Analysis: ITV eyes fit with Friends Reunited

ITV is close to snapping up Friends Reunited after reportedly bidding up to £170 million, in a move that would represent the broadcaster's first major online acquisition since it was created by the merger of Carlton and Granada last year.

As Revolution went to press, neither ITV nor Friends Reunited could comment on the deal, but speculation is that it could be sealed by the end of November.

ITV is one of several firms, including BT, Daily Mail General Trust and Rupert Murdoch's New Corp, rumoured to have courted the community site. It is no surprise that three of the four are traditional media firms, given the recent trend that has seen BSkyB buy easyNet and News Corp scoop MySpace.

On first impressions, Friends Reunited is an attractive target with a strong brand, 12 million registered users and popular spin-offs including the UK's largest ancestry site, Genes Reunited, and the fifth-largest dating site. But the fit between 'Friends' and ITV isn't obvious.

"I personally can't see that fit very closely," says Nancy Cruickshank, managing director of women's site Handbag.com. "It's difficult to comment on whether it would be a smart buy. It depends how ITV plans to integrate Friends United."

ITVi partnership

ITV and Friends Reunited already have a partnership that gives ITVi viewers access to the site, but what would the broadcaster do if it owned it?

Richard Dunmall, managing director of digital media agency mOne, thinks ITV wouldn't make any huge changes at first. "I think (Friends Reunited) would continue to be run independently and ITV would enjoy the additional revenue stream for now."

Friends Reunited forecasts earnings of £6.5m for 2005 and registers about 5,000 new members each day, suggesting potential for further growth.

"Friends Reunited has done extremely well without really doing any marketing. It's largely been word-of-mouth and organic growth. So, perhaps with an even more concerted marketing budget or support of a very large organisation like ITV, the business could achieve a lot more," suggests Dunmall.

Long-term, there are a number of things that ITV could do to extend the brand. It has made no secret of the fact that it wants to diversify its revenue streams, stating earlier this year that it wants to generate half its revenue outside ITV1 by 2012.

It already has two digital channels, ITV2 and ITV3, and plans to launch a fourth. It also has a specialist division, ITV Consumer, focused on exploring new revenue streams in mobile, broadband and new media.

The broadcaster launched a mobile portal to complement shows such as I'm A Celebrity ... and X-factor, as well as a local broadband TV service being trialled in Brighton and Hastings. The service offers news, weather, local films, an entertainment guide and community video. Users can also buy and sell products they upload in a classified ads section.

Broadband content

Content from Friends Reunited's family of portals could fit well with this type of service and help ITV to position itself as a provider of broadband content and classified advertising to local communities. A spokeswoman for ITV says the broadband trial will end in January, when it will decide whether to roll the service out nationally.

In the meantime, Cruickshank thinks ITV could reap other benefits. "There is a tonne of expertise it can take out, whether it's entrepreneurial spirit, new ways of working or a change of management. The survivors from the original dotcom boom have demonstrated that a business model can be put together and made to work. That is definitely worth buying into," she says.

Dunmall adds: "Friends Reunited has got a lot of user data - data about people that ITV may want to engage with across a variety of its different products and services."

ITV's interest in the web site is further evidence that it views a large part of its future outside traditional broadcasting. An ITV spokeswoman adds: "We've got our traditional broadcast channels and now we're looking at a family of channels, including things like mobile and broadband. It's not really about a technology - it's about making the content that ITV produces available in whatever way people want to receive it."

- Voxpop, p18; Editorial, p21.

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