Last week was rough for some big-name stocks of one particular industry. In fact, it was bad enough that it caused many to think about its relation to one of the scariest terms in recent Wall Street history: The Dot-com bubble.
The question now being asked is, “Will this prove to be the start of the bursting for this bubble?”
Let me give you everything you need to know about what this ‘bubble’ is, how bad it got slammed, and what to expect going forward…plus, this situation may actually be opening up a brand new investment opportunity that looks set to skyrocket…
All in the same week, we saw shares of three different companies drop over 20% from one day to the next. Each of those instances occurred after the reporting of earnings, and it all brought back memories of the Dot-com bubble.
The afflicted parties were Twitter (TWTR), LinkedIn (LNKD), and Yelp! (YELP)—all a part of what could turn out to be social media bubble…
Here’s exactly how it played out:
- TWTR started at $52 on Tuesday and finished at $38 on Wednesday, a fall of almost 27%.
- YELP opened Wednesday at $51 before gapping down to under $40 on Thursday, a fall of around 23%.
- LNKD went from over $256 on Thursday all the way down to $205 on Friday, a fall of 20%.
After 3 successive days like that, the social media industry all of a sudden looked like it was an overblown balloon headed straight for a pointy needle…
Where did those drops come from?
As I mentioned before, the reporting of earnings for those companies were most assuredly the catalysts in each situation as investors began bailing on poor news.
But when we look deeper, we can see the real culprit: advertising.
The rise of programmatic ad-buying, which basically automates ad-buying and diminished the need for the middle-man while lowering the price, has taken big chunks out of the revenues of the 3 aforementioned social media companies.
An important note to make here is that this scenario could actually turn out to be favorable for the giants like Facebook (FB) and Google (GOOGL) thanks to their tight grip on advertising power.
So what should we expect now?
First off, we shouldn’t expect anywhere near the same impact as we saw from the Dot-com bubble that dragged the entire stock market down. But I do expect to see some more suffering for social media companies like TWTR, LNKD, and YELP as they figure out ways to advance their advertising strategies.
On the flip side, this slight paradigm shift in advertising could open the door for us to get in on a brand new investment opportunity. With the rise of programmatic ad-buying, you and I may want to turn our attention to some of the companies leading the way in that industry.
In the next issue of Midas Premium, I’ll be discussing this topic further and picking out some of the top programmatic ad-buying companies to possibly invest in.
