We’ve noted already this morning that Groupon Inc. (NASDAQ: GRPN) has replaced its head of national sales. And a report from Bloomberg notes the departure of four executives from social game maker Zynga Inc. (NASDAQ: ZNGA). Facebook Inc. (NASDAQ: FB) also has seen its share of top talent heading for the door.
There could be a few things at work here. One is the poor share price performance at these companies, which extracts a huge toll on stock compensation for many of the social media companies’ top execs. Another is that top talent, especially top technical talent, often exhibits a desire to do its own entrepreneurial thing. A third might be that once the start-up becomes a publicly traded company the culture changes so drastically that top employees figure anywhere else is better. A fourth possibility is that entrepreneurial founders may not be the best leaders of public companies. A fifth reason, of course, is that the executive is not performing and the company points to the door.
The high-profile companies also seem to fare a bit worse than those that fly a bit below the mass media radar. Yelp Inc. (NYSE: YELP) shares are down nearly 22% since the company’s IPO, but that is not bad when compared to Facebook or Groupon (down 50%) or Zynga (down 40%) or Angie’s List Inc. (NASDAQ: ANGI) (down 43%). Only LinkedIn Corp. (NYSE: LNKD) (up 40%) has posted a gain.
Yelp and Angie’s List, like Facebook, Groupon, and Zynga, recently had to contend with the end of their lock-up periods, and as investors dumped their shares, stock compensation values tanked. Facebook has lost three top executives since its IPO, while neither Yelp nor Angie’s List suffered the executive exodus seen at the other companies. At LinkedIn, the rising stock price has apparently helped keep executives happy.
Whatever the reason, the turmoil in the social media companies raises questions about whether or not there’s a there there. Is this a sector that will survive or is it just another bubbly niche that will effervesce for a while before it disappears?
The Global X Social Media Index ETF (NASDAQ: SOCL) trades at $12.57 today, in a 52-week range of $11.84 to $16.00. The fund is down about 16% since its IPO in December of 2011. That’s probably because its two largest holdings, Chinese firm TenCent Holdings and LinkedIn, account for nearly a quarter of the fund’s holdings.