In continuing my short sell of social media, I’ve been imagining Twitter and Facebook as holdings in a hedge fund manager’s portfolio.

In my amateur understanding of hedge funds: the goal is to reduce risk and maximize returns by investing in assets that move in the opposite direction. The magic is in finding the complimentary assets.

A very simple example: if you see long term growth in the US stock market – a hedge would have 50% of your investment in the bond market, for stock and bonds prices often move in the opposite direction.

How does this metaphor extend to social media?

I’ve got a couple projects that would be interesting within a service like Twitter and I’d like to hedge my investment (development time). The question is – where are the complimentary assets?

Or, who wins when Twitter stumbles?

If people stop sending messages via Twitter – where does that communication flow?

Facebook? WordPress.com? Movabletype? Tumblr? Posterous ?

Maybe. While they all offer a similar capability – they fell to similar (private, hosted, silos) to be complimentary.

WordPress.org – feels closer (free, open source, well documented, mature API). But, I have a hard time imagining people mass-installing WordPress in their own web space after having everything taken care of for them.

My favorite answer so far: Email.

What would your Social Media Hedge Fund portfolio be made of?

Over on the Twitter the other day, I wrote:

“Yes, that giant sucking sound you hear is me buying up CDSs against UGC-backed securities. #shorting_social_media”

Right now, the similarities between the overheated real estate market of a few years ago and the current chatter around the marketing potential of Twitter and Facebook are uncanny.

Turns out, I’m not alone in seeing the parallels.

“[Facebook] has consistently behaved in ethically questionable ways regarding all three of its customer sets: consumers, developers, and advertisers. Today, that behaviour seems have infected entire components of the media value chain. Entire networks are, it seems, brokering stuff of dubious quality. Sound familiar? It’s just like Wall St 2001-2008.” – Umair Haque

“What if the social internet as we know it is being built on sand, on ads that almost no one looks at now and fewer will look at in two years? ” – Ethan Zuckerman