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It’s hard to buy a cup of coffee or pair of socks these days without being urged to “like us on Facebook” or “follow us on Twitter.” The speed at which the corporate world has embraced social media is matched only by the speed at which the social media itself is changing.
(For those still using the telephone and even postcards to communicate, social media is a term that describes a wide array of Internet-based services used to create and distribute content in different ways. It was pioneered, to some extent, by Friendster, a social networking site started in 2002 that has long since been supplanted by the industry’s behemoth, Facebook. Another one-time social media darling that has suffered lately is MySpace, which was purchased by News Corp., in 2005 for $580 million and sold last month for $35 million.)
Fund-management companies like Vanguard, PIMCO, Charles Schwab, Putnam, and others are now using social-media outlets to promote their funds, and as social media companies grow in popularity and profitability, they are beginning to turn up in the portfolios of mutual funds and exchange traded funds – sometimes even before they have completed an initial public offer.
The bellwether for social-media companies thus far is Mountain View, Calif.-based LinkedIn, which calls itself “the world’s largest professional network on the Internet” with more than 750 million members in over 200 countries.” LinkedIn stock debuted in May, with shares priced at $45. The stock soared as high as $120 on its first day of trading. At a recent price of about $93 per share, the company was valued at more than $8 billion.
Fortune did not smile so warmly on purchasers of shares in Renren, a Chinese social-networking company with its sights focused on college students and that’s drawn comparisons with Facebook. Renren’s U.S.-listed ADRs were priced at $14 and zoomed to $24 during their first day of trading but fell afterwards, declining to nearly $6 before recovering to a recent $11.
Shares in Pandora Media, an Internet-media company focused on music, have turned in mixed results; priced at $16, they reached as high as $26 on their first day, but fell to nearly $12 just two days later and traded at about $18 more recently.
Public offerings of shares in social-buying site Groupon, social-games company Zynga, micro-blogging site Twitter, and the king of them all, Facebook, are expected to come by the end of next year. Groupon and Zynga have already made their filings with the SEC.