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Friendly fire: Friends Reunited

6 August 09 12:43 GMT

By Zoe Kleinman
Business reporter, BBC News

Remember the days when it seemed as if everyone was on Friends Reunited? Childhood sweethearts rekindled old flames, old school chums exchanged news and reunion parties were all the rage.

Then along came sites like Facebook and we all started virtually poking each other instead.

The rise and perceived fall of Friends Reunited is well documented.

The pioneer of social networking enjoyed a meteoric success in the early 2000s and then faltered when competitors in the very marketplace it had created effectively crowded it out.

Or so the story goes. In fact, the Friends Reunited brand has quietly been doing rather well. It boasts 19 million members and its sister site Genes Reunited has 650 million names on its database.

A quick look at ITV's online portfolio profits for the first six months of this year reveals more good news.

Out of a profits total of £18m, £10m was generated by Itv.com and the "majority" of the remaining £8m came from Friends Reunited, a spokesperson says.

Not the performance one would expect from a company once deemed to be worth £175m perhaps, but not a bad investment for the £25m at which it has just been bought.

Competition

After the launch of Facebook in 2004, Friends Reunited suddenly found itself being criticised for being too basic by comparison - it lacked any applications such as gaming and voting tools with which to entice returning members.

Friends responded by launching dating and shopping services, as well as the Genes Reunited ancestry tracing service.

And although it may enjoy global popularity, Facebook, the grand dame of social networking, has yet to make any profit.

Speaking to the BBC last month, Facebook's chief operating officer Sheryl Sandberg said the company is making money, but its advertising revenue is being used to fund growth.

It does not expect to become profitable before 2010.

Humble beginnings

Friends Reunited got off to a humble start in a kitchen in Barnet, North London.

Co-founder Julie Pankhurst had the idea in 1999 when she was pregnant and curious about which of her old school friends were also starting families.

Her husband Steve and business partner Jason Porter were looking for internet-related business ideas and decided to develop something which would enable people to get back in touch with each other.

The result - Friends Reunited - launched in July 2000. Its original revenue model was subscription-based; members could view other members' profiles for free but a £7 annual fee was required to make contact.

However, following the proliferation of other social networking sites which were all free to use, it dropped its subscription charge in May 2008 and switched to an advertising model.

'Not embarrassed'

This morning, ITV's chief operating officer John Cresswell told the BBC that he is not embarrassed by the media organisation's decision to sell the website at a fraction of the original £175m price.

"It was bought four or five years ago by the then management team, as the first move to give ITV some online presence," he said.

"This current management believes that the future for online for ITV is about video, and we're investing our money into itv.com... that's where we think the strategic direction of the business should go. Friends (Reunited) wasn't important and so we decided to sell it."

ITV may be going in a different direction, but if Friends Reunited continues to make profits at its current rate, its new owners Brightsolid may have snapped up a bit of a bargain after paying £25m for it.

"I don't think we overpaid, but don't think we underpaid either," says Brightsolid's chief executive Chris van der Kuyl.

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