Trying something new, guest posts from our sponsors. Our inaugural guest post is Emil Sarnogoev, CEO at SkaDate. More to follow in coming weeks.
I want to thank David Evans for this chance to speak up and appeal to the industry audience about the problem we’ve been facing for years. As a company that set up more than 5,000 dating sites we have been watching it without seeing the hope of any progress.
The business of online dating has its certain ROI and fierce competition. This business faces a lot of direct problems like growing customer acquisition costs, insane marketing budgets, traditional marketing becoming more and more irrelevant, ad revenue being a myth, not being able to generate any signs of revenue before getting critical mass, etc.
This is what ordinary people are completely unaware of. But the bad thing is that they want to be in business, too.
Historically the industry got the image of another get-rich-quick scheme. For that reason some sorts of people are ready to rush in without any initial insight, and for this very reason other people avoid it like a plague.
There was a time when online dating was a cash cow for several big players. That was before:
1) the advertisement revenue myth ruined (for simple mortals);
2) customer acquisition costs grew several times;
3) a new big thing emerged – how do they call it? – social networking;
4) all kinds of free dating sites popped up;
5) all possible niche and demographic areas got stuffed with packs of rivals.
Still a lot of people see online dating as a Klondike Gold Rush venture. As a result we see a lot of half-assed dating sites (kind of) offering services to those seeking relationships.
The industry can’t bear all these just-launched semi-supported me-too dating services. Really. They discredit the industry, so singles try out several sites, see no value, and abandon online dating all together.
Nobody wins when a clueless ?entrepreneur gets in business quickly and then the reality pushes them out with the same speed. It’s no fun to hear things like “pease set up my site ASAP, I quit my job so I need to start earning quickly!” – this is the real quote.
Software Vendors
Of course the scale of the problem attracts people who try to capitalize on it. I’m speaking about some “software vendors”.
It’s amusing to read websites that sell software for $200 per copy and say literally “this is everything you need to run your own Match.com”. People don?t be stupid – both who write and who read this. This topic is so exhausted but this is why the problem still exists in 2009.
I’m not going to blame anyone for not scaring off potential customers – we don’t do it either. But I think it’s misleading (to say the least) to create hard impression that all you need is to buy that damn piece of software – and the website starts earning money for you. Some post old and bogus Match.com revenue data. But no costs data of course.
This is true for those vendors who can’t offer anything beyond selling you a couple hundred files of program code of uncertain quality and functionality. Their business is clearly ends here so they contribute to the problem for all practical reasons.
Speaking of SkaDate, we have roughly two types of customers. We are not dividing customers by success but by approach they choose.
The first type customer explains you on the phone their business model and asks how we can do this and that before they start marketing campaign and stuff. And the other type that does little beyond email inquiries like “can you check if anything’s wrong with the software, people do not sign up”.
If anyone is surprised that I’m saying people shouldn’t set up dating sites, my point is the following: Most of our revenue lies in ongoing work with existing, real customers. If people get really more educated we may lose some casual sales but we do not see much value in them. On the other hand some developers’ business consists of only those.
Possible solutions
The industry doesn’t need a man with a plan and budget not going far beyond setting up a website. Instead there must be an entrepreneur who examined how general and niche sites work; has a very good idea how their own site will be different and what their audience is; tried it before and failed; tried and failed; and is trying again now.
We need less plain zombie bloody well dead sites yet more real sites that a Joe can use – it will make him believe in online dating. At least it can do better for the industry than saving doomed American auto can do for economy.
The industry is stagnating if you ask me. While big players struggle to survive and little guys can’t find their identity, nobody’s innovating. Revolution can be done only bottom up so we just need more experiments from smart dating startups to get the wheels rolling.
Another point is that industry experts should play bigger role in educating masses. On online dating blogs the best thing I see is asking questions nobody seems to have answer for, the worst thing I see is plain press-release and “news” notifications with zero commentary.
What I don’t see is how-tos, startup recipes (to some extent), and such. I’d like to see more talks about ROI, traffic channels, customer acquisition costs – you know, things that can get little guys some clue.
When you face a freshman don’t take that don’t-get-into-business-unless-you-are-a-marketer attitude. Better ask how they think their site is going to attract traffic, how it will convert to members, how the site is going to be unique, what the running costs are and so on.
Your job is not to scare off again but to point at the questions they better ask themselves now. We need people interested in starting online dating business. But only if they have a good idea of what it is.
In conclusion I want to say that I don’t think we can keep the industry “clean” of clueless people but There’s so much industry consulting and events like iDate can do. We can’t have full-proof solution but we need dramatic changes. If anyone has other suggestions feel free to comment here.
I will be at iDate conference in Beverly Hills, CA, June 25-26. Anyone willing to talk is welcome to visit iDate, I will be happy to meet, answer questions, and discuss ideas. You can also contact me by email (info@skadate.com) any time.
Thank you for your attention.
P. S. If you happen to operate a dating website and it’s dead – shut it down today. If you plan to start one but have not considered what I wrote about – don’t do it. Save your family some money.
Before you get into business repeat these, a hundred times each:
- The extra $0.05 a day I get from that new half-screen banner is NOT ad revenue.
- Members will not pay $50/mo membership fee to chat with 5 people in their zip code.
- This fake database of million profiles can’t communicate and build relationships with 8 real profiles happened to register on my site.
- Nobody really believes “the fastest growing dating site in the world” mantra on my index page.
- If somebody had utter solution for earning millions they wouldn’t bother to sell it to me for $200.
- There are better ways to convert traffic to money than “sit and watch” like they say.
If you do it you may save yourself from the following sayings later:
- I’ve set up my site but nobody cares. Now what?
- My site is better than Myspace but nobody cares.
- My site is even uglier than Myspace but nobody cares.
- I stuffed my site with features but my users don’t use them. Stupid losers.
- Why don’t they get that 3 times more features than at Yahoo Personals is cool?
- If I had known it was going to be so tough I would have tried Viagra business instead.
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{ 7 comments… read them below or add one }
What a confusing post (=
To (naively) summarize, you’re telling anyone who is looking to build an online dating service to do their homework and proceed with extreme caution. It’s a very competitive market with very established large players where the main problem for newcomers is high customer acquisition costs.
Your evaluations for solutions is that if you’re looking to enter the market to get rich quick, stop now. If you’re serious, you better understand what it is you’re trying to accomplish and have a clear direction on how you’re going to differentiate yourself from the competitors.
Recently I’ve been following Eric Reis’ (of IMVU) blog (http://startuplessonslearned.blogspot.com/) and Steve Blank’s Customer Development course from Berkley. Both have very interesting views on how to enter an existing market. The concept is how to develop a lean (technology) startup through experimentation and testing your business hypothesis without burning through large amounts of cash. I think it’s well worth the read and listen if you are trying to embark on a new endeavor.
Eric’s blog is a great resource, I’ve been quoting from it a lot lately.
Dating is not about technology in the beginning though. It’s about outspending/outmarketing your competition.
While I agree that dating itself is not “about technology”, but online dating certainly is about technology (among other things).
I suggest checking out Steve Blank’s book The Four Steps to Epiphany or at least spend some time listing to his course. Eric Reis’ company was built largely based around Blank’s lessons on Customer Development model which is a deviation from the Product Development methodology most startups/companies follow.
Back to the topic written by “SkaDate”, I think there’s a fundamental flaw to a lot of how online dating is conducted. Everything from “inventory” numbers to quality of “inventory”. There are also more humanistic problems which is simply how do I actually get to meet someone? What opportunities are your businesses creating to help get their to actually engage with one another.
Any new entrepreneur trying to enter the space should be asking “How do I get people to meet?” Sure there’s partially an inventory problem, but how can you get around that? There certainly are ways to do so, however “white label” is not the way to go for that (which is what I suspect your “guest writer” largely is writing to).
Match/eHaromony/Singles Net/Plenty Of Fish/Etc. solve the problem by using their inventory as a their selling point. To anyone who wants to compete directly with those companies, the solution is largely an ad/marketing spend play. However there are other options and solutions.
Anyone starting out as a new “dating” service should be getting in front of their potential customers and actually finding out what it is the customer wants. When I’ve gone out and talked to our users and customers the large thing I’ve found were women want to feel safe and secure meeting someone new. Men wanted to meet someone now and not play the “online dating” message tag before someone feels comfortable meeting.
Our service is largely centered around live events in the NYC area. We get a decent turn out at our test run of events, each time changing and tweaking what we are doing based on feedback we get by directly talking to our customers (during and after our events). In the past few months with NO MONEY SPENT on advertising (with the exception of a single press release and a 7 day trial of AdWords [miserable results]) we’ve been able to amass a few thousand users in NYC since the beginning of 2009.
Online dating for a new venture is going to be a failure for anyone trying to approach the industry with the current model. Those wanting to give it a run and think they are smart enough to make some serious changes need to work in a way that allows them to afford failure and mitigate their risks through iteration.
Tobin,
Thank you for summarizing my post, one correction though – SkaDate is not white label, I agree that white labels are just a kind of affiliate systems. Visit SkaDate to learn more about what we do and how we do.
Trying out ideas, taking risks, and iterating through the analysis is what I’ve been telling for years. One thing is that at least you need to have that initial idea that would “look good” on the paper first. My opinion is that if the initial idea is dead wrong you can still get away trying out something different only if your costs are next to nothing. Otherwise you just can’t iterate endlessly.
My original point was that a lot of startups lack ideas, so we never know about them. The problem is the same (on another scale) when you get a big bag of VC money with an intention to outspend existing large players.
I edited the post to reflect that its written by Emil, the CEO of SkaDate.
Most people starting dating sites don’t have a clue about human psychology. I know dating site executives who have never taken a day to talk to a customers on their customer service lines. That should be the first week of their job.
The technology used could be the greatest in the world but if you’re not trying out new ways to bring people together, as Tobin says, it’s going to be an uphill battle.
The problem is we have large dating sites subsisting on massive advertising spend, which makes people think they can throw up a site and the money will pour in.
Niche social networks can bring in as much money as smaller dating sites. I don’t understand why people don’t create more of these.
Hey David,
Here’s something to support your direct attack approach for ad spends (and why to avoid it =):
http://www.remnet.com/lanchester.html
http://en.wikipedia.org/wiki/Force_concentration
Emil, excellent post – you really nailed it!
As an industry “veteran” with over 10 years’ experience, I can say with certainty, “It ain’t easy”. None of us are sitting on our laurels, including my good friend Marcus over at POF (in spite of what he reguarly tells the media;-)
Because of this recession, there are more and more idiots out there thinking online dating is the answer to everything (with very little work involved, of course). Part of this is to blame on those of us talking up our success and part on the media touting what a great “recession-proof” business this is.
As I am fond of saying, if it was this easy to compete, we would have a lot more competitors than we do. It is not like we have a magic formula (ok, so maybe we do:) – we are just (very) good at what we do. The proof is in the pudding, as they say – our members keep opening up their wallets.
Provided me continue to provide a valued service, our customers will continue to support us. ‘Nuff said!
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