Twitter’s influence, moneymaking challenges emerge as hot topic as media summit kicks off

By Michael Liedtke, AP
Wednesday, July 8, 2009

Top media execs wonder how Twitter will make money

SUN VALLEY, Idaho — It turns out the media elite aren’t so different from a lot of less affluent folks: They think Twitter is a great communications tool, but can’t figure out how the online messaging service is going to make money.

The recurring doubts about Twitter’s moneymaking potential cropped up again Wednesday as an exclusive media summit hosted by investment banker Allen & Co. got under way at the posh Sun Valley resort.

One of the first sessions focused on how to capitalize on digital media. Twitter quickly became a focal point of the discussion because it has emerged as one of the Internet’s fastest-growing services this year.

But Twitter hasn’t attempted to profit from its popularity yet, leaving everyone guessing about how the 3-year-old startup intends to pay its bills after it exhausts its $55 million venture capital.

The participants on the panel moderated by media writer Ken Auletta of The New Yorker magazine predicted Twitter Inc. will face major challenges when the San Francisco-based company finally tries to generate revenue. Reporters were barred from the session — like all other meetings at the media summit — but Auletta confirmed the tenor of the Twitter talk afterward.

Two of the panel participants, veteran media executive Barry Diller and cable television magnate John Malone, reiterated their skepticism about Twitter’s moneymaking potential in separate interviews.

“I think it’s a great service. I just don’t think it’s a natural advertising medium,” said Diller, who heads online conglomerate InterActiveCorp.

Malone, chairman of Liberty Media Corp., also believes Twitter will be hard-pressed to sell advertising on its messaging service without alienating users. Twitter’s best bet, Malone said, probably is to simply get people so addicted to the service that they might eventually pay fees.

It’s an idea that YouTube, the Internet’s leading video service, might want to try. Malone said billionaire investor Warren Buffett confided that he enjoys watching YouTube so much that he would be willing to pay a $5 monthly subscription for access. Although YouTube is more popular than ever, it still isn’t making money nearly three years after Google Inc. bought it for $1.76 billion.

Buffett declined an interview request Wednesday.

Twitter’s co-founders, Evan Williams and Biz Stone, still haven’t revealed their business model, but have indicated that advertising is low on their priority list. They have suggested they might impose fees on companies interested in mining the data about consumer preferences and peeves that pour into Twitter.

In an interview before Thursday’s program began, Williams said he has been discussing possible deals with some of the conference’s other guests. He declined to say with whom.

“It’s always nice to have attention,” Williams said. “I don’t know that there has been that much attention on Twitter. I haven’t noticed it. I am just here to learn and meet folks, actually. We are just trying to figure it all out.”

Many media executives running long-established companies are wrestling with their own daunting problems as the Internet lures consumers and advertisers from them. Few of the executives attending the media summit wanted to talk about that trouble.

Some of the most best-known people on the guest list arrived Wednesday after the summit had begun. The late arrivals included Google CEO Eric Schmidt, Microsoft Corp. Chairman Bill Gates, basketball star LeBron James and Facebook Inc. CEO Mark Zuckerberg — another Internet whiz still trying to prove that his service for online banter will mature into a profitable business.

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