Post-Kangaroo, ITV Devalues Its Online Business, Admits It’s Underperforming

ITV (LSE: ITV) placed a £30 million value on its online operations last year – but this was significantly smaller than the £68 million it said they were worth just a year earlier.

It came in the form of a goodwill valuation in today’s full-year earnings, and is likely the result both of the non-materialisation of Project Kangaroo, on which exec chairman Michael Grade had placed hopes of being a shop window for commercialising his programming, and underperforming web ad sales.

High on buying Friends Reunited, in 2007 ITV recorded £257 million online goodwill – but it’s now selling the site for £145 million less than it paid.

Investopedia: “Goodwill typically reflects the value of intangible assets such as a strong brand name, good customer relations, good employee relations and any patents or proprietary technology.”

Online was the only division whose goodwill valuation was reduced by ITV, even as the advertising downturn and restrictions on how it sells TV ads challenged its broadcast operations. “The key assumption on which the cash flows were based is the Group’s online advertising revenue growth,” according to ITV’s earnings.

But a total value of ITV’s web ops would also include their book value, and it’s not as if ITV can sell anyway.

The company acknowledges: “ITV trails key competitors in terms of online viewing and online revenues remain limited in relation to the market opportunity.”

From the earnings…

ITV ruined a healthy Friends Reunited before selling it. After several periods of growth as a subscription business, it lost 28 percent of its income, down to £13 million, after ITV switched it to ad funding on the cusp of an advertising downturn. Fair play, ITV acknowledges this in its earnings.

Total 2009 online revenue rose only three percent over the year to £37 million, but income from, which is now the focus and makes most money from video ads, is up £6 million to £24 million. Its monthly uniques are up by a third to 8.7 million and peaked during Britain’s Got Talent at 12.8 million. “Significant savings” have been made by combining online with broadcasting ops at the corporate level.

Across the group, ITV returned to annual profit (£25 million), after recording a £2.7 billion loss last year on big write-offs.