Adam Berger, Chairman and Chief Executive Officer of Spark Networks, Inc. had this to say about their recent performance:
2008 was a mixed year for us. We achieved moderate annual revenue increases in Jewish Networks and Other Affinity Networks, improved Contribution margins to 74%, cut Operating Expenses by 19%, drove annual Adjusted EBITDA to record levels at a 28% margin and returned capital to stockholders by using cash flow to repurchase 21% of the shares outstanding at the start of 2008.
That is the sound of a man eager to please shareholders with tales of stock buybacks, serious belt-tightening and efficiency improvements. All that hard work and look at the stock price.
So much for the benefits of recession.
Revenue down 18% to $13.2 million.
Net loss for the fourth quarter of 2008 was $164,000, or $0.01 per share, compared to net income of $6.6 million, or $0.25 per share, for the fourth quarter of 2007.
JDate: down 7% to $8 million for 4Q, yearly up $100,000. Lost 7,000 subscribers in 4Q.
We will continue to invest in and enhance the JDate product, adding fresh looks, new tools and relevant content to meet the needs of the single Jewish community.
Most Jewish people I talk to don’t like JDate, but its the only site they are aware of. Enviable market position or not, the reality is that less people are visiting and while on the site they are browsing fewer profiles. JDate needs to do something before a new site swoops in.
I know one company that has JDate squarely in their sights but it’s going to take several years and an enormous amount of marketing spend to get even 1/3 of JDate’s business. I don’t see the usual remnant social networking junk traffic as an option, either. Competitors need to purchase the highest quality traffic they can afford, otherwise the site simply will not take off and become sustainable.
Just look at the embarrassment that is JLove. What stinker that site is, including their ill-fated marketing campaign, which tanked the company before they could get any sort of traction. Case study on how not to start a new dating site, and some of the staff were from JDate!
Fourth quarter 2008 revenue for Offline & Other Businesses was $446,000, a decrease of 54% compared to $965,000 for the fourth quarter of 2007. I wish they would mention what brands are in each category. If HurryDate is part of Offine & Other Businesses and revenue is down 22% for the year.
I believe General Market Networks is where they hide the albatross that is American Singles. Almost a 60% decline in revenue due to a 59% decrease in marketing spend. See what happens when you buy junk traffic based on spammy pop-under ads?
Imagine if American Singles was able to buy social networking traffic like True and SinglesNet, they could have been a contender. What a difference a few years can make.
Final answer: You can increase margins, add bells and whistles and buy back all the stock you want, but Spark is in trouble and I don’t think a website refresh is the answer.
I welcome comments from the more astute financial experts reading this.
Details at Spark Networks Investor area.
