For better or worse, social media has changed the world. Today, social media giants Facebook, Twitter, Tumblr, Spotify and Pinterest are just a few of the many networks that permeate our everyday lives and help us stay in touch, get dates, select music and create DIY projects. Social media shrinks the world and gives everyone a voice.
The velocity of growth of existing companies, as well as the expansion of the industry with new companies, makes this space ripe for a growth investor looking to capitalize on the change agent that social media has become. Users are expected to grow by more than 200 percent between 2010 and 2020, to nearly 2.95 billion, generating almost $32 billion dollars in revenues according to the internet industry group Statista.
The relatively nascent stage of the industry means many companies will grow and flourish, while others will inevitably fail. For that reason, the specific risks associated with investing in single stocks may scare off potential investors. But investing in an exchange-traded fund that focuses on the industry diversifies away that specific risk and allows investors to participate in one of the greatest watershed events of the past few decades—and which has plenty of room to grow.
One such fund is the Global X Social Media ETF (SOCL), which tracks the Solactive Social Media Total Return Index and invests in global companies that provide social networking, file sharing, and other web-based media applications.
Another is the BUZZ US Sentiment Leaders ETF (BUZ). This ETF does not invest in the social media industry. Rather, it gathers data from social media posts—“mentions,” as they coined them—and invests in securities with “positive” sentiment. That sentiment is expressed in the fund’s underlying BUZZ NextGen AI US Sentiment Leaders Index.
A Play On Millennials
SOCL was established to fill an investment void by investing in large, global social media companies. Social media is not categorized as its own investment sector. Instead companies that operate in this space are scattered throughout other sectors, which prior to the launch of SOCL in 2011 made investing in them only possible at the individual stock level.
“We feel social media should be treated as its own industry but it is currently lumped into tech and consumer,” says Jay Jacobs, director of research at Global X Funds.
And investors are interested in these companies for one very important reason. “SOCL’s investment thesis is really a play on millennials—accessing this young demographic with rapidly growing consumer spending power and unique preferences—a segment that is hard to reach through traditional advertising,” Jacobs says.
This highly concentrated ETF holds about 30 securities, the majority of which are mid- to large-cap technology companies. The top three constituents are Tencent Holdings (12.3 percent of the portfolio), Facebook, (10 percent) and Twitter (8.7 percent). The fund’s geographic distribution is dominated by the U.S. and China at roughly 46 percent and 31 percent, respectively. Japan, Russia and Germany combined account for nearly the rest of the portfolio’s holdings.