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In a chaotic market, investors are seeking out investments that can still yield big results. Many are betting on social networking. Recently, Saudi Prince Alwaleed bin Talal invested $300 million in Twitter shares on the secondary market. The Prince hopes this massive investment won’t just provide future returns, but will also allow him and his company, Kingdom Holding Company, to participate more with Twitter management and in their strategic decision-making processes. Even with a few bumps easily foreseeable for Twitter in the near future, many investors are beginning to leverage their portfolios with social networking buys.

What’s New?

At the heart of the interest in social media are the trends in society away from centralized corporate media to more social interactions to find out what’s new. People aren’t as interested in what a corporation or newspaper has to say, they want to hear it directly from their friends. What better way to find out about what works for people who have a similar approach to life like you than to ask a friend for a recommendation? Who knows where the good deals or stories are that might interest you? Your friends. Social networking is fast replacing mainstream media outlets and finding new ways to monetize that stream of attention that is growing quickly. Social networking companies like Twitter may not be making tons of money now, but they are expected to rake it in once they implement ways to monetize and capture attention in a way that will help businesses meet up with potential new customers.

Growing Pains

Some growing pains are also expected, due to the fact that these companies are now getting out of their startup phases and into more of a daily grind. The audience for social networking sites like Twitter and Facebook have exploded and with that comes a need to hire more employees and develop new organizational frameworks. Twitter, for instance, is now at nearly 800 employees. Now that it is obvious that social networking is not just a passing fad, more investors are trying to get into the bottom floor before it disappears all together. For the founders of such startups, the companies may no longer be as attractive to work at as the phase from innovation to implementation has taken place. The same strengths that Twitter founders used to birth the company, may not be ideal for further growth and management of it into a large, multinational, business. Twitter management is coming to that realization and many of the original Twitter founders have now left, while new engineering staff has been brought in.

Not All Social Networks Golden

Even with the tremendous interest in social networking shares, it does not mean that every social network out there will be able to attract large investors, like Twitter. Recent public offerings for LinkedIn and Groupon were very promising and attracted investors, but have now cooled to a less exuberant level. Other social networking offerings, like Zynga, can even fall on the on the first day of their public offering. Investors may be keen on social networking, but not necessarily all social networking sites.