Playing Matchmaker, Winning a Profit
The business models of online dating sites vary, and so do their successes.
Not only does the Internet offer "dating" sites for every preference, it also offers them at every price range. According to Forrester Research, the dating market was worth $957 million in 2008. That market has grown throughout the recession as more people sign up for online love, which has allowed many sites to increase the price of their subscriptions (Match.com and eHarmony both raised their prices over the last two years).
According to a poll by Online Dating Magazine, eHarmony is currently the preferred site with Match.com following closely behind it and a handful of others garnering only a little bit of praise. The results make sense: eHarmony and Match.com are the big leagues of dating sites. Both sites are run under similar business models with members being able to join for free, but having to pay to communicate with other members. The sites also have comparable pricing structures. Match.com charges $20 to $40 per month depending on how many months you agree to, while eHarmony charges $60 for one month, $120 for three months, $180 for six months, and $240 for a year (it's approximately the same amount to join for a year on both sites).
Match.com -- which is owned by Barry Diller's IAC/InterActiveCorp (IACI) and is the only publicly held site -- reported having 1.4 million paid subscribers as of the fourth quarter, up 2% from the year prior, with revenues of $83.3 million for the three month period. More than half of the site's clientele are between the ages of 30 and 49 years old.
eHarmony claims to have had more than 20 million registered users since its inception in 2004, but doesn't release the number of paid subscribers. A 2007 Harris Interactive poll commissioned by the site showed that eHarmony members represent 2% of US marriages annually, with 235 members getting married every day.
Yet, the paid subscription model isn't the only way to make money off of people's need to connect. Some sites are purely advertising-based and free to users, others charge only one party to the transaction, and still others charge on a usage basis. Business models differ depending on the size and demand of the market targeted.
Avid Life Media and FriendFinder are bringing in revenues through a plethora of niche dating sites that tend to lean toward the risqué. Both companies recently decided to shelve their plans for initial public offerings due to lack of interest from investors. Apparently sex sells, but not on the open market.
Canadian-based Avid Life Media is the owner of five sites: AshleyMadison.com, a site that helps married people have an affair, ManCrunch.com, the gay dating site that gained exposure after CBS rejected its ad for the Super Bowl, EstablishedMen.com, a site for beautiful women to connect with rich men, CougarLife, where young men meet older women, and Swappernet for swingers.
According to the Canada's Globe and Mail, Avid Life Media had been planning a $57 million IPO on the Toronto Stock Exchange in an effort to raise money to buy Moxy Media, an online advertising sales company. Documents filed for the IPO showed the company earned $8 million in 2009 on sales of $30 million, with 15% of those revenues coming from members of AshleyMadison. The cheating site allows people to sign up for free, but requires men to buy credits to contact other members.
Meanwhile, FriendFinder had approximately one million paying subscribers as of September 2009, most of which are outside the US. The company's web properties include the FriendFinder sites for just about every constituency, a range of porn sites under the Penthouse brand, and two live webcam peep show sites. It averaged 1.4 million purchased minutes for its products and services that are offered on a pay-by-usage basis. All of these payments resulted in a loss of $27 million in the first nine months of 2009 on revenues of $244 million. FriendFinder had planned an IPO on the NYSE for 20 million shares at $10 to $12 per share.
While subscriber sites bring in the most dough, plenty of dating sites offer their services for free and make money through online advertising. Popular sites that run on this model include PlentyofFish.com and OkCupid. The latter boasts just about 850,000 unique visitors per month, while PlentyofFish competes with the likes of eHarmony with about 3.7 million unique visitors monthly, according to the website Compete.com.
Fore more on the business of online love, check out this week's Pop Biz segment:
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