5 Ways to Invest in the Facebook Craze Before It Goes Public
Facebook will go public someday, but that day doesn't appear to be coming anytime soon.
The IPO market has all but dried up in recent months, and all of the volatility is going to keep underwriters and their vetted companies on the sidelines.
Facebook also doesn't really need the money. Mark Zuckerberg has never had a shortage of venture capitalists seeking to bankroll his pre-IPO dreams.
The passing of time also makes it less likely that getting in on Facebook's IPO will make ordinary investors like you and me rich. There are now 800 million active users on Facebook. What if Facebook doesn't go public until it's peaking in popularity? What if Facebook doesn't go public until it's a $100 billion company? Can a ground floor opportunity bump its head against the ceiling?
Thankfully, there are plenty of ways to play the social networking phenomenon without trying to snap up secondhand shares from a disgruntled ex-Facebook hire.
Let's go over five ways to play the sticky nature of social networking now.
T. Rowe Price (TROW)
A mutual fund operator may seem a strange place to start, but this company has what you and I do not: a piece of Facebook. T. Rowe Price has been an early investor in Facebook, Twitter, Angie's List, Zynga, and many of the other hot IPOs that are bound to happen when the market climate improves.
The company beefs up its tech funds with some of the stakes it acquires. T. Rowe Price Science & Technology Fund (PRSCX), for example, had 539,958 shares of Facebook in its portfolio. It may seem like a lot, but the $15.3 million stake is really less than 0.5% of the entire fund's portfolio.
As a social network for white-collar professionals, LinkedIn will never be as big as Facebook. However, career-minded folks networking, recruiting, and seeking referrals can be a pretty lucrative community for both advertisers and the members themselves.
There were 115.8 million members as of the end of June, a 61% gain over the past year. There were 81.8 million active users, going through 7.1 billion page views during the quarter. LinkedIn is finally monetizing its traffic, as revenue soared 120% to $121 million in its most recent profitable quarter.
The company that is often referred to as China's Facebook is also growing nicely. Revenue climbed 53% to $30.4 million in its latest quarter. There are 124.2 million activated users, but that's a cumulative number. The better number to go with is the 34.4 million monthly unique log-ins, which is well ahead of the 25 million monthly unique log-ins a year earlier.
Like many of the Chinese stocks that have gone public over the past year, shares of Renren are trading well below their IPO price of $14.
Shares of Quepasa soared earlier this year, as the Spanish-language social network tried to position itself as Facebook for Latinos. Sharp losses, problematically weak revenue, and poor user retention metrics quickly nixed the hype wagon.
Quepasa is in the process of acquiring myYearbook, a popular social gaming community. Quepasa also has some intriguing social games of its own that it's trying to turn into viral hits across Latin American social networking sites. Quepasa is the biggest long shot in this list, but it's also the cheapest.
You didn't think I would leave out the company behind Google+, did you? Online portals have historically struggled in making their social networking websites popular, and Google has had its failures in the past.
Does anyone remember Lively.com? Google's avatar-based community looked promising when it launched in 2008. Big G shuttered the "experiment" just a few months later. Google also runs Orkut, a social networking site that has never taken off domestically but has been pretty popular in Brazil and India.
A few months ago it gave social networking another go with Google+. The new platform and its evolutionary privacy controls have drawn critical praise for the initiative. It remains to be seen if the site will take off beyond its early adopters, but it's probably the best bet to take on Facebook domestically in the future.
Five for the road
None of these five stocks will be a perfect match in duplicating the Facebook ownership experience.
However, all five investments are riding on Facebook's coattails. The social networking movement is here, and there are ways to play it.
Longtime Motley Fool contributor Rick Munarriz does not owns shares in any of the stocks in this article. The Motley Fool owns shares of Google and T. Rowe Price Group. Motley Fool newsletter services have recommended buying shares of Google.