Social networking stocks to follow closely

These companies are rich repositories of consumer data, which makes them attractive acquisition targets.

Vikram Barhat 27 June, 2016 | 5:00PM

Tech giant  Microsoft Corp.'s (MSFT) US$26.2-billion acquisition earlier this month of business networking site LinkedIn Corp. created a big splash in the investment world. Industry watchers say there is a natural synergy between tech companies looking to expand into new areas of growth and social media networks with a sizeable consumer base.

The LinkedIn deal sparked widespread anticipation among investors of similar acquisitions of social media companies that are struggling to be financially sustainable as standalone entities. There's little doubt that leading social and business networking companies provide highly visible platforms for advertisers and effective tools for brand creation. With a sizeable user base, these companies are rich repositories of consumer data which makes them attractive acquisition targets for big tech firms sitting on large piles of cash.

An integral part of the daily lives of millions of users globally, the social media is set to grow 18% annually between 2016 and 2020, forecasts market research firm Technavio. Much of this growth is attributable to the greater adoption of mobile devices and proliferation of the internet. According to a PwC report, the global mobile internet penetration is forecasted to rise from 35.1% in 2014 to 58.5% in 2019. Further, the number of social network users worldwide, as per eMarketer, is set to reach 2.72 billion in 2019, from 2.04 billion in 2015.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alphabet Inc Class C1,415.21 USD-3.43
Facebook Inc A249.02 USD-2.25
Microsoft Corp200.59 USD-3.29
NetEase Inc ADR470.98 USD-2.75
Twitter Inc45.33 USD6.08

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a freelance writer.

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