I have a love/hate relationship with social media. Social
media destroyed my business, but now I find it indispensible. Let
Starting from scratch as a newly minted college graduate with
a business degree, lots of nerve and very little money, I
launched my venture with a $15 investment in marketing fliers and
a tank of gasoline.
Being interested in the real estate business, I saw a need to
supplement the regional listing service with an inexpensive
weekly hard-copy supplement for the local community of real
estate agents. I designed and distributed a flier to the real
estate offices around my home that explained what I was
Unbelievably, the first week in business I had made my initial
investment back plus a small profit. Soon, the business started
making more money than my meager salary at the insurance company,
prompting me to take it full time. I outsourced most of the
labor, and my little company grew to be the go-to source of
updates and marketing of listed residential properties in my
However, I had an unstoppable competitor always nipping at my
heels. This competitor was the Internet at first, but then it
became the final nail in my little company's coffin -- in the
form of social media.
At first, I didn't pay much attention to the growing influence
of the Internet. I knew that it had a huge effect on certain
markets around the country, such as California. However, because
my clients were generally old-school agents who did things the
same way they had done for years, I felt safe.
After years of an expanding or steady business, however, I
started to notice a decline as real estate agents began carrying
smartphones and laptops and tapping into networks that connected
them with the latest information in real time. The need for
weekly hard-copy updates soon faded into oblivion as even my
die-hard, old-fashioned, newspaper reading, landline-only clients
started switching to social media sources for their
As fast as my business started, it ended. Although social
media destroyed my first business, I couldn't imagine living
without it now.
If You Can't Beat Them, Join Them
Social media sites like
LinkedIn (Nasdaq: LNKD)
Facebook (Nasdaq: FB)
and Twitter have become my go-to source for networking,
friendships and even up-to-the-second stock market news. These
sites have not only changed the world, but they have changed my
world for the better.
Social media's impact has been truly revolutionary. According
to eMarketer.com, more than 1.7 billion people will use social
media in some way this year.
Not only has social media changed the lives of users, it has
made many investors wealthy. Even after its IPO "flop," Facebook
is trading near $51 after falling to $17. LinkedIn has soared
nearly 150% this year.
Now, a new social media monster is poised to enter the
publicly traded domain. Recently, Twitter filed with the
Securities and Exchange Commission to start the ball rolling for
its initial public offering.
Launched in 2006, this social media service has revolutionized
communication through its 140-character real-time bursts. It now
boasts more than 200 million users. While Twitter is unlikely to
be the largest Internet IPO ever, it has Wall Street buzzing in
In comparison, Facebook raised more than $16 billion in its
May 2012 IPO. Rumors and private stock exchanges have Twitter
valued at roughly $10 billion. It is said that Twitter hopes to
raise about $1.5 billion, which will value the company at around
$15 billion to $16 billion after the IPO. Shares are expected to
hit the market at around $30 with approximately 50 million
Free to use, Twitter has only recently started earning revenue
through advertising. Research firm eMarketer.com estimates
Twitter's revenue will double in 2013, to more than $580 million,
then climb to $950 million the following year.
Twitter's IPO will very likely make its early investors and
founders very wealthy. Right now, more than 50 institutions and
individuals own shares from direct purchases, acquisitions and
secondary sales. Famous names like magnate Richard Branson, Saudi
Prince Al-Waleed bin Talal and actor Ashton Kutcher own shares,
along with a host of lesser-known venture capitalists.
Even if you're not among this lucky group of individuals,
however, there are still ways you might profit from Twitter's
As in most IPOs, non-insider investors are better served with
less risk by waiting several days for the hype to settle down
before buying in. IPOs are notoriously volatile and suitable for
only the most sophisticated trader on the first day of trade.
How Can You Profit Now?
There are two main avenues in which individual investors may
profit from Twitter's IPO: a social media exchange-traded fund (
) and a venture capital firm that holds about 15% of
Global X Social Media Index ETF (Nasdaq: SOCL)
This ETF is made up of a basket of social media companies from
the United States and Asia. The ETF is up more than 40% this year
and will likely obtain shares in Twitter as soon as possible. In
addition, China's Alibaba Group is considering going public soon,
and that could also substantially boost the value of this
GSV Capital (Nasdaq: GSVC)
This closed-end management firm owns about 15% of Twitter's
investible assets, along with several other technology companies.
Basically, this firm obtains private shares in pre-IPO companies
in the hope of successful offerings. It may have a huge winner
Risks to Consider:
We only have to look back as far as Facebook's IPO to see the
risk of initial investment in IPOs. While Twitter might not flop
like Facebook, there are still plenty of unknowns and risks
involved with its IPO.
Action to Take -->
Although GSV Capital may be suitable for risk-taking,
sophisticated investors, I lean strongly toward the Global X
Social Media ETF as the wisest way to participate in the early
stages after Twitter's IPO because it spreads the risk across the
social media space. In addition, the hype surrounding Twitter and
the potential Alibaba Group IPO should result in profits for this
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