Recently, Facebook (NASDAQ:META) and X (formerly Twitter) have been under intense scrutiny by users and various governing bodies. The EU has criticized Facebook and Instagram for allegedly failing to protect children online.
The SEC is investigating X and its new owner, Elon Musk, regarding Musk’s purchase of Twitter in 2022.
Furthermore, the relationship between these major social media networks and their users has become increasingly complex. Algorithmic changes, data privacy concerns, content moderation, advertising choices and the issue of misinformation have left many users looking elsewhere for social communication.
According to a 2020 Pew Research Center survey, 64% of Americans believe social media has a mostly negative effect on the country’s current state.
Even though Facebook, Instagram and X remain leaders in their respective industries, the growing tensions around the giants incentivize users and investors to look elsewhere.
As a result, this shift has opened up new opportunities for smaller-cap social media stocks, including Match Group, Bumble and Pinterest.
Match Group (MTCH)
Match Group (NASDAQ:MTCH) is an American, Dallas-based online dating group that owns brands like Tinder, Match.com, Hinge and Meetic.
As of 2023, Match Group employed around 2,600 people across all its divisions. For the same year, Match Group generated a total revenue of $3.36 billion and a net income of $651 million.
In the fourth quarter of 2023, Match Group reported $0.81 per share, an increase of $0.30 per share reported during the same quarter of 2022.
Match Group’s main strength lies in its diverse portfolio of dating platforms, each targeting different demographics. Tinder, for instance, focusing on a younger demographic, had 75 million monthly active users and 10.4 million subscribers in 2023.
Bumble (BMBL)
Bumble (NASDAQ:BMBL) is another major player in the online dating industry and Match Group’s main competitor.
The Texas-based company has around 1,200 employees and is the parent company of Bumble, Badoo, Fruitz and Official.
Whitney Wolfe Herd, the founder of Bumble, was a former employee of Tinder. Shortly after leaving her position as VP of Marketing, she founded Bumble with the main goal of democratizing dating.
In 2023, Bumble Inc. generated a total revenue of $1.05 billion — an increase of 16.42% year over year. However, it still lost $4.21 million. In comparison, in 2022, Bumble lost $79.75 million.
During the fourth quarter of 2023, Bumble’s total paying users increased to 3.7 million, compared to 3.2 million in the previous year.
Therefore, given Bumble’s improving financial performance, retail investors should definitely monitor the company’s performance and consider adding the social network to their portfolios.
Pinterest (PINS)
Pinterest (NYSE:PINS) is an American social media platform for sharing images and other visual content, such as recipes, home design inspirations, style and motivation.
Of the three small-cap stocks above, Pinterest is the main competitor of Facebook and Instagram.
As of 2023, Pinterest employed around 4,000 people for its massive base of 518 million monthly active users.
In 2023, Pinterest generated a total revenue of $3.06 billion, an increase of 9.01% compared to 2022. They lost $35.61 million, compared to $96.05 million in 2022.
Since Pinterest’s user base has been growing consistently since Q2 of 2022, this social media network could be a great small-cap option for investors to consider.
On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
