What Makes Social Media Sector Investing Different from Investing in Social Media Stocks?

Global X Social Media launched this week. A new ETF, it tracks the Solactive Social Media Index and is (for now, at least) heavily weighted with holdings from China. Its largest are Tencent, Sina and NetEase. But, it does include the likes of Pandora and LinkedIn. No doubt, Zynga will wind up in the mix by the end of the year.

Global X Social Media (SOCL) started strong at approximately $20 a share, according to CNBC. But, it has since slipped to around $18, after going as low as $16. Well, that was yesterday. As of this morning, SOCLhas fallen some more and is below $15 a share.

This isn’t the first social media investment vehicle that has shown the risks inherent in the sector, which leads to an important question: is it the sector or the brands that are fueling growth?

I was on the floor of NYSE for the Pandora IPO, and I watched the price tick higher and higher on a trader’s tablet. By the time I got back to my office, only a block away, Pandora was already giving back its easy gains.LinkedIn has shown much more resilience but has come back from its original heights. For Groupon, it’s just too soon to tell.

In each of these situations, it seems as though brand (and hype, of course) plays a major role in investor behaviour. Yet, the sector taken as a whole doesn’t seem to inspire the same confidence. I get the feeling that this suggests the future of the social media sector … and it reminds me of a rodeo we all rode a dozen years ago.

Click here for FREE email alerts from Inside IPO >>

Source: CNBC

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.