Investor Warren Buffett Warns Of Overpriced Social Networking Sites

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Investor Warren Buffett Warns Of Overpriced Social Networking Sites [businessweek.com]

Warren Buffett, the billionaire stock picker and takeover specialist, said investors should be wary of valuations for social networking websites as some of the industry’s biggest companies prepare to sell shares.

“Most of them will be overpriced,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said today in New Delhi. ”It’s extremely difficult to value social- networking-site companies,” he said, without specifying companies. “Some will be huge winners, which will make up for the rest.”

Yeah, I think a lot of us can see that. I suspect it's just that investors don't want to miss out on the 'next big thing', which forces up the valuations.

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The tricky part is selling at the top instead of the bottom :).

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Why doesn't he just say Facebook? That's the site he's alluding to.

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Well, he's savvy, and he knows it's bad form to be specific. Someone of his credibility can make or break a company IPO witht he right or wrong words.

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He's also talking about Twitter as well as Facebook. And maybe the new darling, Color, as well.

In all cases, I think he has a good point. These services do not appear to offer a high quality advertising platform for brand name consumer goods despite having a huge user base. That is going to limit the potential for them to make money.

The number of ad channels is growing faster than the number of goods to be sold. Marketers only have so many dollars to spend, and these days it's less, not more. Only the better, stronger, more proven channels will thrive. As we know, online marketing is performance driven. That's going make it tough for these new social services.

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Investing Like It’s 1999
[dealbook.nytimes.com]

Banks pouring money into technology funds, wealthy clients and institutions clamoring to get pieces of start-ups, expectations of stock market debuts building — as Wall Street’s machinery kicks into second gear, some investors with memories of the Internet bust a decade earlier are wondering whether this sudden burst of activity spells danger for the industry once again.

The NY Times has a piece on this, suggesting that there may be a bubble and it could burst.