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.