By Andrew Nyquist
Yesterday, I was interviewed by SmartMoney and quoted in a featured news piece entitled 5 Hot Sectors for Job Growth. And it came as no surprise to me that the first sector to be covered was Social Media. It has become an integral part of our everyday life and conversation in America and around the globe, with many people spending the better part of their day passively or actively participating on Facebook, Twitter, LinkedIn, and other social network connectors. And Corporate America has picked up on this trend… Big Time.
IPO offerings by LinkedIn (LNKD) and Zynga (ZNGA) gave everyday investors a hint that social media was on the rise, but the recent Facebook (FB) IPO filing, and word that the company could be valued at $100 Billion, brings it all front and center. From media coverage to investment dollars, this sector is pushing its way onto Wall Street and into the mainstream of Corporate America. On Wall Street, LinkedIn was valued at $4.3B for its 5/9/2011 IPO and has since soared to $7.79 Billion. Similarly, Zynga was valued at $7 Billion with its 12/15/2011 IPO and that has since risen to $9.36 Billion (both valuations as of Friday’s stock market close). Note as well that Zynga stock is up almost 30 percent since the Facebook IPO news. Okay, so you get the picture. There is a lot of frenzied money flowing into this sector.
As this trend continues, I expect Corporate America to spend time and money trying to figure out how to maximize the business side of the relationship. The eyeballs are just too alluring. Whether it’s corporate influence, ad dollars or just creating a news outlet with a personality, businesses are signing up. And this trend stands to benefit big boys Twitter, Facebook, and LinkedIn quite a bit.
But with all the hype comes scrutiny. Privacy questions continue to dog the sector. Because of the personal nature of the business, this comes as no surprise. And it is an issue that will probably linger on for some time. Privacy advocates focus much of their attention on Facebook, but the sector as a whole will have to find a healthy medium and storyline if it wants to keep the star shining bright during the initial growth phase.
Other questions focus on valuations. Many look at the paltry earnings of these companies and scoff at their present valuations. But Wall Street is forward looking and focused on potential. Investors are looking out on the time horizon and seeing huge growth possibilities. However, with hype comes expectations, and no doubt investors will expect public companies like LinkedIn, Zynga, and soon-to-be public Facebook to outperform.
The combination of money inflows and growth expectations should fuel employment opportunities while providing additional ways for entrepreneurs to make money. Furthermore, hiring demands for social media positions are likely to land square in the lap of many corporate HR Managers. Additionally, I can see this increasing the need for advisors and consultants in the field.
The movement is gaining steam. And the best part for the industry is that it’s just now starting to take off.
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No positions in any of the securities mentioned at time of publication.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.