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Should we invest in tech or is that blue sky thinking?

PUBLISHED: 09:36 05 February 2018 | UPDATED: 09:36 05 February 2018

Investors love a bit of blue sky thinking. Photo: Martin Sizeland.

Investors love a bit of blue sky thinking. Photo: Martin Sizeland.

(c) copyright newzulu.com

It’s not been a great week for social media. First came allegations that (Shock! Horror!) some ‘celebrities’ (telly cooks, catalogue models, daytime TV presenters etc) have been buying large numbers of (non-existent) ‘followers’ in an attempt to show just how popular they are on social media.

This column is brought to you in association with Almary Green. Photo: Almary GreenThis column is brought to you in association with Almary Green. Photo: Almary Green

Considering how readily available they are and how cheap it is to buy say, 250,000 likes, flirts, hugs, or some other form of apparent online worship, I’m surprised it’s taken so long for this ‘revelation’. I know several companies that acquire similarly manufactured affection, primarily because it makes their operations appear popular and adds a form of credibility, however tenuous, to their products.

Both celebs and companies who supplement their social media following by paying for new friends are driven primarily by vanity and, presumably, a desire to exaggerate the importance of either their personalities or the stuff they’re selling, but how widespread is the practice? No-one has a clue, a conclusion which might make more objective folks (that’s you, dear reader), question some of the, ahem, unsubstantiated figures posted either adjacent to a celeb’s air-brushed publicity shot or the high-falutin’ gizmo a company desperately wants you to buy.

Later in the week, Facebook admitted that the total time its members spend on the platform had come down by around 50 million hours a day.

Nonetheless, Facebook’s investors were buoyed by news that profits for the final quarter of 2017 had risen by a fifth, to $4.3 billion, although there are signs that the number of legitimate users in Facebook’s traditionally strong markets is falling.

Peter SharkeyPeter Sharkey

Has social media usage plateaued? It’s difficult to say as no-one knows whether all the ‘users’ are real, but the social media phenomenon is beginning to resemble the mobile phone market, now a mature, money-making business sector.

It wasn’t always so: when first introduced, mobile phones were expensive and the size of a house brick (I still have the first one I bought, in 1988, for £750), while coverage was extremely limited, but as component prices fell and coverage improved, sales soared. Today, the market is saturated; everyone who is going to buy a mobile phone has done so and it could be argued that social media is experiencing a similar, rapidly maturing trend.

But, you may ask, what does this have to do with investing?

The answer is ‘everything’. Social media may appear ubiquitous now but there was a time when Friends Reunited and fax machines were similarly dominant and look what happened to them.

The point is, companies – and the products they manufacture and sell – come and go and nowhere does this happen more rapidly than in the technology sector. Nor is this a modern phenomenon: the dotcom boom of 1998-2000 witnessed a raft of companies floating on stock markets. The hype surrounding many of these internet-based outfits ensured their share prices soared, yet just like Icarus, they flew too high, only for their share prices to crash. Of the hundreds of companies that formed part of the dotcom boom 20 years ago, only a handful, including Amazon and eBay, are still around.

Many investors suffered heavy losses as the dotcom boom ground to a halt. Most had bought in to the idea that we had entered a new, technological age, even though many dotcom companies had negligible sales and non-existent profits. We may be experiencing something similar as investors, desperate to identify the ‘next big thing’ pile into newly-floated companies.

Last September, for example, Roku, a US-based streaming device firm that plans to compete with the likes of Apple, Amazon and Google, floated its shares at $26 apiece. By Christmas, the share price had risen 117%, to $56.58, although since then, they’ve fallen, by 28%, to $40. Where next for Roku?

One fund manager, describing investors’ seemingly insatiable appetite for this kind of investment, said: “When you are paying for blue sky, you have to be prepared for hope to disappear.” Investors hoping to avoid such an outcome may conclude that having a word with an investment specialist prior to taking the plunge in the technology sector’s volatile waters would make a great deal of sense.

The week in numbers

£409.6m

Total amount spent by Premier League football clubs during January’s transfer window, up from £215 million last year. Most of this year’s cash (£163 million) was spent on defenders, with the most expensive acquisition being Liverpool’s Virgil van Dijk, who cost the Reds a cool £75 million.

12%

According to the Royal Institute of Chartered Surveyors, fewer than one in eight surveyors believe the government’s target of 300,000 new homes a year can be built due to a lack of development land and suitably qualified workers.

14

Number of planned shop closures proposed by Marks & Spencer, a move that could result in the loss of almost 500 jobs. M&S said the closures would take place to “better meet the changing needs of customers”.

1 million

Sum secured by Noel Edmonds, presenter of Deal or No Deal from Therium Capital Management which will allow the erstwhile disc jockey to launch a legal claim against Lloyds Banking Group worth up to £60 million.

6lb

An international study of more than 1,000 men and women has found that office workers who stand, rather than sit, at their desks for six hours a day, could lose 54 calories a day, a figure which equates to 6lb a year.

3.6million

Britain has more millionaires, new figures show. A total of 3.6 million households in Britain held wealth of more than £1million by June 2016, up 29% in two years, the Office for National Statistics said. Wealth includes pensions, investments and property values.

Peter Sharkey read economics at the University of Bristol. He worked as an accountant on three continents and has been a company director and investor for more than 30 years, building and selling three different companies.

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