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Beware the Bubble

Billion dollar valuations for Twitter and Groupon “mathematically insane,” according to IAC founder and chairman Barry Diller.

Diller addressed a packed house at the SXSW conference in Austin, and covered a range of topics from Apple’s iPad 2 and the issue of network neutrality, to Rupert Murdock’s iPad only magazine, The Daily, and Hulu.com. But what caught our ear was his more pessimistic view of some of the crazy prices people are paying for startups these days.

Twitter, which gained early publicity at the SXSW conference in 2007, received a valuation of between $4.2 billion and $4.5 billion after a fund run by Silicon Valley investor Chris Sacca, with backing from JPMorgan Chase, bought about $400 million worth of shares in February.

And group buying site Groupon, which at one point turned down a $6 billion buyout offer from Google, is pushing toward an IPO that could be worth $15 billion, according to the New York Times.

It’s mostly hot air according to Diller, who is no stranger to bubbles. He led the media conglomerate that would come to be called InterActive Corp. through the dot-com bubble late 90s. However, this time around, “all the money that’s going to be lost will be by people who can afford to lose it,” he said.

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