GCap aims to net gains in online move

The radio operator GCap is eyeing the lucrative online social networking market to help offset declining advertising revenue at core stations such as Capital Radio.

Ralph Bernard, the chief executive, said GCap wants to develop "online communities of listeners that identify themselves within a category of music".

GCap has about 15.5 million listeners a week and wants to follow the success of social networking sites such as MySpace by moving those fans online.

The appeal for GCap would be that it can sign advertising deals that cover both its radio stations and internet sites. Mr Bernard said the company has already signed an advertising deal to sponsor its new national jazz station - thejazz - with a "blue-chip client" that covers the station's radio and internet platforms.

GCap aims to have an active database of 2 million online listeners across its Classic FM, Capital Radio, Xfm and other websites by 2008.

Mr Bernard said Classic FM already derives 17 per cent of its revenue from areas such as online advertising and CD sales.

Yet the comments about its online progress did not draw attention away from the company's immediate problems. Since the merger of GWR and Capital in May last year the value of the combined company has plummeted. It has struggled to maintain its audience share, most notably at its flagship London station Capital Radio, while advertising growth has stagnated.

In the first half of the year, GCap revenue fell 8 per cent and earnings declined 45 per cent. Shares in the company slid a further 4 per cent after it warned that revenue over the past two months has slipped 13 per cent.

"The current advertising market remains very difficult and visibility [is] poor. We anticipate tough trading conditions will persist over the next quarter," the company said.

Numis Securities slashed its forecasts for 2007 by 25 per cent and said it was prudent not to expect any improvement in 2008.

But Mr Bernard was more optimistic about the performance of Capital heading into 2007 and confirmed it has entered talks with Karren Brady, managing director of Birmingham City Football Club, about taking over the running of the station.