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Bertelsmann eyes a 'MySpace' for silver surfers
German group diving back into the internet?

By Reuters

Published: Tuesday 04 April 2006

German media group Bertelsmann plans a return to the internet and is looking at transforming its Direct Group of book, CD and DVD clubs into an internet networking scene for older people.

The company believes that Direct Group can turn its aging customer base of around 35 million to its advantage by changing its traditional clubs into internet communities of like-minded people united by their similar cultural interests.

"People are getting older... and older people are getting lonelier and they will need communities where they can share their interests," chief executive Gunter Thielen told Reuters in a recent interview.

Thielen said Bertelsmann had been studying the demographic trends of the Western world, which point to a future with aging populations, many of them likely to have no or few children and larger disposable incomes than before.

Like many other media companies, Bertelsmann burned its fingers five years ago on the web with an ill-fated online book retailer that failed to survive competition with Amazon.com, although Bertelsmann did turn a massive profit by selling its AOL Europe investment for $6.75bn before the bubble burst.

Other traditional media companies are also ready for another bite at the internet. Rupert Murdoch's News Corp last year earmarked $1.5bn for acquisitions in this field and recently bought teenage internet hotspot MySpace.com, an online music and dating community with about 60 million members.

And though Bertelsmann's vision is still at an early stage, some online analysts said they saw potential for the idea.

"It's challenging teaching that audience to use those kinds of tools," said Jupiter analyst David Card. "It may not be a natural thing but it could work if they do a good job data mining and finding people with like passions."

Direct Group, part of Bertelsmann's heritage as it grew to become the world's fourth-largest media group, runs book and music clubs in 22 countries around the world.

Bertelsmann also owns pan-European broadcaster RTL, publisher Random House and half of music company Sony BMG.

Though Bertelsmann and Direct Group declined to provide any specifics, any internet venture would have to be driven by advertising. That could be lucrative, as advertisers have been increasingly reaching out to older audiences online.

"With communities, the challenge is coming up with an environment more compelling than what's already out there, which are typically organically grown destinations that are unfiltered and without intrusive brands," said Norm Johnston, the managing director for internet marketing firm Modem Media Europe.

"However, if they can attract the audience and create some repeat usage it could be very attractive to advertisers."

At least one US site, seven-year-old Third Age, caters to baby boomers, with 1.5 million members swapping information on relationships, investing and jobs.

But Bertelsmann's notion for Direct Group has its sceptics.

"My gut feeling is that when you look at things like YouTube and MySpace, they've taken off with younger people who are trying to make friends," said Danny Sullivan, an internet consultant who created Search Engine Watch.

"When you're in your 50s," he said, "you've probably already got friends."