Friends Reunited - The W1nners' Club

Friends Reunited was the brainchild of Steve and Julie Pankhurst and their friend Jason Porter. The site was officially launched in June 2000 and became the first online social network to achieve a level of prominence in Britain.

 

The site worked using the principle of user-generated content and registered users were able to post information about themselves which could then be searched by other users.

The original idea for Friends Reunited came about as a result of Julie Pankhurst’s curiosity about the current status of old school friends which inspired her to develop the website and thus exploit a gap in the UK market following the success of the US website Classmates.com.

By the end of the year 2000, Friends Reunited had 3,000 members and a year later this number had increased to 2.5 million.

Friends Reunited had over 15 million members by 2005 and was then bought by broadcaster ITV for £175 million.

ITV Chairman Michael Grade described the site in 2007 as being “the sweet spot” of the internet and stated that “Friends Reunited is one of the great undersung jewels in the crown … one of the most important bits of ITV going forward, a massive presence, and profitable.”

That year the site generated a profit of £22 million for ITV, but its market valuation had declined sharply from the £175 million the company had paid in 2005.

The site also achieved a UK traffic growth of only 1.2% compared to contemporaries like Facebook’s 2,393% and Bebo’s 173%.

After losing 47% of its users in the 12 months leading up to March 2008, the site dropped its £7.50 subscription fee that was required to contact members, but the decline still continued.

What went wrong?

 

Whilst many have criticised ITV for paying so much for Friends Reunited, its real failure was with the overall management of the site.

Friends Reunited’s colossal revenues were earned from subscriptions rather than from advertising.

You had to pay to get the contact details of the friends that you were being reunited with on the website. During 2006 however, an even bigger explosion in social networking was taking place.

The British-founded website Bebo began to take market share away from Friends Reunited, mainly because it didn’t charge a subscription fee to its users and the US-founded Facebook was also starting to eat into the UK market. If you were a young person in Britain back in 2006, you were likely to be a member of either Facebook, Myspace or Bebo and thus, would be constantly in contact with friends, so the need to visit a site like Friends Reunited disappeared. Conversely, Friends Reunited’s initial success was down to the older generation wanting an easy way to reconnect with long lost associates.

By 2007, the use of Facebook had expanded beyond the frat houses and student halls and quickly became the “in site” of the web, so everyone who was anyone soon became a member.

The great paradox is that because Friends Reunited charged a fee, it actually made money unlike many of its newer rivals, but the subscription fee meant that it wasn’t able to grow and as a result, the paying audience started to dwindle. ITV eventually dropped all of the charges on the site and instead relied solely on advertising revenues which did prompt a temporary boost in user numbers.

Unfortunately however, social networks rely on achieving a critical mass of users. People are unlikely to use a site that nobody they know is actively using. Given the choice of signing up to Facebook or Friends Reunited, people eventually opted for the former.

If ITV had ditched the subscription fees on Friends Reunited as soon as the growth of free sites like Facebook took hold, it’s possible that it could have sustained a growth in users, but the fact that ITV had paid so much for Friends Reunited meant that the company required much greater returns on investment than the site was ever likely to achieve.

In our opinion ITV shouldn’t be too hard on themselves for paying £175 million for a service that was being offered for free elsewhere. Our Publisher Darcus White once threw a house party and tried to run a paid-for bar when everybody else had brought their own booze. The alcohol was eventually consumed but this was only because everybody present threatened to leave if the booze wasn’t handed out free of charge.

 

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