Investors Should Pay Attention to Media Companies

President Trump’s favourite social messaging platform has just doubled its character limit.

Twitter [NASDAQ:TWTR] made the announcement four days ago. The limit is now 280 characters, up from the previous 140 level.

The response has been swift.

And savage.

A lot of Twitter users were clearly a bit nervous about any possible Trump fallout from the increase.

Former Mexican president Vicente Fox tweeted this:

@realDonaldTrump has been wrecking America 140 characters at a time. Imagine what he could do with 280 now.

And comedian Stephen Colbert sent out this beauty:

And in one stroke, Twitter doubles the complexity of our nation’s foreign policy.

As well as a host of tweets about how this will affect the troubled relations with North Korea:

Let’s hope the nuke codes are more than 280 characters!

Tongue in cheek maybe. But in a ‘funny cos it’s true’ way!

Ruling by decree is now a case of ruling by ‘de-tweet’ under Trump.

His preference for tweeted soundbites is yet another peculiar feature of this peculiar presidency.

If you’re not familiar with Twitter, it allows you to ‘tweet’ messages in 140 characters or less. People who decide to follow you can read them.

Trump has 40 million followers. As well as a press corps who endlessly report on his Twitter pronouncements.

Originally perceived as a weakness of the platform, some now say the character limitation is a big strength. It encourages concise writing, and direct thoughts.

Something that President Trump has proven to be very good at.

So good in fact, that he is being hailed as the man that saved Twitter.

The platform was struggling for relevance in a sea of social media. Platforms such as Facebook, Snapchat and Instagram were the clear leaders.

Until Trump came along and decided that he would bypass traditional media and go straight to his audience.

He was a prolific tweeter long before he was president, and has continued his 140-character assassinations throughout his term so far.

One analyst even estimates that without Trump, Twitter could lose almost a fifth of its value. That’s $2.5 billion.

There is no better free advertising in the world than the president of the United States,’ said equity analyst James Cakmak.

This is ironic as Twitter founder Jack Dorsey is a known left-wing activist. And has been in trouble with alt-right commentators for closing their accounts.

Trump has avoided the chop, somehow. 

Commercially speaking, though, Twitter isn’t where the money is at for investors. With or without Trump.

It’s here…

The new media empires

Facebook [NASDAQ:FB] owned app Instagram is the hot place to be right now. Advertisers are clamouring to make use of the popular photo sharing phone app.

There are now two million monthly advertisers in the platform. An explosion of growth over the last 12 months.

And Facebook’s not the only one cashing in.

The actress, Selena Gomez has 127 million followers on Instagram. She reportedly gets paid US$500,000 per post. That’s half a million dollars to post a picture of herself endorsing a product.

Not a bad gig.

So where is the world of media heading to next?  And where do the opportunities lie for investors?

Here’s a few places I would start looking…

The death of old school media in TV, print and radio will continue. Not just in Australia, but around the world. Boston Consulting Group estimate that by 2020, online sales in India will account for 40% of all sales.

The driver is the rise in internet use.  It will grow from 390 million to 650 million users, according to BCG’s estimates.

The other main story is the continued growth of smartphones.

Since January 2015, there has been a 68% increase in smartphone web traffic in the US. At the same time desktops and tablets both saw declines.

For investors, this means looking at media companies with a strong mobile presence.

Or alternately looking into companies that provide marketing services on mobile channels.

The world of automated and programmatic ad trading is a particularly interesting field to look into.

Adslot [ASX:ADJ] is a company listed in Australia that is involved in this industry. As is the upcoming float of US ad tech company, engage:BDR.

Pay attention closely

There’s no doubt that the media world has changed hugely over the last decade. ‘Bigly’ even, to coin a favourite Trump-ism

It’s changed. But it’s also changed us.

A two-way exchange of influence that subtly changes the way the world works. A place where an ex-Disney child star can now get paid half a million dollars for a picture!

I sometimes struggle to make sense of the rapid change.  At least intellectually.

But sometimes you don’t really have to ‘get’ it. Just observe it, and take advantage of it.

As always, the stock market is living proof of these changes.

For investors, there have been big winners and big losers.

Like a lot of sector disruption, the two key elements are technology and culture. Especially new cultural trends driven along by the large millennial generation.

This generation are marching towards their prime earning (and spending) years. A lot of big new trends are likely to ferment in this demographic.

It will pay for media investors — indeed, all investors — to monitor these two areas closely over the next decade.

Both can change course very, very fast.

Good investing,

Ryan Dinse,
Editor, Money Morning

PS: Investors looking for a combination of growth and stability need to read this report. Small-cap hunter, Sam Volkering has found three stocks he thinks have a unique combination of potential and resilience. Safe even from Donald Trump’s tweets. Click here to read more…

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

Money Morning Australia