The Social Network ETFPublished 9/27/2010 4:35 p.m. EDT
Facebook is not yet a public company, but that doesn't mean that you can't invest in one of the most important ideas behind this booming social network: the power of online communities.
As movie-goers eagerly await the opening of The Social Network, a fictionalized expose of founder Mark Zuckerberg's early years, it's an important time to contemplate the enormous impact that online communities have had on everyday life and business. Some of the most successful publicly listed Internet firms today make ample use of the social networks at their core.
Consider a site like eBay (EBAY), which not only brings buyers and sellers together but also encourages all users to create profiles and online stores and comment on other users. Amazon (AMZN) is tailored to user specifications (offering product suggestions) and also spotlights user comments and feedback.
Search engines Yahoo! (YHOO) and Google (GOOG) are also major presences in the social-networking scene. Consider the ways in which Google has tried to parlay Gmail into a platform to rival instant-messaging services such as AOL (AOL), Internet phone firms such as Skype and more obvious networking sites such as Facebook, creating communities for Gmail users out of an email contact database. Yahoo! also encourages users to build profiles and rallies a significant number of U.S. consumers around its "Fantasy Sports" options.What's the best way to profit from firms that use some kind of social networking at the core of their business models? The First Trust Dow Jones Internet Index ETF (FDN) is a good place to start. In addition to featuring eBay, Amazon, Yahoo! and Google as top components, FDN also contains other solid internet picks such as Monster Worldwide (MWW), WebMD Health (WBMD) and Salesforce.com (CRM). Take a closer look at most of FDN's components and you'll see the common thread of some sort of social networking as part of the business model. Social networking is a powerful force that's shaping not only the way that individuals connect and consume, but also the way in which Internet firms do business. FDN is a solid way to gain exposure to Internet firms that capitalize on the growth and potential of social networking. I look forward to the day when Facebook joins the list. At the time of publication, Dion Money Management was long FDN.
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