Although the Russian activities only account for a fraction of the companies' total turnover, the advertising business is suffering temporarily. Social media companies earn their money primarily with targeted advertising and the exploitation of user data. In general, however, advertising on social media is a huge, strongly growing market. Forecasts predict double-digit growth rates in some cases for spending on advertising on these channels over the next few years. According to estimates by Statista, this could increase by almost half to almost 190 billion euros worldwide by 2025.
Apart from the limited Russian business, the high activity on the platforms in Eastern Europe brings positive effects for the operators. The conflict in Ukraine has increased user activity on the platforms of Meta, Twitter and Alphabet by three to five percent. Meta Platforms, or Meta, includes Facebook and Instagram, among others. The video platform Youtube most recently contributed ten per cent of parent company Alphabet's group revenue. Youtube has the highest activity growth due to the war in Eastern Europe, followed by Facebook and Twitter (Source: Trip Chowdhry, Analyst at Global Equities Research).
In the growing advertising market, the increase in activity also makes the video platform more interesting and thus more valuable for advertisers. Analysts at the US investment bank Needham & Company recently calculated that Youtube could be valued at 640 billion dollars in a possible IPO. The analysts based their estimate, among other things, on the underestimated importance of Youtube on the stock market compared to Alphabet's larger business units such as Google services. With an estimated value of over 600 billion dollars, Youtube alone would be worth more than Meta Platforms. The company, which owns Instagram, Facebook and Whatsapp, had more than $117 billion in revenue in 2021 and currently has 2.82 billion daily users, according to the company.
A persistent threat to authoritarian regimes: Ukrainian President Selensky currently has 15.2 million followers on the photo and video platform Instagram.
Russian President Putin is aware of the threat to his regime posed by the huge user base that social media content reaches. To further control the flow of information, he passed a new media law that sanctions alleged misinformation about Russian forces with prison sentences of up to 15 years. This also restricts activities on social media. The German Foreign Office warns on its website that private statements on social media could also be associated with incalculable personal risks under the new Russian law. It advises extreme restraint or, alternatively, to leave the country.
META PLATFORMS: Cheap platform package
Facebook, Instagram, Whatsapp: the Meta group has social platforms with a total of 2.8 billion users worldwide, making Meta the global No. 1. The Metaverse offers fantasy, boss Zuckerberg wants to play a key role in the future virtual universe. User growth is declining, as is advertising revenue due to new privacy policies at Apple, for example. Risky but increasingly cheap. Therefore it is a hold for me.
ALPHABET: Giant with growth pearls
The group's subsidiary Youtube is one of the most successful social media platforms in the world. Other business areas include Google services and the cloud business. The subsidiary Waymo, which develops technologies in the field of autonomous driving, brings share price fantasy. Alphabet recently acquired the IT security company Mandiant for 5.4 billion dollars. The upcoming stock split (1:20) is said to make the stock even more attractive for investors. I don’t agree with that, since fractional shares are available everywhere. I will stay on the sideline here.
TWITTER: Still in a downward trend
The downward trend in the share price continues, although the figures presented for 2021 were solid: a 37 per cent increase in revenue and confirmation of the growth targets for 2023, according to which the number of monetisable users is to rise from 217 million to 315 million. Analysts surveyed by Bloomberg expect positive earnings per share from 2023. Many investors are waiting for a sustainable bottom for Twitter. I will continue to hold.
Have a great week!
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