CLASSIFIED INTELLIGENCE REPORT -- Oct '08 -- JupiterResearch predicts the online dating industry will hit $1.9 billion by 2012, not including matchmaking services at $250m+ in the U.S. Mark Brooks, who monitors the personals industry, pegs 2004 as the year when dating sites matured. "There are less people on dating sites, but they're spending more money." The CEO of The Right One/Together Dating, Paul Falzone has been in the business 20 years. "When times are good, people want someone to share the fun with. When times are bad, they want companionship."
The Free factor - Free has become a very real factor in the industry, with the emergence of PlentyOfFish.com. POF has more than 10m profiles, and 2m active monthly users. "He's the renegade of the market," said Brooks. "He's making the other players think about advertising money." Frind acknowledges that his $10m in yearly ad revenue has gotten people's attention, but he thinks the traditional dating sites are too invested in the paid-membership model to shift gears.
The Facebook factor - Many in the online dating industry believe social networks will not be a negative factor because SN are for friends and people are posting all sorts of material there they might not want a prospective date to see. But Robert Lee, who has been reviewing dating sites at ALoveLinksPlus.com, believes Facebook is going to figure out how to establish different layers of access, so a user can create a dating-oriented profiles that not everyone can see. As of Oct. 18, Facebook had 497 dating applications.
Different marketing and revenue models - "Personals ads" in newspapers was disrupted by the Internet in the mid-1990s but is being revived with a new focus on Web-first publishing, promoted in print. Another model uses the Web as its operating venue, but drives new customers through heavy advertising in traditional media. Cupid.com makes deals with radio stations to run ads for free in exchange for a share of revenue and claims a conversion rate of 13%. eHarmony and Match spend millions on TV advertising. The typical revenue model is "browse for free, connect for a fee." Matchmaking sites such as Kelleher and Associates, Together Dating and It's Just Lunch have a dual role in the online ecosphere. First, they buy leads from online dating sites, creating yet another line of revenue. Paul Falzone bought LoveAccess.com as a way to generate his own leads. In the 1980s, Falzone's cost per lead was $200-$250 using direct mail. Now his goal is to get that number to zero.
Growth of explicit sites - At the Internet Dating Conference held in London in September, the hallway buzz was all about the explosion in numbers of women signing up for adult sites like Fling.com and AdultFriendFinder. "I'd call it a sexual awakening," said Brooks. "Guys have always been interested in the adult sites, but this is new." The average length of membership on a regular dating site is three months, compared with five months on an adult site.
The future - Mobile and video remain theoretical game-changers, enabling potential match-ups by proximity or direct communication. Brooks sees another potential business model emerging from academic research: a dramatic improvement in the quality of matching.
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