Friends Reunited and the Winners Curse

I still get annoying emails from Friends Reunited to remind me that I haven’t logged on for nearly two years. The reminders just migrate into the trash folder, but I cannot be bothered to jump over the hurdle needed to rid myself of this site once and for all!

Just a few years ago Friends Reunited was heralded as the must visit social networking site but their position in the market has been irrevocably undermined by the emergence of Facebook, Bebo, MySpace and Linked In. The Independent today carries a well argued analysis of the demise of Friends Reunited as ITV prepares to sell the business for a fraction of the £175m it paid for the site in December 2005.

The crucial point is that FR has lost its ability to be relevant to a younger generation who want much much more from their social networking experience. According to market research experts Nielson, less than 10 per cent of visitors to Friends Reunited spend enough time on the site every month to be of significant value to advertisers. The Guardian reports that FR has seen unique users drop from more than 5 million three years ago to 1.7 million in December in the UK, according to comScore, and just under 2 million globally. The site has become peripheral to most web users.

Here is another good example of the Winners Curse where a suitor pays well over the odds for a business whose future revenue and profit streams have been badly exaggerated. When you think of digital media does ITV immediately come to mind? If the answer is no you have a clue to the failure of their strategy of breaking into the hearts and minds of millions of mobile internet users.