The web is awash with rumours that ITV is looking to sell Friends Reunited, the social networking site it bought for £175m in 2005. Worse, according to the Guardian they may get as little as £20m for it.
The site has been rumoured to be struggling for a while now and according to the FT revenues last year fell to £10m from £11m the year before.
This news is only going to make already nervous acquirers less likely to buy internet businesses. I had a similar reaction to the recent Techrunch story that AOL is looking to sell Bebo at a fraction of the price it paid for the site last year.
This is an obvious thing to say (and a point I’ve made before), but if acquirers are going to keep on buying the businesses that are created and funded here in Europe then they need to deliver lasting value to their buyer.
Different companies have different stories of course, and from what I hear on the ground most of the problems that Friends Reunited has today come from the way the business was managed by ITV and the terms of the earn out that went with the acquisition.
Similarly, Bebo may be doing well as a business and the issue is simply that AOL paid too much for it. Certainly that seems to be the case with Skype and eBay – eBay has written off part of the acquisition price, but the underlying business goes from strength to strength. If the issue is limited to the buyer overpaying then I think that is far less worrying for the rest of us in the startup ecosystem.