LinkedIn – A good company with a horrible value

I mentioned I’d talk about another social media stock NOT to buy. Very simple, it’s Linked In.

Before people start going off on me, let me get something straight. I love LinkedIn’s business model. It provides a great service, possibly more useful than Facebook. Also unlike Facebook, they have premium accounts which people in business will pay for (I’m thinking recruiters and people in HR). While it is not as social or developed as Facebook, it does provide some services and fills a gap that FB lacks.

On the flip side, it is trading at 600x earnings. Yeah. I know with regards to technology companies a lot of people say you have to through out the P/E ratio but when something is trading that high compared to earnings, you have to wonder whether its worth it. While FB is somewhere around 65-70x earnings, LI is 9 to 10 times that. Yikes.

I have this shirt given to me from Pink Sheets from when I was a market maker and used their product. On the back of it in big letters it says “CAVEAT EMPTOR.” So just a quick Latin lesson, it means “Buyer beware.” Here’s a fun cartoon about it found:

Now LinkedIn is a great company, just not at the prices its trading at. When the Price Earnings, Price Book, Price to sales, and Price to Cash Flow ratios are all out of this solar system, I stay away until it comes back to Earth. Still, it’s a company to watch.

I promise to write some things that are uplifting, particularly about something to actually BUY.

Image comes from:
The Bunny System

Google+ reminds me of Google Buzz (and that’s not a good thing)

A lot of fuss came about when Google+ came to be over the summer. A lot of hype went into this platform, thinking it could rival Facebook. But right now, statistics show people are signing up but not using the service as much as intended. As as shown by this picture, it seems as though the only people using Google+ are Google employees.

The world of social media explained with donuts. Notice the last one.

In glancing at the above photo, you notice that there are different sort of “sectors” in social media. Facebook is a purely  social platform for people to connect with their friends. Foursquare, is one I really don’t understand to tell you the truth but it allows people to check in at places. Instagram and Pinterest are very similar in my opinion, with Instagram only serving on mobile devices and having filters to play with pictures. We all know YouTube by this point. LinkedIn is like a professional Facebook. Last FM is self-explanatory (though I would have put Spotify instead of that here).

After going through that, you may notice I skipped Twitter at the top. That’s because I worry about Google+ going the same way as their Buzz platform which was eerily similar to Twitter. In fact my first buzz posting which I put up without reading anything about it was that it looks a lot like twitter. To which I’m pretty sure I got a lot of people ripping on me for that. But the real reason I wrote that is because well, I had no clue what Buzz was supposed to be at that point.

I mention Buzz because it’s another venture that Google started and later shut down. While it wanted to be Twitter, it’s true mission was so that Google could get more information. And recently I read a WSJ article (The Mounting Minuses at Google+) that said that, “… the main financial goal of Google+ is to obtain personal data about users to better target ads to them across all of Google.”

That sounds a little scandalous, doesn’t it? Also in that article it shows a great picture that I will post here:

Average minutes per user on Social Networking sites for January (note: does not apply to mobile apps)

 Google+ even comes below Myspace in average minutes per visitor for the month of January. And everyone thought Myspace was dead! What’s more surprising is how Pinterest has grown, even more than Twitter and Linkedin. While not everyone may agree with Linkedin, it’s purpose is certainly different from Facebook. My dad and uncle would never consider joining Facebook (at least I think for my uncle), but they’re both on Linkedin as they both have professional post-graduate degree and operate in that sector.

Also, Twitter, Linkedin, Pinterest, and tumblr are able to connect directly with Facebook. These connections actually increase Facebook’s influence, even respective to their “competitors”. But Google+ is more of a direct competitor to Facebook.

Additionally (non Google employees), how many friends do you have on Facebook and how many connections do you have on Google+? I don’t want to disclose numbers but between Google+, Linkedin, Twitter, and Facebook, the lowest number of connections I have is on Google+. Twitter is hard to judge but on both Linkedin and Facebook, I know I can post and have almost 1000 people aware of my post.

This isn’t to say that Google+ is doomed. They just need a better strategy. As I stated before, Facebook can go down. And if they were, wouldn’t it be Google+ to take its place?