Sept. 19, 2002 — Selling love over the Internet seems like the perfect business model. Virtually all your content is donated for free. Your customers are motivated by the strongest urges mother nature can conjure up. And they think $20 a month is cheap compared to the price of a drink at a singles’ bar. Until recently, there had been a catch — the weird factor. But that’s a distant memory now, since it seems everyone’s doing it. Virtual matchmaking has become the Internet’s third killer app, behind e-mail and the Web. Can the “mad growth,” and genuine profits, continue?
Far from the cloak-and-dagger days of newspaper personals, online dating has gone mainstream. Match.com sponsored NBC’s Wimbledon coverage last month. Yuppie New Yorkers sometimes include their Nerve.com aliases in every e-mail, as part of their virtual calling card.
Over 18 million people visited online personal Web sites in June, according to research firm Jupiter/Media Metrix — up from 14.8 million last October. And nearly one in five men who are online say they do some “window shopping” on the personals at least once a month.
Those meteoric growth numbers have been seen before in the age of the Internet, from many dot-com flameouts. But there’s a critical difference in the online personals space — paying subscribers.
Perhaps money can’t buy you love. But love, it turns out, is one of the few things people are willing to buy online.
A real return to romance
Market leader Match.com now has 600,000 customers forking over about $25 a month.
uDate.com, which also operates Kiss.com, had $1.5 million in revenue in June 2001; last month alone, the company took in $4 million, according to president Martin Clifford, and the company has just enjoyed its fourth straight profitable quarter.
Yahoo, No. 2 in the online personals category, is much cagier about its growth, but the company beat its chest about its love site at its most recent quarterly earnings announcement, saying personals made a “very significant contribution” to revenues.
“I don’t know if you’ll continue to see the current mad growth,” said Jupiter analyst Stacey Herron. “But online personals will still grow at a healthy rate.”
The key, Match.com president Tim Sullivan says, has been marketing efforts to “legitimize the category” during the past 12 months.
“My own sister got married last month to a guy she met on Match. It’s very mainstream now,” Sullivan said. “Anywhere I go, if I’m in a crowd of more than 6 people and say what I do, invariably someone comes forward and says that they have been using Match.”
A database of dates
Running an online personal business is a pretty cheap date. People volunteer themselves, and their photographs, as a constant supply of free, compelling content. All the sites do is manage a searchable database and work to develop smarter search tools that let suitors sort through potential dates.
“I have 43 employees, and we’ll bring in $43 million this year. That’s $1 million per employee,” Clifford said. “We have zero cost of sales within our business ...The margins are almost super-margins.”
Naturally, the super-margins — not to mention real profits when the rest of the dot-com world has imploded — have entrepreneurs falling all over each other for a piece of the love pie. Jupiter now tracks 29 general-purpose online dating sites with catchy names like “Crushlink.com,” “Heartdetectives.com,” and “Datadate.com.”
And then there’s the second-tier, specialty sites, like the aggressively sexy “Nerve.com” or “PlanetOut.com,” which have dedicated followings and promise users a more targeted field of prospective dates.
Niche Web communities, which have been jealously eyeing the love profits, are jumping on the bandwagon too. Personal ads are being sprinkled on top of established Web communities all over the Internet. Journalists looking to date other journalists, for example, can now find their future mate at Mediabistro.com — which was founded as a writer’s professional networking tool.
The sites operate in nearly exactly the same way, allowing directed searches on everything from zip code to height to salary to eye color — then providing some kind of computerized matchmaking to supplement personal searches. Most offer regular e-mails with rosters of computer-selected candidates. uDate.com offers a specialized service called “Encounters” which tells you if a member has even looked at your ad — a mixed blessing that allows for some additional interaction possibilities (“So, I noticed you gave my personal the once over last night. Want to chat?”)
But there’s a sizable drop-off in users after personals titans Yahoo and Match.com, and the smaller players face a problem that’s similar to what eBay’s competitors face — people tend to go where the largest crowds gather. Just like more bidders mean higher prices for auction sellers, more personals subscribers means more possible dates.
So, many in the crowded field won’t last, Jupiter’s Stacey Herron thinks. “I do not think all these sites can hang onto the fueled growth we’re seeing right now,” she said. “They’re banking on people signing up for 3 to 5 dating services, and some are. But that won’t always be the case.”
Lookers and payers
There’s another fundamental problem for the business right now — window shoppers and free riders. Each dating site works the same — posting a profile of yourself, including photographs, is free. So is browsing through the thousands of eligible people. And with some, you are even notified that a prospective mate is trying to contact you. But to contact your future date, you have to take the plunge over the subscription wall. And right now, dating sites aren’t faring all that well at getting customers to take the plunge.
While 6 million people each month visit Match.com, and the service boasts 3.25 million profiles of eligible people, only 600,000 are paying customers. That 6-to-1 conversion ratio is typical, the other sites say, and they are all experimenting with ways to push lurkers over the subscription wall.
“We spend a lot of time figuring out creative ways to market to those users, trying to find the magic pixie dust to turn them into a paid subscriber,” said Yahoo’s Katie Mitnik. “The single best thing you can do is show this person appropriate (candidates).” Yahoo, like most other services, offers regular e-mails with lists of computer-generated matches, hoping that one of them will be enticing enough to get an unpaid registrant to fork over their credit card.
The heartbroken come back
On the other side of the coin, dating sites have an odd problem — generally speaking, a successful customer goes away. In fact, 75 times each month, Match.com users marry each other, taking at least 150 users out of the system.
But success stories actually generate much more business than they cost, Sullivan says.
“If a person joins Match.com, we hope they resign in one month because they found ‘that’ person,” Sullivan said. “There is not a better marketing voice for us than someone who meets their person online and tells their friends. In this business, churn is a wonderful thing.”
Besides, Clifford said, the singles population is constantly changing, with children coming of age, breakups and divorce. “The census bureau statistics will not change as a result of online personals getting people together,” he said. “There will always be plenty of single people.”
Also keeping business rolling: plenty of relationships that begin with an e-mail introduction don’t work out — and apparently, the heartbroken don’t blame the breakup on the matchmaker. Nearly one-quarter of people who quit the online personals site, presumably because they’ve found someone, come back and resubscribe within the next 12 months, Sullivan said. That kind of repeat business would make any industry take notice.
Married, but looking
Just as love can be messy, and so can the love business. It turns out that personals are popular not only with the brokenhearted, but also with broken marriages, putting the sites at the center of some sticky moral questions. Research published earlier this year indicated that about one-third of online personals users are married; Clifford thinks 20 million married Americans will be interested in using online personals in the coming years.
The sites deal with the thorny issue differently. If anything can stunt growth of the personals category, Sullivan says, it’s illegitimacy, or the general feeling that online personals are only for people who need to meet others in secrecy. So Match.com won’t let people who declare themselves married register at the site. And if the company hears that a customer has lied about their marital status, they are dismissed.
“Legitimizing the category is our internal mantra,” Sullivan said. “We choose to make Match.com stand for something everyone feels is legitimate.”
Yahoo and uDate, on the other hand, leave the policing up to the users. Until recently, Yahoo had a category called “married but looking,” but has removed the feature.
“It’s just a fact of life. Look at the divorce rate,” Clifford said. “The fact that a significant number of married individuals are using online dating services gives more credence to the sustainability of the market... From a social perspective, this has some disadvantages, and from a business perspective it has advantages.”
Besides, Yahoo’s Mitnik says, not all those married people hanging out at online personals sites are looking for a fling. Many have far more wholesome motives.
“There’s huge entertainment value in searching through online personals,” she said. “We try to get them to work for us, too. So for example, we made it easy to e-mail (personal) ads to friends. These people are married matchmakers. .. And we pick up a fair number of subscriptions from that.”
The other personal sites have similar “e-mail a friend” features — meaning they’ve learned to monazite the strongest urge in the world, the urge to find love, but also the second strongest urge: the urge to meddle in your friends’ love-lives.
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