The legal case against Facebook Inc. (FB) is gaining steam, and demonstrating just what a huge deal, and an opportunity, the social media sector is right now.
At this point, we now have the federal government and 46 states seeking to have the world’s most successful social network break itself up.
The idea is to have the Silicon Valley giant with 2.3 billion active monthly users divest itself of the wildly popular apps Instagram and WhatsApp.
To make that happen, though, the Federal Trade Commission (FTC) and the states must meet the high standard of clearly proving that Facebook acted illegally.
Here’s the thing, though; As tech investors, we don’t have to decide who’s right or wrong, or whether that will happen or not.
Our mission is to profit from the social media market that is worth at least $100 billion.
If you follow the suggestion I’m making today, you’ll capture the entire sector in one investment that is doubling the market’s return…
A Network of Networks
Now then, I agree with Facebook CEO Mark Zuckerberg. Breaking up Facebook won’t just be difficult; it would be a disservice to the user group.
Right now, the company is set up so that users can easily access all three services.
Make no mistake. The cross-platform ease of access between Instagram and Facebook is a boon to advertisers.
With a Facebook business account, they can seamlessly run ads on each service, even pushing them out to WhatsApp if they so choose.
Plus, the algorithm will select high-engagement posts and automatically serve those up as ads if the client so chooses.
For small companies with a limited budget, this is a very cost-effective way to access social media. It’s one of the reasons why Facebook now has annual sales of roughly $70 billion.
Now, the accusations against Facebook are that its acquisitions of Instagram, in 2012, and WhatsApp, in 2014, were illegally anticompetitive and meant to create a monopoly in the social media messaging space.
As for remedies, the FTC is looking for the court to force Facebook to reverse those acquisitions. But breaking apart WhatsApp and Instagram from Facebook now would be very difficult, would take years, and cost as much as several billions of dollars.
That’s because, as Zuckerberg has argued, both apps make extensive use of Facebook’s technology, servers, and platforms behind the scenes.
Instagram and Facebook are so closely linked that the engineers working on them use many of the same tools, and jump from one to the other without any major changes.
Meanwhile, the WhatsApp messaging service is heavily encrypted, which has made it more difficult to integrate it with Facebook’s Messenger, advertising, and monetization platforms.
However, many of the new WhatsApp features introduced after it was acquired in 2014 depend on Facebook’s technology and servers. So, behind the scenes, a break here could take years, too.
It’s a strong example of the fact that generally speaking, regulators have a hard time standing in the way of a highly valuable and effective technological paradigm.
You can see the same principle at work in the world of cryptocurrency. Regulators have hesitated to embrace the sector, but that hasn’t stopped Bitcoin, the leading example, from skyrocketing these past months.
Not only do I predict that regulators will eventually be forced to come around, some of my colleagues are even predicting that Bitcoin will reach a price of $100,000 by the end of this new year.
And a whole new universe of moneymaking opportunities will emerge as this expected explosion of value brings the entire new sector of smaller cryptocurrencies along with it.
We can tell you exactly which of these coins to buy to maximize your profit opportunities. Just click here to get started.
The Dependable Alternative
Still, it may not come to that, because history is on Facebook’s side.
IBM and Microsoft were both accused of similar behavior, and after 10 years of legal wrangling each, both got away without having to sell any divisions.
They simply made it easier for third parties to use their platforms, and that was that.
But whatever happens, we can have our cake and eat it too with an investment that covers the whole sector.
I’m talking about the Global X Social Media ETF (SOCL) from Global X Funds. As the name suggests, this ETF invests in social media stocks from across the world, giving investors broad exposure to this sector.
Despite the global access it provides, SOCL has an expense ratio of just 0.65%. The ETF currently holds 39 stocks from across nine countries, with just under half being based in the U.S. Take a look:
- The ETF’s largest holding is Snap Inc. (SNAP), the Santa Monica, CA-based company behind social network app Snapchat. The app may have started as a simple messaging app focused on sharing photos with added text and emojis with friends, but it now has fully integrated and ad-supported short-form video content. Snap boasts over 229 million daily active users, and more than 4 billion Snap messages are sent every day.
- Match Group Inc. (MTCH) is most known for its Match.com dating service but also owns almost every other popular one including Tinder, Hinge, OkCupid, and many others all over the world. And don’t be fooled by the phrase “dating service,” either. These apps often work like full-fledged social networks more than simply ways to find your soul-mate.
- Pinterest Inc. (PINS) has evolved much since its humble beginnings as an image-sharing site. It’s now a complete social network platform based around the idea of sharing “ideas” on anything about your favorite DIY projects to wishlists for Christmas. This September the service logged 400 million monthly active users, and the image-heavy “idea” format has made Pinterest very popular with businesses.
- For its part, Baidu Inc. (BIDU), often called “China’s Google,” gives the ETF access to the Chinese market. Much like Google, Baidu’s central platform is an Internet search engine, but the company has long since expanded beyond that. It’s now one of the world’s largest Internet and AI companies, offering everything from online encyclopedias to web analytics and an online translation tool.
As you can see, with the SOCL ETF we can win no matter what happens to Facebook and its antitrust lawsuits.
Not only that but since the markets rebounded in March, SOCL is up 126%, beating the S&P 500 by just shy of 100%. Not to mention that the ETF beats Facebook itself by 50%.
So, no matter what happens with Facebook, SOCL is a great way to ride the profitable social media trend for the long haul.
Cheers and good investing,
Michael A. Robinson