Social media names have been some of the best and worst performers from a fundamentals perspective over the last year. Facebook (FB) continues to be the darling of the space, growing revenues by 50% or more quarter-after-quarter — an impressive feat for a company with a market capitalization of $365 billion. Twitter (TWTR) and Yelp (YELP) are consistently the biggest losers in the group, while LinkedIn (LNKD) tends to report mixed quarterly results.
It was once the concern of many investors that Facebook’s U.S. business — its most profitable market by revenue per user — had matured.
However, the company has proven it’s much more than just a social media platform, becoming a full-blown media outlet with 40% of Americans saying they get their news from the site. Expansion internationally has gone well, especially in emerging markets like India, where FB has the opportunity to reach more than one billion people.
Monthly active users (MAU) tend to be one of the most heavily watched numbers for the social media names, and unlike its peers, FB continues to grow that number by double-digits quarter after quarter, with no signs of slowing down.
Ad revenues still make up a majority of total revenues for the company, driven by mobile ads in particular.
The addition of video instant ads has been the big winner in 2016, adding more value for advertisers. Strategic acquisitions of Instagram, WhatsApp and Oculus Rift during the last few years also have driven growth, with Instagram growing faster than Facebook.
All other social media names seem to pale in comparison. While LinkedIn has had some strong quarters, it just couldn’t keep pumping out the same revenue growth numbers, and hence, is being taken over by Microsoft for $26.2 billion. However, in the first quarter of 2016 the company saw the largest growth in cumulative members since 2014, up 19% to 433 million, but still a relatively small number when considering Facebook’s 1.7 billion MAU worldwide.
Twitter and Yelp seem to be at the bottom of the barrel, with acquisition rumors swirling for both. Surprisingly, Yelp’s stock did well during the first half of 2016, gaining 12%, while Twitter was down 21%. Still, profit and revenue growth has been decelerating for both.
Twitter constantly comes under criticism for stagnant user growth. In the latest reading, the company reported 313 million MAUs, a year-over-year increase of just 3%. Volume of tweets per day has declined considerably as well, falling by more than half since the peak in August 2014. Concerned by the downturn in metrics, advertisers have started to pull back their business.
In an attempted turnaround, Twitter has gone all in on live video streaming. This year the company aired special Wimbledon coverage and both political conventions with plans to broadcast two National Football League games this upcoming season. If these new efforts are unable to attract ad revenue, then the best-case scenario for Twitter could be a buyout.
Yelp, once the leader for restaurant and business reviews, has failed to gain traction in the investment world. In spite of decent revenue growth in the past years, profits have struggled to turn positive and shares are down nearly 70% since the peak in March 2014.
While Yelp is still the most highly used platform for crowdsourced business reviews, Facebook’s review system eliminates the Internet anonymity typically associated with a Yelp rating.
After Microsoft’s acquisition of LinkedIn, which of the social media names will be the next takeover target? While Facebook seems primed to become the next Internet behemoth, Yelp and Twitter look ripe for a buyout.