Do social networks like Twitter belong in media?

By Alexei Oreskovic - Analysis

SUN VALLEY, Idaho (Reuters) - If there's one group of executives at this week's Sun Valley media and technology conference who ought to be in good spirits, it's 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 Inc to DreamWorks Animation SKG Inc and Amazon.com Inc to Dell Inc, 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 Corp 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 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 $900 million 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 $900 million.

"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."

PAID VS FREE

Sales of traditional media staples such as newspapers and DVDs are in a multiyear and seemingly inexorable decline. By contrast, Facebook's active users doubled in eight months to top 200 million in April and U.S. visitors to Twitter surged 83 percent that month over March, according to comScore.