Social Media advertising works. It's an explosive growth medium whether you put the ads on smartphones, tablets or phablets. On that point there can be no debate, not after what we've heard from the two social titans this week. We expect great growth from Facebook (FB) but when it's weak little brother Twitter (TWTR) comes up with a quarter of a billion in mobile ad revenue it's clear that a sea change has taken place.
The existence of social media as an ad platform business model has been justified but whether or not those ads sell anything other than more advertising somewhat in doubt. Last night Facebook quietly announced that it would be shutting down its Facebook Gifts initiative. The business was really an afterthought for Zuckerberg and Co. It started with large ambitions but by the end was simply a largely forgotten spot where customers could buy gift cards to places like Starbucks and iTunes.
Related: Facebook soars as Zuckerberg’s cash-machine kicks into gear
Facebook and Twitter are both going in the direction of payments and allowing users to buy from advertisers using one-click. That's smart for two reasons. First: it's a sign that both companies are maturing. Second, and this is the point, it's much easier to sell ads than it is to sell tangible products. Much has been made of the fact that Facebook's market cap is bigger than that of Coke (KO) and IBM (IBM). With this morning's gain Twitter will be worth more than Macy's (M) and Family Dollar (FDO) combined.
Maybe those valuations are out of whack thanks to a certain... euphoria... surrounding social media stocks. Then again, it's easy to make the argument that making promises and ads is a much higher-margin business than trying to sell tangible products to living, breathing humans.
The truth is somewhere in the middle, of course. Just keep the financial disconnect between the economics of ads and commerce in mind the next time the stock market experts suddenly cropping up at every cocktail party and Fed testimony in the world start throwing around words like bubble.
More from Yahoo Finance:
Don’t be fooled, all is not well for stocks
Corporate raiders make a return
The 20% market correction has already started
