses. As of March, Twitter had one billion registered users and 310 million monthly active users. You may have read that the Twitter share price has struggled lately. While the company’s business model is attractive, Twitter has not adequately monetised the user base. Twitter’s recent sequential revenue growth decline is unprecedented versus its peers. There remains a possibility that Twitter improves execution and is able to reverse the trend of declining growth. User monetisation could improve faster than industry forecasts.
There is always a chance that Twitter is viewed as a strategic takeover target given its user base and is acquired at a premium (like LinkedIn). Twitter is generating advertising revenue and producing valuable real-time data. Twitter’s most valuable content is produced by the so-called power users: politicians, authors, academics and celebrities.
Wheeling dealing in social media
There has already been a spate of high profile acquisitions in the social media space as leading stocks compete to try and acquire the customers of the future. Google’s original move back in 2006 to purchase YouTube for US$1.6 billion has triggered a slew of major takeovers in recent times — here’s the takeovers investors need to know.
The global social media powerhouse Facebook led by Mark Zuckerberg has acquired Instagram and WhatsApp.
Now known by its parent company name, Alphabet, Google has acquired Polar (social polling software) in September 2014 and YouTube in November 2006.
Led once more by founder Jack Dorsey the social media group has acquired Periscope
(live video streaming app) and WhetLab (Artificial intelligence) in 2015.
The most high profile transaction in this space is the recently announced acquisition of LinkedIn by Microsoft for US$26.2 billion in cash. The transaction is in the process of closing.