The 1 exception to the social media bust

October 06 00:26 2015

One of Twitter (TWTR) investors’ biggest concerns — the lack of a CEO — was solved Monday with co-founder Jack Dorsey officially taking that top slot.  The stock rose on that  news, but overall the social media giant has still been a bust for investors. In fact, almost all the major social media stocks have been a disappointment for investors over the past couple years. There’s one runaway and glaring exception in the form of industry heavyweight Facebook (FB) – yet other big social media companies, such as Twitter and LinkedIn (LNKD) are all down big-time this year and have been losers since Twitter sold its shares to the public for the first time nearly two years ago.twitter

Such under performance probably comes as a surprise to investors who blindly piled into the sector years ago as social media mania was at its peak.  Many assumed social media would give the companies a huge advantage in online marketing and further disrupt other traditional industries in the media space. And while the industry has spurred massive change in the business world, social media stocks have been big losers.

Twitter sold shares to the public with much fanfare with shares starting to trade on Nov. 7, 2013.  Shares closed at $44.90 apiece. Investors who jumped into the stock then thinking it was a ticket to cash in on the social media gold rush have been sorely disappointed as shares have dropped nearly 39% since then. And that decline is even eased a bit by the stock’s 5.6% bump higher Monday to $27.80 after the company finally named Dorsey CEO.

But Twitter is far from being the only social media company that’s struggling, and that’s especially true this year. Take Yelp, which combines reviews and social networking.  That site, which compiles and shares reviews by consumers about everything from restaurants to plumbers, has had its shares fall a crushing 70% over the past two years. Just this year alone the shares are down 59%.  It’s not just traders sucking the air out of the room. Analysts are calling for Yelp’s adjusted profit to fall 35% this fiscal year.  So much for the unbridled growth potential of social media.

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