According to the New York Times (reg req’s) , instead of waiting for an IPO, Eharmony founders are cashing in on their recent $110 million fundraising efforts.
Supposedly, 116 people benefited financially when the company, which was started in 1999, announced last December that it had raised $110 million. The word within the venture capital community is that less than $30 million of that sum went into the company coffers.
This type of deal is happening more often. Pay out some raised capital to executives and early employees, and ease the desire to go public or worry about losing it all.
Who could buy Eharmony at this point? Yahoo is the only company out there with the resources available. Match could, but that money might be better spend fixing their site and attracting new members from cheaper properties.
[tags: eharmony]
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Match BADLY needs more in-depth peronality tests. eHarmony would be a good acquistion for that — though I have to question whether there are cheaper sources of personality tests (I bet there are) and I question whether many of the members of Match.com are already eHarmony members (decreasing the number of net new member additions such an acqusition would provide).
eHarmony also has a so-so reputation as being painfully slow to get to the meeting stage as well as one of the more expensive sites.
I see online dating becoming more of a commodity and the prices steadily eroding.
Match had a deal with WeAttract, and that deal went south for a variety of reasons. Yahoo grabbed the WeAttract deal, which was terrible news for Match, regardless of the low take rate (something like 1% took the tests during the Match relationship).
I’m willing to bet that Yahoo has a higher take rate, 1) because they integrated the profile results with the search engine results and 2), they know how to market their features better.
On the contrary, I think prices will rise. Cheap sites are generally that, cheap. I’m in my mid 30′s, a serious online dater, I would gladly pay $500 to get access to quality database of women.
Gladly, but how many services out there offer that price point? None, it goes from $20 to $1500 for Great Expectations to $10,000 for a matchmakers.
There is a seriously underserved middle market that someone could run away with.
Most dating sites don’t have the know-how, experience or maturity to deal with this price point.
Match had a $500 service last year for a few months if I remember correctly, then it dissapeared without a trace.
What seems to drive the masses for dating is lots of faces. In my experiences the past year online I’ve met perhaps 15 people.
I’d say that roughly zero wanted to keep meeting if the “chemistry” wasn’t there on the first date.
To me I’d be HIGHLY reluctant to pay for anything that only gave me more of the same. Sort of a “show up and if I think you’re hot I’ll date you”.
I just don’t see the value in that. Do most people need an online service to deliver that? Perhaps they do just to get the quantity of meetings up — but the quality of meets is certainly no better than what you would gather from supermarket checkout meetings…
An online dating site that combines lots of specifics, some extended ways to interact, and serious daters (perhaps the price point is what separates the serious from the onlookers) would be interesting.
I think the newness is off the online dating scene. Most people don’t really care anymore that their best friend found someone online and married her in 4 days. That’s becoming less of an amazing story — and as that happens – online will just be another way to meet people.
Well – the one thing all of these sites rely on is a person’s ability to be HONEST with themselves. Also – there is no place for truly objective feedback from the dates you never hear from again… which leaves many people puzzled when they have (what they think) was an outstanding time, but perhaps said or did one little thing that the other person cannot discount. At least with a matchmaker, you would have feedback…but there has got to be a more affordable one than $10,000 …
eHarmony is not the only social site that have founders to sell up. FriendsUnited, a uk based reunion site was put up for sales by the founders.
I have been following the string between you and LG 1964 and wanted to make a correction. You stated that Great Expectations charged between $20 and $1500 for membership and we actually charge between $1,500 and $5,000. We have an online site (that is not in any way connected to the Great Expectations property) GreatDatingSite.com that is part of the Relationship Exchange and on that we do charge the $20 plus. Please keep up the good work you do keeping us informed. I look for this blog at the start of every work day!
Robert, thanks for the clarification and the props.
I don’t think higher pricing will make a viable long term business model. There are 2 trends that make it pretty much impossible.
1. Hardware costs are constantly falling.
2. Software development costs are constantly falling.
3. Rise of free sites, especially myspace.
It seems odd that no one in the industry points out that growth on online dating sites slowed to a crawl at the same time that myspace exploded.
It may well be that the future is a hybrid like matchdoctor. Matchdoctor was once a major free dating site in the .com boom days but in the last 2 months its done a complete redesign and is now a paid hybrid/free site. Since the redesign hitwise shows it as having doubled its marketshare and still growing agressively. I think by christmas time webdate, plentyoffish and matchdoctor will be in the top 10 hitwise rankings.
About:
why higher pricing will make a viable long term business model for persons interested in serious dating.
What Markus has previously said is good for 13-25 years old persons (teenagers) not interested in serious dating who will use the service for fun. They are used to send a lot of traffic with emails, photos, videos, or simply stay in chat rooms for hours. They will need exclusive CONTENTS for members like own blogs, recipes for cooking, songs in mp3 format at special prices, advice about leisure activities, entertainment, travel, holidays, music, movies, books, online magazine about lifestyles, etc. They will want to be 24hs a day online or pending of their cell phone / PDA. Mobile applications will only complement but not replace On Line Dating / Social Networking Internet sites.
.
.
.
Things will be very different for 26-and more years old persons interested in serious dating. They will need quality CONTACTS (compatible real persons) like actual Offline Chains that offers confidential treatment of information provided (profiles), privacy, code of ethics and background checks (professionalism): the next generation of dating and matchmaking will be more scientific than ever, most probably the 16PF5 test in different languages (or similar test) will be a “must have” in compatibility matching.
These clients will have a good reason to pay for the service: avoid being hurt in their feelings by other persons. Cost concerns and free sites will not be of their interest!!!
Kindest Regards,
Fernando Ardenghi.
Buenos Aires.
Argentina.
ardenghifer@gmail.com
Fernando,
You are just posting theories of how you think web surfers may act. All the evidence points in the other direction. If a site is marketed as a dating site there is no way you can sell users on MP3′s, recipies, blogs or even compatability testing. Many sites have tried and none have been able to get a pickup rate of over 5%. Should compatability testing be a must have, I will just add one of the many free tests onto my site and integrate it.
Dear Markus:
Any entrepreneur, Executive Director, VicePresident or CEO has two main tasks
to “see in advance”
and
to make things happen.
I think that now, 2005, the Flight to Quality process started for the “Online Dating & Social Networking Industry”.
and by 2008: Quality Norms, Legislation, confidential treatment of information provided (profiles), privacy, code of ethics and background checks (professionalism) will be expected for serious dating.
The market will be divided into two well-identified groups.
*13-25 years old persons (teenagers) not interested in serious dating, who will also/mainly need exclusive contents for them.
and
*26-and more years old persons interested in serious dating. They will need quality contacts.
Markus, you are running & operating a free-dating site, that is not precisely a quality-contacts-provider like actual OFF LINE CHAINS. (You cannot guarantee to any of the members of your site Quality Norms, Legislation, confidential treatment of information provided, privacy, code of ethics and background checks as an OFF LINE CHAIN OFFICE can)
You said “Should compatibility testing be a must have, I will just add one of the many free tests onto my site and integrate it.”
Why don’t you do it now?
How are you going to compare one test to others?
How precise will be the comparison method?
Kindest Regards,
Fernando Ardenghi.
Buenos Aires.
Argentina.
ardenghifer@gmail.com
I think that now, 2005, the Flight to Quality process started for the “Online Dating & Social Networking Industry”.
What proof do you have? Most dating sites are reporting active members are flat or decreasing and any increase in revenues are coming from increases in prices.
What proof do you have that the market will be split into 25+ and 18-25… My site is over 60% 26 and over. Does that mean i’m going to lose all those members? Many people are members for years on and off and they tend to stick with the service they first used. My average membership is only going to get older and older as i lock them in young.
As for quality, who defines quality? If 10 out of 100 people hate your site, they may consider it to be “not quality” but the other 90% consider it quality.
There is no real market for compatability testing, it is really only used as a marketing gimick to lure in women. When i promoted true.com’s tests i was told the test taking ratio was between 2 and 11% The high end of that came from bidding on terms like dating compatability tests.
There will always be a market for paid services, simply because people will automatically assume that anything with a sticker price on it is worth more. I think that it is more like a 50 to 100 million dollar market subscription market long term, not 500 million plus like it is today.
The problem with online dating is much simpler than you think. It’s no longer unusual to date or meet people off the Internet. The story of two people meeting and marrying isn’t unusual anymore. Previously when it was considered “creepy” – online dating services existed as a way to somewhat guarantee that the person you met wasn’t a total psycho.
Now with free sites, blogs and niche chat rooms — it’s much easier and more widely accepted to meet someone that you connect with.
Ultimately dating sites that don’t bring anything to the table but a place for someone to write a paragraph about themself are doomed to declining growth.
I smell consolidation coming very quickly for the industry.
Dear Markus:
What is quality?
Quality Norms like ISO9001:2000 independently audited.
Please see this whitepaper named CONSUMERS ARE HAVING SECOND THOUGHTS ABOUT ONLINE DATING; written by the company WeAttract.
http://www.weattract.com/images/weAttract_whitepaper_v1_4.pdf
On page 22 says /////…..it should not be too surprising that online dating may have unanticipated consequences. In fact, studies of major technologies and inventions (from cell phones to antibiotics, to cars) have found a repeated pattern of:
-Intensity of spread and excitement.
-Disaster or highly publicized damage is observed.
-Reform occurs in the industry.
-Vigilance by industry and consumers become necessary.
…../////
Actually, there are more than 910 “Online Dating & Social Networking Sites” at the United States and Canada. Most of them are “free dating sites”, their business model is a combination of free users and paying clients. Free users who search on the database, (what they want to find / what they believe they want) and clients who pay to deliver ads to that users. This “free dating sites” are mainly “infomercial-advertainment companies on the web” as their revenue/income is due by ads only.
As TIME is more valuable than MONEY, because we pay spent-time with our lives. Sooner or later, the free users will realize/understand that spending time and effort searching low-reliable profiles in “free dating sites” (a lot of hours contacting persons with low success rate, with low satisfaction index) is MORE EXPENSIVE that paying a fee (USD300-USD800?) to a quality contacts provider!!!!
You have a good amount of free-users at your site, but as they grow-up they will move on dating-sites delivering quality contacts.
Kindest Regards,
Fernando Ardenghi.
Buenos Aires.
Argentina.
ardenghifer@gmail.com
Hey Markus, what kind of car do you drive?
I don’t normally agree with many of Fernando’s views (13-25 year olds do not want to exchange recipes!). However, I think that he is right about the online personals market segmenting into two tiers. I think that this is what we’re seeing right now.
The “serious” segment will see value in a higher-priced service if it delivers a higher-quality product. This is reflected in the growing popularity of services like eHarmony, PerfectMatch, and Yahoo Premium Personals. However, people won’t pay more if it is just more of the same generic personals service that many sites have. Services either have to differentiate (like True, purportedly) or they will have to provide better results. Why do so many sites give me poor-quality search results? Where is the Google of online personals?
The “non-serious” segment simply won’t pay for a higher-quality product. Low prices will drive this segment. Since they’re satisfied with the product they’re getting already, there’s not much else that this market can do to grow. This is where the consolidation will occur. A free service that does better that the competition could gain momentum and win this segment over the existing pay sites.
Regarding personality tests, if some company were to come up with a test that truly worked and produced real results, then you’d see higher adoption rates. Right now, personality test matching is seen as a gimmick that doesn’t really work. (Though some companies try to sell their “scientific matching” as effective.) It’s like astrological matching. Yes, more services could offer it, but most customers wouldn’t bother because they think that it’s bogus.
Going back to the original article, Match could acquire eHarmony if they ever decided to get into the “serious” dating market and wanted to jumpstart that side of their business. However, they might want to just develop their own service in-house, like Yahoo is doing with their Premium service.
Ben (not an industry insider– just an educated consumer)
I agree with you on the segmentation. I don’t believe in the personality tests and the only thing that I’ve seen work is lots of good pictures and details and specifics about what specific people like to do in their spare time.
Those without details in their profile are simply engaging in the online beauty contest where their profile is selected based on simple attraction (funny how the people never look the same in person..)
Definite consolidation coming. Probably room for one or two paid higher end sites. Chat/message boards might be attractive because spam free ones are VERY hard to find in the free world.
I had been studying different proprietary tests and matching algorithms invented by actual online dating sites and I think that the main challenge the “Online Dating & Social Networking Industry” need to solve is not to design personality tests or other proprietary tests for dating.
The main challenge to solve is to invent a precise way / method to compare the results of well-known tests between each others (MORE POWER CALCULATION / more precision in matching algorithms).
As it seems that TEMPORAL PATTERNS of relationship variables: combination of physique, personality, intelligence, social background, attitudes, habits and leisure preferences may indeed play a significant role between mates / prospective mates,
it would be very interesting to research if :
“ONLY HIGH LEVEL on PERSONALITY SIMILARITY between mates / couples is the FINAL PATTERN”
i.e. “birds of the same feather (high level on personality similarity) finally flock together”
Kindest Regards,
Fernando Ardenghi.
Buenos Aires.
Argentina.
ardenghifer@gmail.com
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