Analysis: ITV should have chosen its Friends more wisely..

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ITV’s decision to pull the plug on the subscription charge for Friends Reunited (MW last week) comes as no surprise to observers, who argue the media owner faced little alternative in the battle with free social networking sites such as Bebo, Facebook and MySpace.

One observer says the move “is too little, too late”. When ITV bought Friends Reunited in 2005, he explains, its user base had peaked and ITV has subsequently failed to capitalise on its popularity.

Another analyst calls ITV’s £120m purchase of Friends Reunited poorly executed; little more than an attempt “to secure a digital presence in the market”.

Friends Reunited was effectively the UK’s first social network but has struggled to maintain the initial momentum it enjoyed. Despite posting a 38% rise in revenues in the six months to June, it has failed to attract the user numbers achieved by competitors such as Bebo, Facebook and MySpace.

Space to improve

ITV says its site has about 1 million UK subscribers and 22 million registered users. MySpace has 100 million UK users. According to comScore, in September Friends Reunited had 2.3 million unique users in the UK compared to 10 million for MySpace and 10.23 million for Facebook.

An ITV spokesman says Friends Reunited is a different proposition from the likes of MySpace, and that changes are not a reaction to other sites’ success but part of a long-term strategy.

ITV managing director of commercial and brand Rupert Howell adds that the site has been profitable and growing since ITV bought it. “It’s not in trouble,” he insists. But he concedes, “In the long term the subscription model is not sustainable. The strategic review shows you can’t expect to continue (with a subscription model) in a world where the competition is free.”

Steve Davies, managing partner at Experian Integrated Marketing, says ITV’s approach to Friends Reunited is symptomatic of its digital strategy overall: “copycat and lacking innovation”.

He says ITV failed to see Friends Reunited’s limitations: “Once you have contacted old friends there is little more to do on the site.” Repositioning to target older users, as with Genes Reunited, is one way to achieve growth, he says. “But the older demographic is not very responsive to advertising and less impulsive, so not a great revenue stream for advertisers.

“Now Saga Zone has launched, once again ITV could be forced to play catch-up, just as it has with its online playback service and on-demand programming.”

The ITV spokesman counters that Genes Reunited has been successful and is the UK’s most popular genealogy site. He says the sites will be integrated further into, which relaunched earlier this year.

In September ITV executive chairman Michael Grade outlined the broadcaster’s digital strategy, saying: “ITV is uniquely placed to prosper in the new age. We don’t need to look for a brand new business model.”

Development strategy

He outlined plans to develop new businesses, such as online gaming, and specialist sites around programming and online communities. Friends Reunited was identified as a key asset and the ITV spokesman says the brand, whose name will be kept, will be integrated further as ITV builds its community services, such as ITV Local.

But there are signs of a disunited front at ITV. Last week ITV managing director of global content Dawn Airey called social networking sites such as Facebook mere “trends” driven by consumer consumption.

ITV’s stated objective is to “deliver £150 million in online revenues by 2010, with at least 75% to come from online display, video and local classified advertising”. The media owner aims to make a top-10 UK commercial entertainment site.

The broadcaster says attracted 6 million unique visitors, with 2.5 million streamed videos viewed in October, and offers “a great product for consumers and advertisers alike”. The site attracted 3.9 million unique users in September, with just behind on 3.8 million.

ITV may hold the lead at the moment, but without innovation it could, like Friends Reunited, soon find itself playing catch-up.