Plant/Capital Investment
While social media sites and applications are accessed through the Internet, the
firms still have a physical location that houses employees, programmers, software
engineers and other professions. Social media firms also must invest a lot of
resources in maintaining a base of servers and backup centers, along with the latest
in security tools to limit hacking and other attacks.
Several of the larger social media firms have moved to raise capital through both
private equity firms by offering a minority stake in a company, and for a select few,
engaging in an initial public offering (IPO) to sell stock to the public. Linkedln
was one of the largest firms to launch an IPO in 2011, followed by several other
firms including Groupon, Zynga, and Facebook. IPOs have the potential to raise
billions in new capital for growth and expansion, but force companies to operate
to meet the demands of shareholders. Going forward, we can expect more social
media firms to enter the IPO market.