Social media 'doing very well, making very little money'

If there is one group of executives at this week's Sun Valley media and technology conference who ought to be in good spirits, it is the handful steering the fleet of internet social networks.

The buttresses of old media institutions, from print to television, are under stress from the advertising downturn, but social media is thriving as the world flocks to the likes of Facebook, Twitter and LinkedIn.

But the glow of social media is tempered by the hazy business models underlying the internet's latest trend. The world is talking about Twitter, but as far as anyone knows, the San Francisco-based microblogging site has yet to earn a dime.

So even as Twitter's Evan Williams and Facebook's Mark Zuckerberg were seen conversing with CEOs from Google to DreamWorks Animation SKG and Amazon.com to Dell, there were no signs these talks would soon lead to the deals that have made the Allen & Co conference famous.

Indeed, Rupert Murdoch said Twitter would be a tough investment to justify for News Corp because it has not yet come up with a sustainable way to make money. "Be careful of investing here," Murdoch told reporters.

Sony Chief Executive Howard Stringer was similarly blunt. "A lot of people are doing very well making very little money," he said, when asked about opportunities in social media. "That's not a club I'm willing to join."

Early combinations between old and new media, such as News Corp's acquisition of MySpace for $580 million (Dh2.12 billion) in 2005, offer reasons for caution.

Once the top dog in social media, MySpace's popularity has been overtaken by Facebook. And when MySpace's $900m advertising deal with Google comes to an end in July 2010, it's not clear what the future holds for the site.

Google CEO Eric Schmidt was coy when asked if he would renew the three-year deal with MySpace at $900m.

"Never say never," he told reporters, but then talked about changes in the marketplace that could affect the terms of any deal. "We have more tricks up our sleeve now."

Sales of traditional media staples such as newspapers and DVDs are in a multiyear and seemingly inexorable decline.

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