As takeover talks continue with Friends Reunited, the website that helps old acquaintances get in touch, the company has hit back at claims it has passed its prime.
Despite having 11 million members, revenues last year of more than &£9m and profits of &£5.2m, some critics question Friends’ potential, and doubt the rationale of a media owner such as ITV reportedly paying between &£120m and &£170m for the business.
Launched in July 2000, Friends Reunited attracted intense interest through word-of-mouth recommendations. This reached a zenith in late 2001, fuelled by the school nostalgia boom among people in their 20s.
In 2003, Friends invited in a management buy-in team headed by ex-Financial Times executive Michael Murphy. The brand has since expanded into highly competitive areas such as genealogy, dating and jobs.
But some think the Friends Reunited brand has gone off the boil. James Ghani, managing director of new media agency Wax, questions what positive contribution ITV would bring to the business and adds: “The optimum Friends Reunited user has been and gone. I just do not think there is enough long-term marrow or diversity potential in the Friends Reunited brand.”
Nick Blunden, client services director of new media agency Profero, thinks Friends will struggle to maintain the kind of growth rate it had in the early days, but the company insists it is still experiencing strong growth. A spokeswoman says revenues are expected to rise to &£12m this year, while earnings before interest, taxes, debt and amortisation will hit &£6.7m and &£8m next year.
The company now has five revenue streams – the core Friends Reunited site; Genes Reunited; a job site; a dating service; and advertising – and the spokeswoman adds that next year only 35 per cent of revenues will come from the Friends business.
There are some 35,000 new registrations a week, she adds, though she declines to reveal how many of these are paying customers. In fact, of the site’s 11 million members, less than ten per cent – 1 million – are paying members. Even so, Audit Bureau of Circulations figures for March 2005 show Friends Reunited attracted 4.3 million users that month which, Blunden says, puts it in the “top drawer” of UK websites. Friends claims user numbers are increasing 43 per cent a year, while more than 5 million profiles have been updated in the past 12 months.
However, Forrester Research analyst Rebecca Jennings believes visitor numbers say little about a website’s success and that paid membership is a better measure. She adds: “Friends Reunited has lost that element of excitement of being a brand new, thrilling site, but it has growth that ITV would kill for.”
Friends Reunited founders Steve and Julie Pankhurst and their associate Jason Porter have made much of the site’s “amateur chic” and non-corporate credentials. After the 2003 management buy-in, Steve Pankhurst said they had turned down takeover approaches at the time because they felt a big corporate company would “change the culture” of Friends, which would, in turn, affect the brand.
The founders appear to be backtracking from this view at the prospect of sharing with the MBI team a potential &£100m windfall from a corporate sell-out. But some agree with Pankhurst’s earlier view that a corporate owner would damage the brand’s credentials.
Profero’s Blunden says ITV would seek to turn Friends Reunited into a local community site competing with the likes of Craigslist.com, the US site that has recently launched in the UK. It could then exploit opportunities for classified ads. He says Friends’ image has benefited from not being part of a major media company and adds: “If it is part of ITV, it will change its position in consumers’ minds.”