Social media is once again making headlines as another company, Twitter, is entering the stock market. The biggest question on everyone’s mind is will they follow suit with Facebook and MySpace? This is a recurring event that endlessly repeats itself to only benefit those who can buy and sell first so that they can catch the price wave, before it crests and jump ship at the peak. Namely the owners and largest shareholders will no doubt profit, but the ‘average Joe’ looking to invest for his and/or his family’s future should avoid this stock at all costs. Twitter is a ‘fad’ whether most people realize it or not. Yes, they are incredible at what they do right now but soon some other company(s) will have a fresh concept to fulfill the same need and do it better. All you have to do is look to the past performance of almost every social media outlet to see if you should invest or not. They all thrive on being new and capitalizing on high usage. Once their popularity goes down, they will start making less money on their advertisements and are forced to come up with new solutions to boost popularity and user interaction because they do not charge a membership fee. LinkedIn is successful because they not only charge their users to have full use and advantage of the website, but they offer real-world gains to their users in the form of jobs and ‘professional’ networking. Emphasis is on professional because employers offer jobs based on what you say in your profile while they may not want to hire or even fire you based on what is posted in via your Twitter and/or Facebook accounts (key example). This is the reason why most avid investors avoid social media stock unless they are in it for the short term gain of an IPO wave.
Twitter will enter the stock market and will most likely follow Facebook with a rise and fall into a downward spiral they cannot get out of unless they pull-off a revolutionary idea that is the next big thing in social media (which only delays the downfall of their stock price).
Do not invest in this stock unless you are experienced at day trading or set strict guidelines for when to sell, 20-150% gains on initial investment. Once their stock price falls off, they will most likely be acquired by a larger company. This stock is going to require close monitoring, especially when they are getting close to being acquired on account of a buyout or trade in shares with the larger company.