Global X Social media Index ETF (SOCL) was down by around 5% in the last week, mainly due to the significant drop in stock prices of Twitter Inc (NYSE:TWTR) and LinkedIn Corp (NYSE:LNKD). Both Twitter Inc (NYSE:TWTR) and LinkedIn Corp (NYSE:LNKD) stocks dropped more than 20% on Tuesday and Friday respectively after their earnings reports, which disappointed many investors with lower guidance for 2015. Facebook Inc (NASDAQ:FB) on the other hand leads the social media market with monetization and active users. But, even Facebook Inc (NASDAQ:FB) dropped around 3% in the last 5 days. Founder and Manager Partner of The Social Internet Fund, Lou Kerner talked on CNBC about the evolution of these stocks and highlighted the major difference between Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR).
Kerner said that Twitter Inc (NYSE:TWTR) has got problems with user growth. He added that LinkedIn Corp (NYSE:LNKD) stock has run ahead of itself.
Kerner said that he has been holding onto names like Facebook Inc (NASDAQ:FB) in the social media sector. He mentioned that he will continue to hold the Facebook stock. He pointed out that Facebook is currently leading the social media sector in the user engagement aspect. He feels that at end of the day all that matters for social media company is growing engagement. He thinks that Twitter is no longer pointing to the engagement factor. He said that Twitter is not talking about timeline views which they were talking about in earlier earnings reports. He thinks that Twitter has not mentioned about it, mainly because the numbers are not good, but he said that those numbers are consistently climbing for Facebook and LinkedIn. Kerner is holding on to Facebook stock but what about Twitter stock?
“No, I am very simple. I focus on engagement and Twitter has been struggling with engagement for a long time. I love Twitter, I use Twitter everyday. I think it’s a great service. But they remain, even though they are a 300 million, it does not look like they are on the track to a billion which is what everybody thought they were going to be a year or two ago,” Kerner said.
After a poor earnings report in October 2014, everyone questioned the leadership of Dick Costolo. After a disastrous report on Tuesday, those doubts again resurfaced. Kerner said that Costolo was there in the helm of Twitter for a very long time and tried various product revisions, but he thinks that none of them worked. He feels that Twitter need to improve the onboarding and the product. He thinks that many users does not like to come to Twitter platform the second time, since the platform does engage users enough.
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