Spark Networks is looking for a hookup. Spark Networks runs many online personals, back in the day, it differentiated itself with offering publishers a private label service.
When I was a sales executive for a men’s online magazine, I had the pleasure of closing a lot of advertising deals with the online personals sites: Match.com, Date.com, Friendfinder.com, AmericanSingles.com, Love.com, etc. All of them. In fact, they were some of our biggest clients. Spark would repeatedly pitch us to have a private label version.
Indeed, some of these sites were doing a killing. To publishers, they represented a welcome revenue stream: at a time when no one was advertising (2001-03), the online personals sites were; either through:
- affiliate marketing programs that paid out a CPA (cost per action, in this case a signup) or
- online advertising deals.
Their business model was lucrative in that people paid them monthly fees AND they gathered a lot of data on end-users.
In fact, oftentimes clients would forget to cancel their memberships even if they found a match, so the recurring fees would repeat many times. Ultimately, the average client would remain for 2 to 3 months, providing lucrative and recurring revenue. Over time, the user data would also prove valuable.
But, I personally think most of these sites lost out on the bigger opportunity, that being said in hindsight of course. The industry makes for a great case study in just how much times change and offer a lessons for today’s high-profile social networking sites.
1 - Once the online advertising market turned around, a lot of these online personals found that obtaining high-quality, low-cost advertising real estate to promote their sites and acquire users proved hard. While previously these marketers were welcome by publishers, by 2004 a lot of demand from global advertisers and agencies created inflation in advertising rates and online personal services - always fickle and very ROI-oriented - could not compete for prime real estate.
2 - Fake profiles. All online personals sites knew that they had some fake profiles. I’m not exactly publishing news by saying that. Very few did anything about it… and ultimately, a lot of users were turned off because of these fake profiles.
3 - Social networking sites such as MySpace, Facebook and what not ended up becoming competitors and eating into the online dating sites’ raison d’etre.
4 - Free dating sites have garnered market share, much the same way that classifieds have taken a hit from Craigslist.org.
5 - Craigslist.org itself launched Missed Connections and Dating categories which further eroded online personals share of the pie.
6 - But the biggest missed opportunity was by these same sites, because many had adopted and fine-tuned a strategy based on subscriptions, none of them really managed to generate sizable advertising revenue despite having a lot of data on users. This was very foolish.
7 - Over time, the emails many of these online personals sites became dated and lost value. After all, say I use an online personal in 2000, I would have used my old email account. I was also single and 22 then. Today I am not really using my old email addresses and I am married and 29… the point is, not all user data is created equally… which takes us to the next point:
8 - Today investors and media are drooling over user data on MySpace and Facebook, but I doubt how valid and accurate most of that data is, and what shelf-life most of that data has anyway. This is a lesson for investors and management at such companies who mortgage their company on user data.
9 - Advertising is the more lucrative business. Spark Networks boasts a market cap of $130M on shrinking revenues of $15M. It’s nothing to sneeze at, but it’s not where it would be if it was an ad-supported model… because a) revenues would not be shrinking and b) the multiples would be higher.
10 - Most importantly, you should sell when you are hot. Online personals would have fetched far higher multiples a few years ago, but today many are seen as passe for the reasons outlined above.
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