A day after Google launched its answer to Facebook, News Corp sold MySpace, the social networking site displaced by Facebook, for $35 million – $545 million less than it purchased it for in 2005…READ MORE.
My Take: One of the main lessons to learn from the downfall of MySpace is that which seems certain online, is often not certain. Myspace for a number of years was king of the social media world. Who would have thought this would have changed in 2006?
It’s easy to switch services online, which makes online customer loyalty relatively fickle. AOL was once king of Internet providers, then the game changed and they were left out in the cold. MySpace was king of social networking until Facebook’s momentum increased and aced out the trendy MySpace social media platform. Other examples exist and others will follow.
I talk a lot about trends on this site, but I believe a difference exists between a trend and being trendy. When you speak of that which is trendy you’re often talking about what’s in fashion or what is popular with the “in crowd.” When you talk about trends, you might be discussing demographic forecasts for example. Yes, a relation exists, but you can certainly differentiate between the two.
When investing in a company that provides a product or service that you believe is trendy, you should make sure you have an established exit strategy. Your strategy can make or break you when investing. If you’re investing in trendy stocks, but lack a short-term exit strategy, then you’re allowing failure to brew within your portfolio.
Understand that investing in trendy products or services is not a bad idea. The idea though must be properly aligned with a clear strategy that ensures that you’re ready and willing to cash out of a position based on specific positive or negative movements in the stock’s price.