Welcome to Facebook City, Turkey
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
While social media might be a fickle investment mistress, it can be as telling as a friendly brothel madam when it comes to sizing up new markets.
After the insiders cash out on their Facebook (NASDAQ: FB) scheme and the company (eventually?) proves itself to be a going concern – maybe by starting to be as profitable as the slightly less ridiculous LinkedIn (NYSE: LNKD) which already takes in as much revenue per user as Facebook and is monetizing at a faster rate – less drunk investors might make use of Facebook’s aptitude by using its numbers to evaluate the relative potential of emerging markets.
A country like Turkey represents the best proving ground for new technologies and methods being adapted for global use. Exchange traded funds like iShares’ MSCI Turkey Investable Market Index Fund (NYSEMKT: TUR) are trying their best to profit off a country comprised of a young society, an ancient history (where brain surgery was invented 5,000 years ago), a non-Anglophone culture, and a rapidly growing diversified economy. The consumer market and labor segments range from the ultra-modern retinal scanning security high rises of Istanbul’s Maslak district to the self-sufficient hamlets in the shadow of the Biblical Mount Ararat (the iconic double-peaked mountain of Noah's Ark-fame that anchors the Turkish Republic on its eastern geographic and socio-economic extremes). Every hundred miles one goes east in the country is like going back a decade in time – and not in the bad way: the food is better, the business opportunties abundant, and the communities are as lively as the garrisons are friendly. (It would not be surprising to stumble across the reincarnation of the next Boy Buffett in the homey environs of a town like Gaziantep – whose kebabs and presentation can rival any Omaha Steak.)
Facebook is Turkey’s newest city – with over 30 million online residents according to the popular VakifBank-Volkswagen advertising campaign. (Its sister Facebook USA currently hovers around 160 million netizens.)
The United Kingdom has the same number of Facebook users as Turkey– and according to online marketing group Social Bakers, Facebook has penetrated almost 90% of Turkey’s online population (compared to the UK’s 60% and the US’s 40%). In addition, the (often banned) YouTube (NASDAQ: GOOG) has several Kurdish- and Turkish-language channels that pull in as many millions of viewers as some of the country’s traditional, long-established broadcasters, and reach its diaspora – another 10 million through out Europe. Even the Turkish prime minister publicly endorsed YouTube despite the ban – and the popular lampooning and debating of his Davos incident by all factions in Turkey using a range of digital channels has firmly established social media as part of the Turkish media meze.
While General Motors (NYSE: GM) recently pulled its $10 million of Facebook advertising (probably more due to an immature Facebook sales team than a coherent GM strategy), a smaller outlay (and smarter concept) by VakifBank in conjunction with Volkswagen has evidently yielded results from their joint campaign depicting a Turkish village run like Facebook. Currently, the German group is the second largest vehicle maker in the world, and by decade’s end, Turkey could be producing over 10% of its cars and parts. The Turkey-EU Customs Union, which has been expanding liberally for over 60 years, coupled with high-quality and reliable Turkish manufacturers has resulted in partnerships with every major automobile manufacturer around the globe (and is pretty much the only industry that kept Ernst & Young's Turkey practice afloat when its bumbling leadership failed to retain most of its other major clients due to its botched upward merger with the local Arthur Andersen carcass). The customs union effectively gives Turks all the upside of EU-membership and none of the downside. Clearly, the Ottoman legacy is fresh in the Turkish mind: Let the Greeks be the death knell of someone else’s empire for a change.
VakifBank is a government-linked corporation that was initially designed in the 1950s to invest the vast capital accumulated over centuries that had become bottled up in the Islamic trusts (vakıf). It has also recently become one of the first Turkish companies to publicize its presence in Kurdish Iraq. (While the dominant presence of Turkey in northern Iraq is natural and obvious, it is still a touchy point for both Turks and Kurds on both sides of the border.) Though fairly radical in its early years, currently the banking group has not been known to be as innovative as upstarts like mobile operator Turkcell or as creative in their marketing as Garanti Bank, Turkey’s flagship private institution.
Not only has the Feysbuk campaign attained international meme status, but it highlights important differences for social media between emerging and developed economies (as well as the role social media plays in a successful multi-channel campaign). While the top brands in the US that report strong results from their social media campaigns are predominantly entertainment-oriented, brand interaction numbers and local media stories suggest that Turkish consumer goods and telecommunication interests are far more satisfied with their facebooking efforts. While Turkish media outlets are effectively uncensored, diverse, and ubiquitous, the Turkish example indicates that social media in closed-media emerging economies will likely be even more impressive as it capitalizes on the personal trust-component that usually stymies many developing economy enterprises trying to grow beyond their immediate circles.
Facebook Co-founder Mark Zuckerberg has stated he is on a “social mission,” but it has become apparent that Facebook’s newly-printed billionaires still have no understanding of what they hath wrought. Harkening back to the days when the recordable cassette tape made the revolutions of the Ayatollah (and Metallica) possible, Facebook’s major social accomplishment has so far been to hasten the ascension of Egypt’s Muslim Brotherhood and allow the Islamic bolsheviks to direct useful democratic mobs to their own ends. (So much for Zuckerberg’s humanist atheism.)
More constructive in the long-term is that social media is becoming a major accelerant to producing the homo economicus that used to take decades to evolve in places like Singapore and Chile (which now have similar consumer behavior patterns as North America, Europe, and Japan). In some ways, social media might be the intelligent design needed to catapult consumer societies fully formed into the global marketplace. Recent stories show that social media can be more than just word-of-mouth advertising, some advances inspired by or properly harnessed to social media are allowing consumers to verify and police pharamaceuticals. In tandem, the increasing use of Facebook to win lawsuits against people who share too much (dates are sticky things) will probably also herald the rule of lawyers for which America has become synonymous.
So while the world waits to see the Next MySpace brush the New Friendster aside after knocking FaceLink off its pedestal (though India will probably birth the new-new thing – after all, with Facebook only penetrating less than 3% of the Subcontinent, that’s over a billion people ready to carve out their own digital destiny), it is probably best to invest in opportunities where the players have shown an ability to consistently make tangible returns from what they have been given.
The Turkish economy has steadily been making progress every decade and now has a highly-diversified economy with no need for a Facebook revolution like its Arab and Slavic neighbors – nor a need to spend one kuruş bailing out its financial institutions like its American and European friends.
While Turks are no strangers to market liberalization, Harry Potter fever, and other global trends, as for the Facebook IPO, one Istanbul-based consultant summed it up:
Yes, Facebook is very popular in Turkey, but the wedding of the guy [Zuckerberg] was much more interesting for people than the IPO. A handful of investors wrote articles on whether Turks should buy Facebook shares and those articles were read by the same number of people who wrote them.
Currently, MSCI’s TUR is the primary option for US investors not wanting to go to London or Istanbul to trade in Turkish stocks other than Turkcell, the only Turkish company listed on an American exchange. While MSCI’s broad coverage of the Istanbul-100 is a good way to capture all the Turkish trends, it is only the beginning of a long-term affair investors will be having with one of the world’s most dynamic societies this century.
Nick Slepko has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend General Motors Company and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.