Last night I was at beer club. I started going a few years ago because my good friend Ed attends and it’s one of the few times I get to see him. Last night’s group consisted of a lot of financial types, and the mood was grim, but educational.
This morning I read Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble. It’s clear that raising money is going to become more difficult. I have a client who raised a large round of funds recently, and another who raised a smaller round, and both are glad they got their money when they did.
The only way a dating site is going to raise capital in the current climate is through angel investors. Even in the best of times, VC historically don’t like to invest in dating sites (there are a few exceptions.)
Investors are even more hesitant to hand over money for marketing after a site has been launched. They have little control of the company, since the site is live and the audience profile and features have been decided. The promise on a high return based on a new dating site adding paid subscribers in a down market is bleak and unappealing.
What does the current financial, political and global situation mean for dating and social networking sites and startups? Will we see a surge in white label dating popularity or less interest in standalone software sales? Will niche sites flourish and general population dating sites falter? Will singles flock to free dating sites, eschewing paid dating? Look at the graph below, which tells the story clearly. Paid dating is on a downswing, free dating is trending upwards.
People that start dating sites with little money are often unable to escape the gravitational pull of the zero-member database. Online dating is about marketing, and unless you have thousands of dollars to spend every month, you site simply isn’t going to grow quickly enough to launch a successful escape trajectory.
Even if you go with a white label dating solution, you still have to spend a considerable amount of money on marketing. Members don’t just fall out of trees.
As Markus Frind at PlentyOfFish said last week, dating is local, it will never be global. The days of launching new generic large-scale dating sites are pretty much over. Everything we see these days is a variation on a theme of niche, web 2.0, lifestreams, speed and group dating. Mate1 and SinglesNet were the last two general-purpose dating sites to achieve any considerable traction. SinglesNet continues to grow in lockstep with PlentyOfFish, actually surpassing it in terms of overall traffic according to Compete. Mate1 is all over the place, and trending downward. Must be those pesky Ambassadors that keep ending up in my spam folder.
Now that Google is too expensive and ad networks can’t deliver except to sites with the most money, it’s time to take a look at new ways to reach singles. Back in the day (1996) I worked for the ad agency that did Microsoft’s online advertising. I wasn’t directly involved, but I spend enough time around online ad people to know that even to this day, targeting singles in an ad network is a total crap-shoot. The targeting gets better, but with everyone and their brother starting another underperforming ad network, it’s no wonder that the companies with the best targeting technology, reporting and research departments are the ones delivering solid results. Everyone will tell you they can target singles, and guess what, they are blowing smoke.
I just had a client spend $5k for a week on one of Yahoo’s networks. Something like 12 signups a day, abysmal results, but yet the perky Yahoo chipper sales force continues to sell junk ads on their networks like it’s the best thing since sliced bread.
Lead generation is another opportunity, but few dating sites have the resources to put together an outbound call center, and that only works for paid dating sites and matchmakers.
Niche sites are actually well positioned to gain market share. Their keywords are not overbid, for the most part, they know exactly who their audience is, and can focus on finding out where they hang out online, as well as other closely related demographics to market to.
Social network advertising is cheap too, but you get what you pay for. Again, you’re putting several thousand dollars a month into any of these initiatives. Sporadic growth through press releases and laying it all on the line for expensive banner ads on high-cost networks are a thing of the past for small and medium-size dating sites.
Troubling financial markets, online advertising expected to plummet, hundreds of dating sites limping along on life support, not quite alive, but not dead yet. A few major players continuing to grow, unstoppable with 50-100 million-dollar advertising budgets and the resources to survive a downturn. And people continue to contact me every day about starting new dating sites. My advice? Take your money and put it in gold or become an affiliate marketer.
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I just had a client spend $5k for a week on one of Yahoo’s networks. Something like 12 signups a day, abysmal results, but yet the perky Yahoo chipper sales force continues to sell junk ads on their networks like it’s the best thing since sliced bread.
So is that 12 paid or 12 registrations? And what was the conversion on that?
I think the comment you’ve highlighted by Markus is obvious, but sometimes the masses miss the obvious. Dating by practice is local, are you going to go to a singles event geared towards finding a relationship in Seattle, WA when you live in Brooklyn, NY? You don’t care about the global dating scene, you care about the local dating scene.
One of my thoughts on building an online dating brand is to look at it as building a local business. You need to focus on building your initial user base in a regionally focused area.
We’ve been experimenting with some new ways of reaching a local market and it’s been working out effectively. I’d challenge that while you do have to compete with the big boys, entrepreneurs in the space can earn a lot by focusing on what’s relative to them regionally and focus on directly targeting a more personal user base.
Oh on a side note, in terms of funding and financing… I don’t think it’s reasonable for an entrepreneur without an established track record to make their way straight to the VC route. Even with it, you’d still be going through the pecking order:
* Founders
* Friends, Family, and Fools
* Angels
* VC
Also getting funding has NEVER been easy, especially for those who have not gone through the process before.
“As Markus Frind at PlentyOfFish said last week, dating is local, it will never be global. ”
What does “local” exactly mean?
Pertaining to a city, town, or small district rather than an entire state or country?
Is Online Dating “local” or “local” is only illusory?
* Why do many online dating sites have to deal with scammers, predators and other fauna? They have to protect their members from scammers, predators and other fauna.
* You can check from eHarmony’s marriages archives the percentage of the spouses who are from the same city and also the percentage of the spouses who are from the same state.
* You can check from eHarmony, PerfectMatch, True, Chemistry and others sites the percentage of online daters who could consider moving to another city/state if they think they have found his/her right match living in that other city/state.
* Just now there are more than 900 Online Dating sites at the United States and Canada, but top 10 sites have 90% of actual market. If you add net paid subscribers of all United States and Canada Dating sites, perhaps the total is less than 5 million!!! What dating sites are doing / will do to court the other U.S. 90 million singles not seriously dating online?
If dating were really local, there is nothing to do, because those U.S. 90 million singles will use bars, parties, colleges, squares, live events, supermarkets (like Walt Mart) and other local zones for dating purposes.
If dating were really local, Off Line Chains, proposals like eight at eight, table for six, it’s just lunch and others like them would have been dominating the market, but the truth is ….
local proposals are only minority reports.
By the way, what happened with PlentyOfFish live events?
Remember last July 22nd 2006 PlentyofFish Speed Dating Record Attempt a Success
Kindest Regards,
Fernando Ardenghi.
Buenos Aires.
Argentina.
ardenghifer@gmail.com
Many of those other 90 million people are on social networks.
The 8 at 8 and lunchtime dating services do ok, they end up feeling like long speed dates IMHO.
I bet you will see that the majority of singles connect within 100 miles of each other.
Right then, lets just go and shoot ourselves!
Alternatively read this..
http://www.readwriteweb.com/archives/entrepreneurs_credit_crisis.php
Good post, I love RWW.
nice read.
Dating IS local. People go where they can get results.
The company I founded, Eight at Eight Dinner Club, provides the perfect alternative venue for traditional daters. It is an unconventional approach but it works because it gets you off the internet and in front of like-minded singles. We’ve had over 100 marriages and Eight at Eight is the most efficient and unique concept in the off-line dating world. Just recently we were named the #1 way to meet new people by OK Magazine.
We operate in 6 major markets in the U.S. I pick our locations based on where the best and brightest singles in the region flock after college. NYC, Chicago, Washington DC, Atlanta, Dallas, and Denver.
Eight at Eight is not franchised and we organize thousands of dinner parties per year. Our clients tell us that they enjoy our service because it beats the drudgery of on-line dating and it is more sophisticated (and safer) than the bar scene.
There really isn’t competition in this arena in the US. Everyone else seems to come and go because the concept looks easy to operate but it isn’t! Eight at Eight has been in business 9 years due to our investment in infrastructure, and a knack for getting free PR. We are growing daily – over 100 leads per week and that is thanks to appearing on Oprah, the WSJ, Playboy, and various other venues.