Skip to content

ITV and Friends Reunited: haven’t we seen all this before?


After months of speculation ITV looks set to unload Friends Reunited for just £15 million, a fraction of the £120 million purchase price (which excludes performance payments that take the total to £175 million). ITV’s decision to buy the site was always questionable. Despite being the leading UK social network at the time, it was soon eclipsed by the emergence of MySpace and Facebook. Its long term position wasn’t helped by the charging structure and with free sites like MySpace growing it soon lost its attraction to many users (when was the last time anyone logged onto the Friends’ site?).

I can help feeling a sense of déjà-vu about all of this. MySpace is another brand seemingly in trouble. Recent announcements of significant cuts in head count suggest that the brand is also struggling. Whilst some of this may be down to the economic climate there is also a view that it has found it difficult to respond to newer competitors such as Facebook. How long will it be before News Corp divests itself of this loss-making digital asset? Like ITV this purchase was also pricey costing the media giant $580 million in 2005.

It’s not just Friends Reunited and MySpace inspiring this sense of déjà-vu. Back in 2000 media giant Time Warner merged with internet giant AOL in what was billed as a meeting of leading off and online media brands. Since then, TW has failed to see significant growth from its online stable. Earlier this year media reports indicated that the time has come where Time Warner now sees a better future without AOL.

These high value takeovers often occur when a site/trend is attracting massive media hype and is the current darling of the press. This makes the brands targets for acquisition whilst also raising the potential price. It’s not surprising that they are then acquired by another company for these eye-watering amounts of money. More often than not however, these Internet brands have yet to make money or even to determine how they’re going to monetise their offering.

It’s at this point the things start to unravel. Do the demands of revenue generation imposed by a parent company help or hinder? Let’s put it another way. Does the addition of chargeable services for users or even advertising/sponsorship take away one (or more) of the elements that made these sites successful in the first place? And are these attempts to generate earnings put in place without a real understanding of internet audiences?

It’s perfectly understandable that the new owners want to see a return from their investment. It’s equally problematic that the financial imperatives placed on the acquired division present challenges. This problem isn’t limited to offline businesses who buy online counterparts. Will Google make its purchase of YouTube pay? And will Twitter succumb to potential interest and be snapped up? Or will the above examples get investors taking a more considered view and looking at the long term picture before investing? These aren’t the only examples and won’t be the last but isn’t it about time that big businesses learnt from past mistakes? Maybe, just maybe it’s time for investors to proceed more slowly when making these massive investment decisions.

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: