Online Dating Services Add Features is a NYTimes article about whether or not Friendster’s method will shake up online dating. [Note that despite all of the advice to the contrary, Jonathan continues to get quoted saying that he will charge when things go public. ::sigh::]
August 11, 2003
E-COMMERCE REPORT
Online Dating Services Add Features
By BOB TEDESCHI
ONLINE dating companies are seeking a deeper commitment from their customers.
Internet personal ads have shed nearly all traces of stigma to become a mainstream medium, with 40 million people in this country visiting dating sites last month, according to comScore Networks, a research firm. Now the companies that serve the market have stepped up their competition for users, investing heavily in new features and preparing new rounds of marketing – all in hopes of a big financial payoff.
The market leaders, meanwhile, are looking in their rearview mirrors at a new company, Friendster Inc., that could shake up the industry by taking the business beyond dating to social networking in which – as with offline life – romance is not the only purpose for hooking up.
The online personals business has been dominated for the last two years by Match.com, which is owned by InterActiveCorp, and the Personals division of Yahoo Inc. Lately, MatchNet, a Los Angeles company listed on the Frankfurt Stock Exchange, has been quickly gaining ground. Those three companies, as well as a few second-tier players and numerous smaller competitors, are expected to collectively generate a total of more than $300 million in revenue this year, according to Jupiter Research, which forecasts a $400 million market next year.
“This looks like a pretty good business,” said David Card, a Jupiter analyst. “And, our forecast could be a little conservative.”
The revenues, Mr. Card said, tell only half the story. Because the services are built on “relatively simple database-driven applications,” he said, “the costs to support this stuff are pretty modest.” The level of profitability depends largely on how much a company spends to market the service to customers, who typically pay about $25 a month to prospect a site for dates, he said.
Match.com and Yahoo do not disclose their marketing budgets. Yahoo does not disclose financial statistics of its Personals division, but Match.com has begun to generate positive cash flow. Last week, InterActiveCorp said Match.com’s operating income for the second quarter reached $7.6 million, a 14 percent increase over last year’s second period, as revenues grew 60 percent, from $30 million to $48 million.
But those numbers mask a slump of sorts for the company. A substantial portion of the revenue growth came from uDate, an online personals service Match.com bought late last year for $150 million in stock. (The transaction closed in early April.) Without uDate, Match.com’s paid membership fell by about 44,000 in the second quarter, to 722,000 – the first such decline for the company.
The company pegged the slide, in part, to a cutback in marketing as Match.com prepared a new version of the service, which it introduced in mid-June. Barry Diller, InterActiveCorp’s chief executive, said in a conference call with investment analysts last week that the decline in users had lasted three or four months. But “for the last 30 days,” he said, “every day has been an up day.”
On the conference call, Mr. Diller waxed rhapsodic about Match.com’s new features. “You see them and go `How can you do that?’ – not that it’ll get people to stay together any longer.”
Match.com does not necessarily benefit if its users pair off for good. Tim Sullivan, Match.com’s president, said in an interview last week that although his subscribers typically dropped off after about five months – having either found a promising mate or no luck at all – many return for another try. In fact, he said, about 40 percent of the site’s current subscribers are returnees.
But competition is such that Match.com and its rivals are under pressure to improve their services so that people will find dates quickly, even if it means they will lose those customers more quickly. One new feature of Match.com’s revamped site is video messages, a capability that Yahoo added early this year that allows users to post personal statements on the site.
On the redesigned Match.com, such features are joined by new offerings, like a compatibility test meant to illuminate the attributes of a user’s ideal mate, and a feature called Wink that enables users to send flirty e-mail messages to prospective dates.
Yahoo, meanwhile, has introduced various embellishments over the last year. When Yahoo Personals users search for dates, the search results will be accompanied with a message that says, “If you like this person, you’ll also like these people,” and it provides a link to their profiles.
While Yahoo’s new features do not necessarily represent a shift in focus, Match.com’s revamped site does. Beyond its original “find a lifetime mate” mandate, Mr. Sullivan said Match.com now supports users who are interested in casual dating. “Online dating is sufficiently legitimate now that it’s O.K. to embrace a broader spectrum of dating and relationship experiences,” he said.
Matchmaker.com, which is owned by Spain’s Terra Lycos and attracts about only half the monthly traffic of Match.com, is heading in the opposite direction – as a destination for those willing to commit. According to Meredith Hanrahan, Matchmaker.com’s vice president and general manager, the company will today debut a newly designed site, branding itself as a “place where people are looking for serious relationships.”
The site conducted a survey and found that “80 percent of the people who use these services are looking for serious relationships,” Ms. Hanrahan said, adding, “but only 30 percent think other people are looking for serious relationships. So, we see an unmet need here.”
MatchNet.com, meanwhile, takes a different approach than most others in the category. The company operates nine sites, including AmericanSingles.com (a general dating service); JDate.com (for Jewish people); Glimpse.com (for gays and lesbians); and the German site MatchNet.de.
MatchNet.com’s chief executive, Joe Shapira, said such niche marketing was a primary reason that MatchNet.com had the most visitors of any online dating company in June, with nearly 4.4 million visitors, according to the Internet measurement firm Nielsen Net-
Ratings.
While Mr. Shapira said the industry’s $25 average fees had been enough to generate healthy revenues, he argued that subscription prices are lower than they could be. About 20 percent of MatchNet.com’s customers are also paying members at Match.com or at Yahoo, or both, he said.
“This is not a commodity,” he said. “We have different inventory.”
Still, many customers of the big online dating services could be lured by a cheaper and entirely different dating company that has amassed 1.5 million members in a little more than three months, without any marketing. Friendster, a start-up company based in Sunnyvale, Calif., helps users meet friends of friends, by encouraging social networking.
On Friendster.com, which will remain free until its official kickoff sometime in the next few months, users sign up and post a picture and a list of interests. They also provide e-mail addresses of friends, who are invited to join. Users can search the service for their friends, then contact their friends’ friends for dating or simply for socializing.
According to Jonathan Abrams, Friendster’s chief executive and founder, “this is more reflective of reality.”
Mr. Abrams said users would always be able to browse the site for free, but after the official rollout, Friendster.com will charge subscribers “less than one-third of what Match.com charges” to contact other users.
As for whether Match.com or the other services might simply replicate his approach, Mr. Abrams said: “We’ll see,” adding that he is not intimidated by Match.com and others. “I’m growing way faster than them.”
