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ITV Still Reunited

Simon Pitt | News | Wednesday 4th November 2009

Just as ITV thought they'd finally got Friends Reunited off their hands, the Competition Commission have stepped in to investigate the deal.

ITV said in a statement that they were "disappointed", a word, behind which, you can imagine a lot of suited senior executives swearing and shouting. Particularly since they were selling the site for over than £100 million less than they bought it.

The sale was agreed in August 2009, for £25 million, and it seemed that was the end of the matter. With the rise of sites dedicated to social networking like Facebook, MySpace and Twitter, ITV just didn't have the time or resources to compete. When they'd bought Friends Reunited in 2005 for £120 million, the social networking landscape was rather different. ITV must have thought they'd be able to jump in and make a quick few bucks. Now, though, that has all changed, and Friends Reunited has been haemorrhaging members like anything. If anything, they were lucky to still get £25 million for Friends Reunited, a brand that has little respect and is losing members daily.

In the last three months, according to Alexa, the number of global pageviews of Friends Reunited has dropped by nearly a quarter and the site has dropped to the 402nd most popular site in the UK. In August 2009 when ITV made the sale, Friends Reunited was the 290th most popular site. On the one hand, being the 402nd most popular site in the UK is still worth something, but, on the other hand, it is dropping by over 100 places in three months (around one place every day). On an average day Friends Reunited receives 8,000 page views. This may sound a lot, but it is down 2,500 in the last three months. If this rate continues, there won't be anyone viewing it by the time they actually sell it. You have to wonder, as well, who is actually viewing the site nowadays. The problem with Friends Reunited's business model is that it's value comes from the userbase. Once users start to leave, the situation gets worse exponentially.

In August, the site was sold to Brightsolid, a company owned by DC Comics. Brightsolid's intention was to join the only bit of Friends Reunited worth keeping, Genes Reunited, to its own genealogy pages: findmypast.com and 1911census.com. However, the Office of Fair Trading were worried that this would reduce the genealogy market to only two players: Brightsolid and Ancestry.co.uk.

Amelia Fletcher, OFT senior director of mergers called genealogy "an increasingly important market":
The proposed acquisition would see the three main providers of online genealogy services reduced to two, and we are concerned this could lead to a reduction in choice or service for consumers. [...] We are therefore referring the merger to the Competition Commission for a fuller inquiry.
In a statement the OFT said:
On the basis of the evidence it received, the OFT does not believe that the current competition in this market or the potential for future entry is sufficiently strong to prevent the merged firm from reducing the quality or range of its services, or possibly raising prices.
The competition commission is not expected to make its report until April 16th 2010.

Brightsolid chief executive Chris van der Kuyl seemed to be up for the challenge of facing the Competitions Commission:
We believe the merger will be good for competition and good for consumers. [...] We look forward to demonstrating that this is a lively competitive marketplace with a multitude of free and paid offerings available to consumers.
Meanwhile ITV showed less enthusiasm in their statement:
ITV is disappointed by this outcome, but will work closely with the Competition Commission and Brightsolid to seek to resolve this process satisfactorily.
Behind the scenes, though, things were a lot more fraught. "Who knew the genealogy market was this cut-throat?" one insider complained to The Times. "Would this have happened in the United States? Is this a sign of how internet transactions are going to be regulated in the future?"

Things are not going well for ITV at the moment, with the recession and the decrease in advertising revenue. With the way things are you can see why they can't find a new chief executive.

SP



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