Social Media Buy-Ups Lisa February 20, 2014 Assets, Financial News News emerged today that social media powerhouse Facebook has paid $16 billion to acquaire instant messaging service Whatsapp. The big daddy of social media has a history of buying up its potential competitors; Facebook purchased Instagram for $1 billion in 2012, and also offered the creators of Snapchat $3 billion dollars towards the end of last year, though they knocked this proposal back. Facebook’s acquisition of Whatsapp, which boasts almost half a billion users, is its most expensive to date. Payment will be made in the form of $4 billion of cash, plus about $12 worth of Facebook shares. You could be forgiven for assuming that the motive behind the purchase is to eradicate competition for Facebook’s own messaging service. However, Whatsapp will continue to function independently of Mark Zuckerbeg’s golden egg, with no interface integration planned (as far as we know). Today’s announcement leads us to re-visit the social media market, and question which companies (if any) are safe bets for investors. Social media services have gained a reputation for being rather volatile on the stock market. However, as the following case studies indicate, long-term growth and profit does seem like a realistic prospect – even if there are a few bumps in the road. When Facebook initially appeared on the market in 2012 its IPO, or Initial Product Offering, was $38. After a brief first-day spike (a pattern which has been observed with numerous social media share offerings), the value of the shares declined quite consistently, dropping to about $20 three months after its stock market debut. However, things have since improved; at present, Facebook shares sit at around $68 each, having experienced a 1.1% bump in the wake of today’s news. Since Facebook first appeared on the stock market, various aspects of its brand and operations have changed. For one thing, advertising has become more targeted – and thus, perhaps, more lucrative. However, the trend of social media users moving from desktops to mobiles could threaten this, with the mobile format and interface being less ad-friendly. Facebook also appears to be losing its touch with younger social media natives – something that might explain their acquisition of the younger-skewing Whatsapp. A less complicated (and more encouraging) case study comes in the form of professional media site LinkedIn. The IPO of LinkedIn was set at $45. At the time of writing, the value of each share in the company has since grown to almost $200. However, it’s important to remember that for every success story there are sure to be at least a couple of failures. Compared to Facebook and LinkedIn, Twitter is quite new to the stock market, having appeared for the first time in November 2013. Its shares started off valued at $26. To date, their value has followed a similar trajectory to that of Facebook, and currently sit at about $55 apiece. On the whole, these three example paint a fairly positive picture of social media services on the stock market. However, analysts continue to warn investors about the fast pace of change in the social media market – should things go wrong, they’re likely to do so very quickly. There’s no such thing as a truly safe investment, but sticking with a well-established social media site could help to minimise risk.