Searching for Social Media Profits

NEW YORK (TheStreet) -- Social media stocks seemed to many like the place to be in 2013. The three most recognizable companies provided returns well above the broad market averages. Facebook (FB), Twitter (TWTR) and LinkedIn (LNKD) have moved to the upside by an astounding 94%, 127%, and 101% percent year-to-date, respectively. In general, the real driver has been company focus on monetization and user engagement.

I have not messed with these guys in my portfolio. However, I thought it would be interesting to look at the relative search interest over time for each one of these companies. Search interest data gives investors a good insight into the strength of brand and business.

Google's Trends tool allows anyone to find the relative search interest over time for any keyword. The numbers on the graph reflect how many searches have been done for a particular term, relative to the total number of searches done on Google over time. The output uses a scale from 0 to 100, a score of 100 represents the highest level of search interest for the searched keyword. It is logical to assume there is a high correlation between brand demand and search interest especially for social media companies. Let us first look at the Google search interest on Google for keyword "facebook":

Since peaking at 100 back in December 2012, relative interest for the keyword "facebook" has declined to a predicted score of 80 for December 2013. Fears of slowing user growth and engagement have made headlines in recent quarters, and it seems likely these fears are just as there has been a 20% decline in relative search interest for the brand over the last year.

Let's look at the relative interest for the recently public Twitter:

Above is a graph of the relative search interest for the keyword "twitter" on Google. There is a very similar trend to "Facebook." In December 2012, relative interest peaked at 100 and since then relative interest for the keyword has declined to a predicted score of 78 in December. This one kind of surprised me; I was fully expecting to see a score of 100 as it seems anecdotally that more and more companies are moving to Twitter for their marketing needs.

Next, let us look at the relative search interest for LinkedIn, one of my personal favorites.

I have found myself using LinkedIn more often to connect with colleagues and employers. Out of the three, LinkedIn saw its relative search interest peak most recently in September 2013. Since then, its relative interest decline has been smaller. The company has started offering employers and its users greater tools to establish tangible connections. In the third quarter, the company's Talent Solutions subscription grew 62% to $224.7 million. Moreover, its Marketing Solutions revenue segment was up 38% to $88.5 million while Premium Subscriptions increased 61% to $79.8 million.

Finally, lets look at the relative search interest for everyone's favorite social media company, "myspace":

The last decade hasn't been that great for Myspace. Since interest for the company peaked in July of 2007, relevance has steadily declined. While this "myspace" data may be irrelevant due to the clear deterioration of the brand, it gives us a look at what the declines of a social media company may look like using relative search interest data. I'm not sure who uses Myspace service today. 

Wrap-Up

While I cannot say for certain there is a correlation between relative search interest and company revenues, it seems likely as all of these companies make their living online. The point of this article was to give my readers something interesting to chew on this weekend. Out of the three, it seems the relative decline for LinkedIn is the lowest while Twitter is experiencing the largest decline of relative search interest. Are these declines caused by emerging competition? Larger amounts of searches in other areas? Or lost relevance? We cannot be sure, we can only speculate at this time. Over the next couple years, I will be watching this data closely for tangible correlations to emerge.

I hope you found this article interesting, and please feel free to let me know if you have any thoughts or questions. You can recreate all of these graphs yourself by using the Google Trends tool.


At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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