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Social Media Business A Good Investment?

by Team Caffeine · 0 comments

lori r taylor, revmediamarketing, social media, social media marketing, branding, product branding, networking, oneclicksocietyThere have been a flurry of social media IPO’s recently, some bringing in big bucks for companies like LinkedIn and Pandora. But does that mean every social media IPO is a good buy?

Think about it.

Once upon a time every IPO that came along saw a huge influx of cash from investors who knew little about what they were buying, just that they were getting in at the ground floor and the elevator was going up.

Today, investors are certainly a little cautious. After a few years of struggles in the markets no body is throwing cash around for fun. They expect results.

And social media has certainly been showing results. In the case of LinkedIn, for example, they have created a niche social media platform for professionals and maintained a solid growth trend for the past few years. This does not mean they are assured of future growth, but it certainly increases their chances.

Look, social media is no different than other industry. Yes, most of these companies have strange names and for some folks they hold no interest, but the fact is, they are turning profits, big profits in some cases and that’s what makes a good investment a great investment.

In recent weeks, we’ve seen the likes of LinkedIn (NYSE: LNKD), Pandora Media (NYSE: P) and Groupon file to sell shares to the public. And while at least two of these stocks were flying high at the outset, they’ve since sunk — along with fellow entrepreneurs’ hopes for a similarly frothy showing.

For its part, LinkedIn opened at $88.30 a share on May 27 and was trading at $66.81 a share today, which is down 32.4 percent. Pandora started trading a week ago, opening at $16 a share, and was trading at $13.30 a share today (down 15 percent.)

Like many tech-company watchers, I found myself wondering: Why the about-face? To find out, I tapped Leslie Weiss, a partner in the Chicago office of Barnes & Thornburg, who, as it turns out, has some interesting thoughts about the recent stampede of social media-related firms filing initial public offerings.

Here’s Weiss’ take on what all this social media mania might mean for entrepreneurs and their plans to similarly take their companies public:

Given the gloomier turn for LinkedIn and Pandora, how do you expect Groupon’s IPO to perform?

Despite the backslide, there’s a renewed enthusiasm for technology and online startups. Venture sources are starting to come around to invest in these companies, which shows that there could be an uptick in the VC market as well.

Investors are enjoying investing in cool ideas that they believe will make them lots of money due to high-profile, high-value IPOs like LinkedIn and Groupon. Small startups are starting to realize that they could be the next one to go public.

How does Groupon’s IPO set the stage for Zynga, Facebook and others?

Groupon’s IPO will inflate the entire market of online and social media companies as it relates to the valuation of their business. Facebook is already known to be worth billions of dollars — as is Zynga. This high valuation of their businesses is going to trickle down to other online companies who think their company should be worth the same amount. This also encourages new startups and the financing of those businesses.

Click here to read the entire article.

Team Caffeine

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