In a previous post I mentioned that Friend Finder Networks had an amazing advertising solution right under their nose but are distracted with the IPO plans. I went back and re-read some of the commentary about the IPO and thought it would be interesting to share some of it.
For people who think starting a dating site is cheap, read the Friend Finder Networks prospectus.
Net loss of $29.9 million on $48 million in revenue in 2007. For the first nine months of 2008, FriendFinder had operating income of $17.6 million and a net loss of $32.3 million on $244 million in revenue.
…company labors under default and nearly $400 million in debt coming due in the next three years.
In the first three quarters of 2008, FriendFinder spent $46 million on marketing, up from $3 million in the same period a year ago. FriendFinder’s net loss for the period widened to $32.3 million from a loss of $14.8 million. Revenue was $243.9 million for the nine months ending Sept. 30, compared with $26.7 million in the year-ago period.
Numbers seem a bit out of whack since they company a dating network to Penthouse magazine.
Point 1: Observe how much money it takes to be a major player in the online relationship space? Various, Inc. made things incredibly difficult for the new owners by doing things like “forgetting” to pay EU taxes for a few years and running the debt up incredibly high, which was required to get the footprint and mindshare they now enjoy. Irresponsible or not, they are in a very tight position.
Point 2: How long until Friend Finder Networks goes out of business or is forced to sell off assets in order to survive?
International Herald Tribune, WSJ, ZDNet, and TechCrunch for more details.
Someone left a comment on a previous post about the marketing costs associated with launching a dating site. They said $10,000 sounded about right as opposed to my $25,000. $10,000 gets you a month or two of late night radio spots in a single metro market and some Adwords. You haven’t tested your AdWords yet and don’t know what creative will perform the best so you throw away at least a few grand during the learning curve. Two months, budget gone, maybe 500 users if you’re lucky. I’m skimming over the details but anyone who runs a moderately successful dating site spends about $30,000/month on marketing. Once you start spending that much you can’t stop or your traffic will crater. It’s even worse if you’re a free site relaying on impressions and clicks.
I know companies who have spent $500 on AdWords and converted many more members than a $5,000 Yahoo ad buy during the same period. Dating sites like SinglesNet keep to themselves about their ad spending habits, we know the ballpark of what they spend but as for those first few critical months, who knows what they did to get the traffic?
Of course there is gorilla marketing, doing live events, partnering with blog networks, buying spot ads and all the other marketing tricks and advertising optimization tricks out there. That stuff takes a while to figure out, there is no hard and fast blueprint these days, only guidelines and best practices based on those who have launched before you.
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{ 8 comments… read them below or add one }
Friendfinder Networks aren’t in quite as much trouble as they look to be. The debt is largely owned by guys who have zero interest in the company falling over. The sky isn’t falling, it’s just leaking a little. And think about all that Space it’s having to hold up!
And unless you’re talking about some weird singing/dancing thing involving guys in ape suits, I’m pretty sure you meant “guerrilla” up there.
$400+ million debt on a dating site is a big deal. Doesn’t matter who “owns” the debt.
No, I meant gorilla marketing. You give business cards to gorillas and they go and hand them out on street corners. Come on, get with the program ;-)
Yeah, I’m not saying it’s nothing. But it’s certainly not as scary as it superficially sounds.
This “gorilla marketing” thing sounds like a brilliant idea. Will there be a post forthcoming?
I haven’t looked closely at the documents yet but isn’t most of that $400 million debt actually from Penthouse purchasing the FriendFinder Network?
The gorilla mkt stuff is for clients only. You have no idea how difficult it is to train gorillas to hand out business cards.
True David,
But the $400 million debt is not the result of the original FF network dating sites day to day business practices. From my understanding the business strategy for the most part is sound (except for the European Tax issues). The debt is largely from the purchase of the original FriendFinder Networks by Penthouse Media Group, who then decided to use the FriendFinder Networks name for the entire company instead of Penthouse Media Group.
AFF is a great money making site. Its just in a financial maelstrom with its new owners. Fling and Sexsearch (with its new white labeling platform) are giving AFF a run for its money. Meanwhile, Erocity and Iwantu have completely tanked and are out of the competitive picture. (Full Disclosure: Fling is a current client of Courtland Brooks, SexSearch is a former client)
Surely the important thing is to be found in the websites and Search Engine Optimisation is the key as well as decent advertisment income. Dating in national and even internations so global awareness is required. I used to work with lovestruck but have started my own business.