Social media IPOs raise investors’ interest. Facebook now is valued at humongous $400 billion. But not every new IPO in this area succeeds. Failure is typical when it comes to apps related to messaging, whether for text, pictures, or videos. As Techcrunch report shows, venture capital firms invested hundreds of millions in this type of companies, and most of these bets haven’t paid off. Those companies have either closed or haven’t succeeded in expanding their user base.
One example is Tango. This company develops apps for mobile messaging. So far, they have raised $360 million. But, the user growth has stopped. Tango used to be among the top 20 most downloaded apps in the United States, but now has fallen beyond top 150. Another promising app, YikYak, raised $62 billion. The company provides anonymous chat service for users locally. But, when usage decreased, the company had to fire 60 percent of its workers.
There seem to be quite many social media companies nowadays. Some will be bought out by others, a few will grow on their own, while majority will never fulfill their promises. Facebook is the giant when it comes to social media, and this company takes on its competitors successfully. Its Instagram service is going to be a tough competitor of Snapchat, a company which just went public and is presently worth tens of billions.
Even those companies which succeed in the marketplace may not bring rewards to investors. Twitter is down more than 40% off its highs. Microsoft, once a dominant company in the technology sector, hasn’t become a dominant player when it comes to social media. This business is tough, unpredictable, and its landscape changes so quickly that investors take high risks when betting on these companies.