Today’s guest post is by Ross Felix. Ross has been paying close attention to Spark Networks for quite some time and is well-versed in the challenges it faces today.
Spark Networks reported their year-end results on Thursday March 4th. Much of their results came in as expected with a few big surprises. All in all, it was yet another poor showing for the company.
The Numbers
Net Revenues for the year $45.4 million, down for the 4th year in a row. Total revenues are down 34% since 2006. Excluding the General Market Networks, revenues are only down $387,000 or 1.6% for the same period. That said, management has maintained for the past 6+ quarters that they are “managing the decline of the brand” in reference to the General Marketing Networks, and obviously, they have been very successful in doing so. The question is, why are they managing the decline? Perhaps they should either pull the plug, or do something to salvage it. What kind of message does this send to its remaining 9,594 paid members (down from 92,041 in 2006).
For the year, Spark Networks reported a large loss of $6.4 million for the year. To be fair though, it was largely impacted by a write off of just under $12 million. The bulk of the accounting charge though came from writing down the assets of their Other Affinity Networks, which is made up of a number of niche sites that Spark bought a number of years ago. These include Moretolove, InterracialSingles, ChristianMingle and others. Though unexpected, this makes complete sense. Earlier this year, Spark announced that it would be honing its focus on just a few of the brands in the Other Affinity Networks area, and allowing the others to continue along as they will. Basically it sounds like they’ve allocated X number of advertising dollars to the category as a whole, and if the top choices don’t utilize the entire ad spend, the step children will get a bit of the love. In 2009, Spark spent only 8.2% of the Jewish Networks revenue on direct marketing expenses, while they spent 64.8% of the revenues from Other Affinity Networks. It’s obvious that they want to bring that number much more in line. They indicated that they would only focus on two or three of the brands in this section, thereby devaluing the other brands, which probably led to the write off. Spark during the quarter retired their debt. While that makes for a stronger balance sheet (one more easily purchased, I’d imagine) it leaves members wondering why they didn’t use some of that money to improve the sites.
On the topic of improvement, Spark has also indicated that it will use 2010 to merge their technology platforms, bringing a homogenous approach to all of their dating sites, as well as their back end technology used by their customer service department. Unfortunately for members, while they do this integration they will not be focused on new site improvements. So, for those of you who hate change, 2010 will be great for you. And for those that enjoy waiting on hold, they also announced during the quarter, 24 positions were eliminated to reduce costs further (I believe most if not all of these were from the customer service department).
One other very interesting note, as mentioned in my prior Spark post, What is Great Hill Partners up to?, they have been doing a lot of discounting to try and turn around their slumping member base. Over the 4th quarter on Jdate they provided deep discounts for multiple month membership plans. While it helped bring the subscriber numbers up a bit for JDate (5% increase) and the Other Affinity Networks (4%), it reduced their average revenue per user by 15% and 16% respectively.
With all of the companies innovating in the online dating space, it should be very interesting to see how Spark does in 2010, while they hunker down instead of trying to play catch up. Will they begin to burn more brightly, or will their spark flame out completely?
