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In the past decade, social-media stocks have created fortunes for investors. In fact, Facebook's (NASDAQ: FB) IPO reportedly created 1,000 millionaires from its employees alone. Its stock has since appreciated more than 200%.
In recent years, Facebook, Twitter (NYSE: TWTR), and LinkedIn (NYSE: LNKD) have become the top social-media stocks on public markets. Here's how the three social network giants rank today in terms of size.
Data source: Google Finance.
While each of these social networks offered substantial promise at their IPO, their more recent histories have diverged. Here's what you need to know about each of the top three social-media stocks on the market today, as well as a primer on some of the more important names to watch in the coming years.
The world's largest social-media company has never been stronger, the result of strong execution in its core business and a savvy acquisition strategy. Unlike other names further down this list, Facebook has clicked on all cylinders after its post-IPO swoon that sent its shares to all-time lows of below $20 per share. In the four years since, it's been an upward climb.
The results speak for themselves. Though Facebook enjoys well over 1 billion users, the company was still able to grow its monthly active users (MAUs) 15% in its most recent quarter. Revenue also grew 59%, and profits rose 186%. For all the momentum its core social-networking business enjoys, Facebook has also acquired would-be competitors in Instagram and messaging platform WhatsApp. Few know how high Facebook's ceiling is, but it seems as if little can get in the company's way at this point.
At the time of its 2013 IPO, the jury was out on the social microblogging platform. The intervening years have proved that Twitter is, unfortunately, not the next Facebook. Consider that Twitter's market capitalization hovered above $35 billion in late 2013, versus its $12 billion mark today.
More concerning, Twitter has struggled to do much to evolve its product outside of some shrewd yet incremental improvements. Today, Twitter appears more likely to remain a niche tech company. It remains to be seen whether Jack Dorsey can expand the company's consumer appeal, but Twitter's future course seems more muddled than ever before.
From an investor's perspective, things have become a lot less interesting for professional social-networking power LinkedIn since this summer.
Microsoft, of course, announced an agreement to acquire LinkedIn for $26.2 billion. The deal with Microsoft is expected to close by the end of the year, and it's not likely to hit any snags. Microsoft's and LinkedIn's boards both unanimously approved the acquisition, and LinkedIn's stock has traded just below the $196-per- share deal price and will probably continue to do so. Investors looking to invest in social media stocks should look elsewhere.
Snapchat and Pinterest waiting in the wings
Though you can't purchase shares in either name yet, social-media unicorns Snapchat and Pinterest are likely to make their presences felt in short order. Neither company has filed paperwork, but both could roll out IPOs next year.
Snapchat is perhaps the fastest-growing social media network today. With a recent shift toward profitability -- a harbinger of an IPO if there ever was one -- the company could see revenues surpass a staggering $1 billion next year, a mere six years after its founding. Pinterest has also grown its user base to over 100 million, and some of the company's consumer purchasing data makes it appear as if Pinterest could be the next great e-commerce platform with a strong social component.
In all, investing in social-media companies can produce astounding results. However, like any high-growth set of companies, losers here can plummet as quickly as winners can soar, so investors need to thoroughly research each individual name before purchasing.
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Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool owns shares of LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.