Social media shares for Xmas?

TomAndersonIt’s clear that 2014 is seeing strong growth in online sales but that isn’t new news.  If it was, companies like UPS would not have traded up 20% heading into the Christmas season as they shipped all those products.  What investors may be missing though is what I call ‘the derivative trade’, and you can profit from it…

This is the impact that Social Media is having on peoples’ buying decisions.  If you combine the weakness in traditional retail with the dramatic increase in online shopping we get the “Social Media Christmas” that will make you money…

IBM’s Digital Analytics group tracks online sales for retailers and offers free reports on the progress.  The results are in and online sales during Thanksgiving, Black Friday and Cyber Monday were up 20%!  Compare this with overall retail sales reported by Shoppertrack data showing overall sales up only 1% and its clear that retailers need to market to this channel.

One of the key ways retailers are trying to capture this business is by marketing through Social Media sites.  Over the last year, Facebook has turned into the new water cooler where people congregate, only you don’t stop congregating there when you go home from work.  In addition to sending messages to each other, people are going online during TV commercials to distract themselves.

If you cant beat them, join them!  The number of marketers using Facebook’s Custom Audiences tool in the third quarter rose almost 75 percent according to a Facebook blog in November.  This shows interest in Facebook growing faster than even overall demand!

Facebook isnt the only one to benefit though, Google is in the mix as well.  Google may not be your first thought when you hear the words social media but its ownership of YouTube makes it a key player in ad sales.  Its presence in the advertising market may be heating up since it recently agreed to let Nielsen start to measure the ads placed on its web properties, including YouTube.  This has been cited as a reason that advertisers stopped buying ad space on YouTube.

While companies like LinkedIn, Yelp and Monster.com do participate in online advertising, their audience is more focused and not the seasonal crowd that would click through to the retail web sites.  If you want to capture the seasonal upside, even though we see investment merits in some of these companies, we would avoid reaching for ideas and sticking with the clear winners.

The Christmas season may be the catalyst to take a closer look but it isn’t the end of the good news coming.  Facebook is expected to be offering 15 second commercials directly in the newsfeed in 2014.  When the company started discussing the idea with its advertisers, the news leaked out but it won’t be reflected in earnings estimates until the formal announcement comes.

As you finish your Christmas spending, consider using some of  the money saved from the online deals you’ve found to buy shares in Facebook.  Google is expensive at over $1000 per share but a beneficiary as well and there are cheaper ways to participate by using options.  We dive deeper into the investment details, company fundamentals and trading strategies in our paid service “Tech Stock Jackpot” but hope this offers you a good starting point for the 2015 Christmas Club.

Tracking the Jackpot,

Tom Anderson.

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