When McDonald’s Corp (NYSE: MCD) added the Big Mac sandwich to its menu in 1968, it quickly became a taste sensation that swept America and was soon one of McDonald’s top-selling items. The Big Mac revolutionized McDonald’s business, but it has a mixed legacy as a symbol of American excess. And while the Big Mac may have altered the fast food business model, it didn’t truly change the way anyone eats, though “Fast Food Nation” author Eric Schlosser might assert otherwise.

The wheel, on the other hand, irrevocably altered the course of human existence. The first wheels were used roughly 6,000 years ago to enable humans to move heavier loads over longer distances in shorter periods of time. Since then, the simple technology behind the wheel has been applied to myriad endeavors that extend far beyond mere transportation. Simply put, the wheel’s contribution to the quality of human life cannot be overstated.

In contrast, we remain skeptical about the importance certain touts ascribe to social media.

Social media proponents believe that social networking websites such as Facebook and Twitter have permanently reshaped the way humans interact. These websites allow us to communicate more quickly than a letter and with a wider group of people then a telephone call. And from a revenue standpoint, social networking websites allow advertisers to bombard us with pitches perfectly tailored to our tastes.

But social media’s long-term legacy may be less enduring than some might assume, as users move beyond its novelty phase and realize that social media comes replete with myriad annoyances.

To be sure, social media has already achieved its place in history, but its ultimate legacy may be more akin to the Big Mac than the wheel.

Numerous investors seem to be regarding social media with similar skepticism. Despite the fact that share prices of LinkedIn Corp (NYSE: LNKD) nearly tripled on their first day of trading back in May, they’ve since declined by more than 22 percent. Groupon (NSDQ: GRPN) has had a similar experience since its initial public offering earlier this month, with its shares currently down about 8 percent.

In its latest quarter, LinkedIn lost 2 cents per share as its operating costs more than doubled. While LinkedIn has roughly 135 million members in about 200 countries, it’s still very much a growth company. As a result, the company will have to continue investing heavily in research and sales in order to further expand its presence worldwide, expenditures that will likely weigh on its profitability for some time to come.

The situation is similar at Groupon, which lost $102 million in its latest quarter despite an explosion in revenue. Again, the main culprit was marketing costs.

Given the amount of money these social media firms must spend to attract and retain customers, profits should remain elusive for some time. Of course, there are plenty of investors willing to patiently await the prospect of enviable capital gains. But while venture capital investors reap the rewards of their early investments, equity investors may be too late to the game.

Additionally, technology makes it simple enough for potential competitors to launch websites that offer many of the same features as the more established names. Facebook, for instance, was hardly the first entrant into the social networking space.

While LinkedIn has yet to experience significant competitive pressure, Groupon will likely be challenged by some of the most established players on the Internet. For instance, Amazon.com (NSDQ: AMZN) has launched its Amazon Local service in about 30 major markets, offering essentially the same service as Groupon. As such, it’s going to be difficult for any single player to maintain an edge in the local discount business.

Despite the obvious concerns, there’s still a certain air of euphoria in the social media space, so naturally an exchange-traded fund (ETF) has been launched to capitalize on such sentiment.

Global X Management Company launched Global X Social Media Index ETF (NSDQ: SOCL) on Tuesday. The ETF tracks a basket of 25 social media stocks, so it offers excellent representation of the subsector. Its underlying index is weighted by market capitalization, which causes the portfolio to be allocated more heavily among the larger names. The ETF charges a 0.65 percent annual expense ratio.

The ETF adds yet another wrinkle to social media investing due to its substantial international allocation.

For example, China comprises the fund’s largest allocation at 36.9 percent of assets. That weighting could be problematic since the Chinese government often limits the freedom with which social media operate. Google (NSDQ: GOOG) was basically chased out of the Middle Kingdom after Chinese dissidents’ Gmail accounts were attacked by government hackers. And Chinese artist Ai Weiwei was jailed after he used Twitter to accuse the Chinese government of illegally imprisoning dissidents.

Given the tight social controls in place in China, Chinese Internet firms face significant risk from the government’s oversight. If they fail to comply with its policies, they’re liable to be shut down. The political atmosphere in Russia–to which the ETF allocates 9.5 percent of its assets–is much the same.

At this point, an investment in social media is an extraordinarily aggressive play. While growth investors may find this space attractive, we don’t believe the potential gains in this space are commensurate with the risk.

What’s New

PIMCO Funds and PowerShares each launched two new exchange-traded products last week.

The bond giant PIMCO launched two new fixed income ETFs: PIMCO Germany Bond Index Fund (NYSE: BUND) and PIMCO Canada Bond Index Fund (NYSE: CAD). Both funds track the investment-grade debt of their respective countries and each charge 0.45 percent annual expense ratios. Interest rates in both countries are currently at rock-bottom levels, so the funds are essentially currency bets since they hold locally denominated debt.

The new PowerShares funds complement two products that the firm previously launched. PowerShares DB Inverse Japanese Government Bond Futures ETN (NYSE: JGBS) and PowerShares DB 3X Inverse Japanese Government Bond Futures ETN (NYSE: JGBD) are bets on rising Japanese bond rates, which would push down bond prices. They are equivalent to short positions on Japanese government debt.

The firm previously launched PowerShares DB Japanese Government Bond Futures ETN (NYSE: JGBL) and PowerShares 3X Japanese Government Bond Futures ETN (NYSE: JGBT), which are bets on falling bond rates and rising bond prices.

Portfolio Roundup

While there was little news directly impacting our holdings last week, our model portfolio still declined by 1.9 percent due to its heavy international allocation. The current standoff between France and Germany over how deeply involved the European Central Bank should be in resolving the European sovereign-debt crisis should entail additional volatility over the coming weeks.