Social media stocks are taking massive plunges across the board and many are blaming TikTok for the concerning trend.
One would think that the sheer popularity of social media platforms like Facebook, Instagram, and Twitter would mean excessively high stock value. But unfortunately, stocks have been dropping industrywide since the beginning of 2022. Many look to TikTok’s accelerating rise to the top as one of the reasons for other companies’ social media stocks plummeting.
Investors who once found exorbitant monetary gains from social media stock are now on the losing side. Sites like Facebook and apps like Instagram have been experiencing massive devaluation since the beginning of this year. From January 2022 until now, Meta Inc., which owns Facebook, has dropped by more than 40%. Zuckerberg’s newest venture Horizon Worlds, a metaverse for trading and cryptocurrency, has worried shareholders about Meta’s longevity. Zuckerberg is slowly attempting to leave Facebook behind, changing its ticker symbol from FB to META, which could signal its imminent downfall.
Another factor for Meta’s massive recent stock plummet is Facebook’s longtime COO stepping down. Sheryl Sandburg, former COO, will leave the position at the company shortly and remove her post from the board of directors in the fall. She has been the COO since 2008 and has seen plenty of Facebook controversies unfold in real-time. Facebook’s unsatisfactory handling of misinformation spreading on the platform and not protecting users’ private information has given her no choice but to leave the company. Controversies tied to privacy have devalued many social media platform stocks except for TikTok.
Twitter is another humungous platform that is experiencing value degradation. Despite Elon Musk’s surprising offer to buy the company, the social media’s stock went down by 11% on Tuesday. It’s trading far below Musk’s offer price of $54.20 per share, scaring longtime investors of Twitter. Since the stock doesn’t seem to be getting any better, Wall Street is betting on Elon Musk’s deal falling through, despite his adamant claims about acquiring Twitter.
Social media stocks were conflated with tech stocks like Apple for a long time. Big tech enterprises were generally rising in the stock market, having many investors attempt to jump on the bandwagon of Apple, Intel, and other notable brands. Since social media stocks were lumped in with tech, many shareholders weren’t thinking about advertisement and user shifts intrinsic to social media platforms. These fluctuations at media companies are dissimilar to tech ones, which is a vast oversight for investors who mistook the industries as synonymous ones.
Every time one social media platform gains traction, the rest start to fade away. There’s intense competition in the media game, with TikTok giving all other platforms a run for their money. TikTok has gained monumental users from younger Millenials and Gen-Z kids, tapping into a market that other media companies haven’t. Large brands incorporate TikTok at a higher rate, with new advertisements and campaigns running exclusively on the video app. Most social media stocks have suffered from TikTok’s widespread attention, and the number of users continues to increase on the app daily. CEO of Calvin Klein, Steven Larson, agrees with the advertisement shift to TikTok, stating that companies are attempting to be “relevant to the younger Gen Z consumer.”