Friends extends its circle of Reuniteds

Friends Reunited is one of the few businesses to have been created in the internet boom that has emerged strong, independent and intact. Happy Group, the company behind Friends Reunited, has gone on to expand the original business with launches such as the genealogy website Genes Reunited.

But questions are beginning to be asked about the long-term future of Friends Reunited and its offshoots, and what the company plans to do to maintain interest as the novelty wears off.

Tabloid headlines about how Friends Reunited has broken up marriages and relationships by reuniting long-lost lovers may have been negative, but they also fuelled spontaneous interest in the phenomenon.

But media interest is waning, a fact that appears to have been recognised by the company, which has decided to resort to advertising, having conducted a small trial this summer, to push its services.

It is about to invest about £1m in a series of online advertising campaigns, developed by Kitcatt Nohr Alexander Shaw and Manning Gottlieb OMD (MW last week). Mark Nohr says the aim of the advertising is “to improve the profits of the core site and to improve retention”. It will also spread the word on newer initiatives.

Currently in rude health and still privately owned, Happy Group is professionally run following a management buy-in last year. The team includes managing director Michael Murphy, a former chief operating officer at the Financial Times; and Tim Ward, a former FT marketing director. The three founders now take more of a brand ambassadorial role.

Friends Reunited boasts 11 million registered members on the main site, and spin-off Friends Reunited Dating is the UK’s fifth-largest website in the booming dating sector. The company forecasts profits of £5m on a turnover of £9m by the end of this year, compared with profits of £4.2m and a turnover of £7.2m in 2003.

But according to insiders, the Friends Reunited site has had problems retaining members, who pay an annual £7.50 fee to contact names that appear on the site. Friends Reunited will not disclose the number of users who have fallen by the wayside, but insiders claim that more than 3 million pay the annual subscription.

In addition to the income generated by the subscription fee, revenue also comes from the sale of advertising space and merchandising spin-offs, such as branded CDs and books. The company claims that ad revenue is up 20 per cent year on year, with space booked by clients such as O2 and AOL. Zed Media head of digital Damien Burns says that Friends’ appeal for advertisers lies in the fact that, unlike other sites, the member registration process is such that it enables them to “target by gender and occupation and to certain demographics and age groups with confidence”.

Revenue may be in growth, but the Happy Group is looking for new products to generate additional income, hence the genealogy and dating sites. But not everything it has tried has worked. Last year it unsuccessfully trialled a not-for-profit lottery on the Friends’ site, with proceeds going to charity.

Marcus Mitchell, associate director at branding agency Corporate Edge, warns that “if Friends adopts a ‘suck it and see’ approach to brand extension, it runs the danger of reducing the long-term credibility of the brand”.

The Happy Group also aims to grow through acquisition, and recently bought the Australian equivalent of Friends, called Schoolfriends, which also has sites in New Zealand and South Africa. The Happy Group believes Schoolfriends subscribers will be eager to use Genes Reunited and Friends Reunited to research family history in the UK.

But the pressure to be a commercial success is, according to brand experts, causing tension with Friends Reunited’s heritage as a “bedroom start-up” and its aim of creating a friendly community.

The company tries to manage the brand carefully so that the core ethos of “no customer exploitation” remains intact, for instance, it does not sell its customer data to marketing houses, although advertisers are allowed to piggy-back the e-mails it sends to members. It is also keen not to alienate users with intrusive advertising such as pop-ups and pop-unders – preferring skyscrapers and banners instead.

Matt Gorzkowski, a former i-traffic executive setting up a new agency, suggests additional advertising opportunities could be generated by further segmenting its membership base and that new products could also include a network for putting businesses in contact with each other.

But Murphy says: “We very much appeal to the mass market and that’s where the focus will stay for the moment.” With that in mind the company plans to launch a social networking site by Christmas, where people can make new friends (MW August 5).

As for the company’s long-term future, Murphy denies there are any immediate plans to sell the company, but insiders say that he is an entrepreneur by nature and is likely to have an exit strategy scheduled for some time in the next two years, with a trade sale the most likely option.