The full video of the interview is below. Complete coverage of the conference is on our EconSM channel, while the rest of our videos are on our video page.

Some more highlights from the conversation, after the jump.

—Twitter: Conway isn’t concerned that Twitter isn’t making money yet. “If you look at some of the greatest companies that have ever come out of Silicon Valley—Google (NSDQ: GOOG) and Facebook—(these are) examples of companies that focused on critical mass before they worried about monetization.” He also does not think that Twitter will sell itself. “I think Twitter could be the next Facebook or Google in size—market size and potential. Why not stay an independent company?”

—Digg: Conway thinks Digg is an IPO candidate, once the recession is over. “I think Digg is growing at a good enough rate,” he said.

—IPO market: The IPO market is a year away from recovery, Conway said. “It would be great if six months from now we have some good M&A activity which then (leads) into an IPO market.” One sector he thinks will be active in M&A: media companies, since the Internet sector is “their future.”

—Investment strategy: “I look at teams first and ideas second,” Conway says. “When an entrepreneur starts a company, the idea they have morphs radically.” He talked about meeting Facebook founder Mark Zuckerberg in Palo Alto five years ago. “He told me exactly where Facebook was going to be today and why he thought he was going to be able to get 250 million users. He was very confident. That’s what makes a great entrepreneur. They can explain to you why (their) company is going to be great even though they are plowing completely new ground.”

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Kennedy said that increasingly people are listening to Pandora radio outside their PCs. “We don’t want you looking at an ad while you’re driving,” he said. “Pandora is not just something you do on the computer; it’s something you listen to on the home stereo, something you listen to in the car, so we will utilize a wide range of advertising forms.” Kennedy also said the company was looking at introducing additional premium subscription offerings, although it continues to believe that the “vast majority” of Pandora users will access it via a free, advertising-supported model.

He also listed a set of statistics to demonstrate the service’s success on smart phones. Among them: On a daily basis, about 400,000 people listen to Pandora on the iPhone or Blackberry. The average length of a session is one hour, 40 minutes. And iPhone users are disproportionately likely to buy music via Pandora, compared to web users.

As for why Pandora isn’t yet available on Android phones, Kennedy said that the company had not been impressed with Android so far from an “audio streaming standpoint.”

Thau joined Twitter in mid-January, since then, he said the company has brokered about a dozen business deals with partners like mobile service providers, handset makers and even media companies. MarketWatch’s EIC David Callaway grilled him on the details:

—Search: Twitter’s real-time search capabilities have been well-documented (so much so, that even Google has stepped up its real-time search features); Thau said the startup will monetize its search traffic “in some way”—though he didn’t elaborate.

—Carriers: Much of Twitter’s traffic comes from mobile: both through data plans and via SMS. Thau said getting some sort of a cut of the carriers’ data business wouldn’t be a huge source of revenue—but definitely a portion. Twitter’s also working on handset deals that would “integrate the service” into certain devices right out of the box. 

—Content: MTV is sharing ad revs from an upcoming show with Twitter, so will we see an influx of similar content deals? (Note: MTV has since noted that rev-share talks between the two companies were not finalized, and that Twitter will not be getting a cut of the ad sales for the foreseeable future) Thau said yes—which is partly why they hired a new exec to focus on the media/entertainment business. “The media industry is looking for ways to stay fresh and interactive; you’re already seeing CNN and ABC (NYSE: DIS) Nightline using it, and we think more media companies will start using Twitter as a utility.”

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“Hulu’s done a great job executing—acquiring compelling content and running ads—but we have a great model that runs on non-exclusive partnerships. There may be a day when you see CBS content on Hulu, but it will have to be on a non-exclusive basis. We like the ability to work with other partners, syndicate and monetize our content as we see fit.” 

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CBSi has an app for TV.com, not to mention music apps for Last.fm and third-parties like AOL—but are users flocking to them? Are advertisers? Our Staci D. Kramer got the scoop from Zander Lurie, CBSI’s CFO, about whether its mobile app business is booming.

—Are you generating a profit on mobile? “We are, but it’s not as ad-driven as our online business. We have carrier relationships that pay well, and a lead-generation deal with iTunes.”

—What are the user stats?: “We’ve had over 1 million downloads of our TV.com app, and we’re seeing 5 to 10 times the level of engagement (time spent) from the app than on the site.”

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Facebook and MySpace are going full force into mobile social networking with their free apps. MySpace, for instance, says that mobile now accounts for 35 percent of its traffic. But at the EconSM conference, representatives of various mobile-first social networks said that Facebook and MySpace’s forays hadn’t dampened their growth and that they don’t believe it will.

Why?

—International opportunities: “I think when you think globally there is a real opportunity ... to take share,” said Shawn Conahan, the founder of Intercasting. A “fair number of people” around the world have never seen MySpace or Facebook, he said. Plus, many are not familiar with PCs, while they do have experience with phones.

—Differentiated experience: Although Facebook and MySpace may be pushing their mobile apps, it’s not what they are focused on. “They could easily eat our lunch if they were focused on it but they are primarily focused on the web experience,” said Jonathan Linner, the CEO of Brightkite. Moreover, there are different expectations with mobile-first social networks. For instance, “There is the expectation you will hear back almost immediately” when you contact someone, said MocoSpace CEO Justin Siegel.

Making money, of course, remains the big problem. None of the mobile social networks represented on the panel are profitable. Some charge, other depend solely on ad dollars. Brightkite, for instance, is bringing in “north of a couple hundred thousand” dollars a month from ads. “We could all be profitable,” but that would come at the expense of growth, Siegel said. Then again, Facebook isn’t making money either.

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Economy and outlook for 2008: Geoff Yang, Redpoint Ventures: “There’s been a lot of money raised in the venture business, but there aren’t that many spaces that have a lot of wind in their back… as such, you have a lot of money wanting to investing in the consumer internet… that’s been pushing extremely high valuations.” Companies are worried about the economy, and want to tank up, raising big amounts of cash (especially among later stage companies). However, even if things slow down, there will still be a big backlog of cash looking for a place to park itself. “I would expect that the number of acquisitions that have been done at recent prices will go down”  But, for the next 2- 3 years, there will still be a vibrant M&A market. Ross Levinsohn, Velocity Interactive Group: “We’re coming to the end of the cycle.” But that’s not because things are dying down, as Levinsohn claims to be seeing more innovation than ever before. It’s just that this innovation is accompanied by compression. He added that his firm is telling companies to preserve cash and look out for good buyout opportunities: “You’re going to see some big names have to take down rounds.” (You can probably take some guesses on who that would be). Michael Hirshland, GP at Polaris Venture Partners, declined to predict what economic effects there would be, and argued that to some extent, startups are economically immune. Later, Yang added that downmarkets are great times to invest: “I’m thrilled when it’s really dark out.”
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Talent: Building the right team has been a challenge that’s frustrated several startups. Hirshland: It’s very difficult: “We have a recruiting department of four full-time people, and that’s all they do.”

Buyouts: Shawn Colo, head of M&A, Demand Media: Frequently, it’s more efficient to buy than to build from the inside. Of course, the heavily capitalized Demand Media (NYSE: DMD) has made several deals, most recently the social networking player Pluck. Jason Rapp, SVP-M&A, IAC: Clearly the severe contraction of the credit markets has limited private equity. And it’s grown harder to be public, so selling to a strategic buyer makes more sense for a lot of companies. Rapp reiterated a point that others have made to defend the health of the consumer internet in the face of a downturn: “The measurability of the internet is what the marketers are looking for, so there’s a certain mitigation there.”

Hedge funds: Yang:” We’ve had a couple of hedge funds come into our companies and offer extremely high prices… and part of the attraction is not having to mark to market.” Basically in a downturn, they won’t have to mark that asset down. Beyond that, they’re hoping to be in a good spot for an eventual IPO once the downturn turns into an upturn: “Their rationalization is kind of a little bit weird… I think it screws things up for us.” Rapp: “An out-of-the-money call on the next Google (NSDQ: GOOG). There’s an abnormal return out there.”

Metrics: Colo: “For us, it really does boil down to profit metrics (ed note: shocking).. of the number of acquisitions that we’ve made, there have been one or two that haven’t been profitable at the month of acquisition.” Rapp: At IAC (NSDQ: IACI), it’s all about asking whether a company fulfills a compelling social need, and if so, then it’s about figuring out the size of that market. Hirshland: “I’d go as far as to say the idea of metrics doesn’t really fit into seed or early stage… it’s really all art.”

YHOO-MSFT: Will a theoretical merger of Microsoft (NSDQ: MSFT) and Yahoo (NSDQ: YHOO) harm the deals market? Yang says yes: “I would rather see a healthy Microsoft and a healthy Yahoo… we do best when there’s arms races.” But: “Somebody’s gotta stop Google... it’s almost an unnatural share of market that they have.” Both Right Media and Zimbra, Yang noted, were Redpoint portfolio companies: “I’d like that to continue.” And if the deal doesn’t happen, Yahoo could be a huge buyer, predicts Yang, as it may have to make a measure, bet-the-company kind of move to stay competitive. But who, besides Facebook (and that’s not going to happen) would move the needle for Yahoo right now?

The Plan: Grant: “There’s a real opportunity to open up these platforms and provide an environment that is very friendly to the user. We’re not trying to to build a destination, but rather lean into the fragmentation of the web.” More specifically, Bebo’s engagement marketing will be melded with AOL’s Platform A, an opportunity made available by the broad reach of the service. He described Bebo as the “final leg of the stool” following the rebuilding of the sites (which has led to an impressive traffic spike) and the establishment of Platform A.

How it’s used: Shields: “In the UK, the 13-24 year olds are watching less and less television… if you’re trying to reach the young demographic, you have to reach them in the language in which they’re interacting with these sites.” Grant touted the redesign of AOL to make the various sites more appealing to youth, which has caused an increase in engagement.

International: Bebo will be a core platform for AOL’s international expansion: “When we think about social networking, we think more about the social anthropological side, and less about the technology and social graph, if you will.” So the challenge is to get the site right for each culture where Bebo is used.

Sponsored content: Robert brought up Bebo’s own sponsored content, and asked whether there were opportunities with Time (NYSE: TWX) Warner’s efforts. Grant was a little unclear on this: “I actually met Joanna at a Time Warner event in London.” He noted that the folks at Time Warner immediately felt that Bebo was a very friendly home for content. Shields “We’re not just chopping up television programs, we’re actually creating content that works in our environment.” And she assured that content creation wouldn’t be a costly albatross: “We don’t launch them until we know they’re going to be profitable… they’re all brand sponsored.” Is there anything lost when Bebo-oriented content goes to TV? Shields: “We’ve moved away from the shaky camera third-person type dramas… the expectation from the users is that they want that professional level of content.”

A home for content: A theme that Shields and Grant kept hitting on: Bebo is designed to be a home for content; unlike Facebook, it’s not designed to be a social communications utility. Between this angle and AOL’s Platform A expertise, the opportunity to monetize the site may be superior than what it’s been at other social nets. Or at least that’s the hope.

Justifying the acquisition: How soon can AOL show a dividend on Bebo? Don’t expect that projection anytime soon. Grant noted that the deal hasn’t closed yet and that Time Warner has given AOL broad leeway to do “what’s right” for the business.

The oddity of Bebo: Robert concluded by pointing out how surreal this discussion was: Bebo was start by someone from England, launched in San Francisco, operated largely in the UK, with an American head, being interviewed today by a Briton in LA.

—All advertising is local: Joanne Bradford, EVP of National Marketing Services, Spot Runner: Bought a company called Weblistic, have a web shooter and can produce immediate videos. Discussing the political panel that kicked off EconSM on Monday night, Bradford said: “I just thought those people are doing a lot of work and not getting a lot of money.” Larry Kramer, Senior Advisor, Polaris Venture Partners and ContentNext board member, opined that social media itself is the new local. “Everything we used to do in face to face groups, we’ve started experiencing as an online community.”

—Tapping into passions, not locations: Other panelists mildly disagreed with the geographical aspects that social media allows. Passion and interests have replaced the need to focus on a geography in terms of figuring out how to make the most of a brand’s message, said Patrick Keane, EVP and CMO, CBS (NYSE: CBS) Interactive: Touted CBS’s 200 percent year-over-year growth for March Madness, which got a tremendous boost from its association with Facebook. Everyone wants to beat up social media as un-monetizable. We were able to sell a lot of ads across mobile and online. Music is another area that’s key. That’s why we bought Last.fm. Over half the traffic the site has happens outside of Last.fm. Sports and music are prime points for generating engagement, added Gordon Paddison, EVP of New Media and Marketing, New Line Cinema, which recently released the teen comedy Harold & Kumar Escape From Guantanamo Bay. “We ask people to upload their videos and yes, sometimes you get someone putting a hat on a penis, but obviously, that’s not the kind of engagement we want. Engagement levels are determined by how many social ads are generated, how many pages are created around a subject. Social nets are not in a position to give you adequate numbers to determine success.”

—Measuring discussion: Ad agencies are still figuring out what numbers to use in order to identify successful use of a social media-based ad campaign. At the moment, a good indicator is seeing how much word of mouth you can get through community sites and blogs. Peter Kang, Group Creative Director, OgilvyWest. “Three years ago, we’d get a call: go make a viral video. Now, it’s make a widget. We try to get past the infatuation with the latest tool. Our clients ultimately care about sales at the end of the day, not what’s the latest technology. Amount of discussion is the only metric we’re linking to sales. There is often a direct correlation between the amount of discussion and sales.”

—Learning to listen: Kang also said that marketers are using social media in less specific ways, such as “learning to listen” to what users are saying about brands. Paddison was incredulous. “After all these years of advertising, marketers are only now learning to listen to their consumers, thanks to the advent of social media? Well, that’s just pathetic.”

—A challenge to attendees: Playing the curmudgeon, Paddison praises mobile as a great content platform, but it’s a lousy advertising platform. He happily offered to debate anyone after the conference who believes differently. He essentially argued that the display space is too small to make it worthwhile. He did say after that the iPhone and other phones that offer similar screens offer some hope. “I’m developing apps for the iPhone - but that’s just me. I’d love it if an advertiser could develop a program for the iPhone. But we’re not there yet.”