OPW INTERVIEW -- Sep 19, 2005 -- Nate covers the online personals industry for Jupiter Research. Before joining Jupiter he spent the internet boom years working for Doubleclick (4 years) and with Macromedia. He took a break and then decided that being an analyst would be an interesting way to satisfy his curiosity.
Why do you work from England?
I worked in Jupiter’s New York office for 2 years. I wanted to move to Berlin but Jupiter doesn’t have an office there. We did have an office in London, so they said I could move here. I got here February 1st. I live in Clapham and work in Soho.
What other areas do you cover?
My primary area of research is European digital home technology, which includes consumer electronics and entertainment technology. I cover HDTV, DVR's, home cinema, game consoles, home networks, portable media players and a range of other devices and technology focused around home entertainment. Online dating and social networking and other online media are a smaller part of my job. I get to play with iPods and Playstations and TV sets and I get to talk about online dating. I'm traveling a lot for work and fun...I was on the road 20 days last month.
Where is the industry headed?
The U.S. online dating market is headed for slower growth and a harder slog. Fewer consumers are showing up at the sites, and fewer are posting profiles. To keep growing revenues sites have to do a better job of converting visitors to paid subscribers. The good news is, they are getting better at that. We've seen the number of visitors to dating sites drop by about a third in the last year. But the number of paying subscribers is still rising marginally, which is interesting – it’s proof that conversion rates are improving. Online personals sites are also getting better at taking more money from each subscriber. Sites with a focus on serious dating are able to charge higher monthly fees. Sites are also focusing more on 3-6-12 month memberships that extend the lifespan of a user. I see sites getting more creative in terms of turning browsers into subscribers, because they have to.
Why is the number of unique users falling?
The market is reaching maturity. Two things have happened. First, people have already gone through online personals sites for the first time. Some subscribe, and then about half of them come back for a second go. And some visit but don’t subscribe. It gets to a point where so many people have visited these sites and decided whether they want to use them, so there are fewer consumers ‘just curious’ to have a look. It's no longer the 'new thing’. That’s probably why we are seeing higher conversion rates now – there are fewer window shoppers. Second, the satisfaction ratings on most dating sites aren’t fantastic. We did a survey this January, and 35% of online daters were somewhat dissatisfied or very dissatisfied with the sites. Only 29% were somewhat satisfied or very satisfied. If you have more dissatisfied users than satisfied ones, eventually it's going to lead to fewer users. I think that over time, you’ll see more sites focus on just casual daters or just serious daters. The services that focus have a better chance of attracting a good audience and making that audience happy. Users self select by choosing a site – does the site market itself as a serious dating site or a casual dating site? Most of that comes down to marketing because the sites themselves are not that different. The technology and features are fundamentally the same. Their differentiation is more a factor of which audience they’re targeting. By targeting one audience or the other, and building a user base with common goals, they may be able to improve those satisfaction scores.
What are the differences with the European audience?
The European online personals market is growing pretty aggressively, which differentiates it from the U.S. industry. The U.S. dating industry will continue to grow over the next 5 years, but it’s not growing like it used to. The US market grew 72% in 2002, and 77% in 2003, but will only grow 9% in 2005. Still, we’re forecasting it’ll grow to $516 million this year, and reach $623 million in 2009. (These numbers do include adult dating). Europe is still seeing that impressive growth. The European industry brought in 88 million Euros last year, and we’re forecasting it’ll reach 160 million Euros in 2005 and 352 million Euros in 2009. That’s 82% growth from 2004 to 2005. So the growth is a lot faster in Europe than in the US, but it’s on a smaller base. Over time, the European market will follow the same curve as the US market, and will shown this same pattern of maturation. The population is larger in Europe, but the market differs in a couple of ways. European online content and services tends to lag a couple of years behind what we see in the U.S. It's also a more difficult market; dealing with a couple dozen countries, different languages and national borders – which matters more then some of the U.S. companies might think. There are also different media preferences to consider. In Europe, you can’t cut one or two portal deals and cover the entire market. Each country has different portals, and even the multinational portals sometimes cut separate deals in each country. It’s all a much more fragmented landscape than you see in the US.
What are your thoughts on the relationship sites and personality profiling?
It seems like eHarmony is doing a great job helping to grow the industry as a whole with their TV advertising?
They are. But I wonder how much it has to do with personality profiling and how much with media spend. I think serious dating would have been a growth area anyway, but it's certainly growing more because of the money they're spending and the attention they're getting. And that has fed back into industry growth. I think personality profiling is interesting but clearly not necessary. Self-selection is the more important piece. The relationship personals sites are marketing themselves to serious daters. That marketing focus is the biggest piece of the puzzle. Users go to those sites because they’re looking for serious relationships, and they find other people looking for the same thing, and so you’ve got a database of like-minded individuals. The actual profiling becomes almost secondary. But, the problem is, the serious dating sites have created high expectations. They say “we’re going to find you the love of your life,” and that’s really hard to actually do, and so their satisfaction scores tend to be lower. There are also examples of profiling being used in casual dating, like at Tickle, and there are basic efforts from Match and Yahoo. But, if the idea is to have fun and do introductions for casual relationships then profiling is not a necessary part of the strategy. For serious daters however, personality profiling is the kind of marketing message that resonates.
How will online personals sites extend beyond the web in the future, in 5 to 10 years time?
I don't think anyone has done a good job extending their brand beyond the internet. There have been some interesting attempts. Comcast (cable operator) teamed up with Hurrydate (speed dating and personals) to provide personals on cable. There have been some efforts in the mobile dating space. They're all interesting ideas, and in theory they all should work, but none of them have. I think the offline singles services are the only other format that can compete. Events have advantages – they’re fun, social activities, and there’s no substitute for meeting someone in person. However, online services have something that offline can't offer; a combination of depth and anonymity. That sets them apart from event services, mobile services, classified ads in the newspaper, and introduction services. No other format offers the level of depth – lots of details and photos and forms to fill out and chances to interact – combined with anonymity. That’s why online personals work so well. $500 million a year is a pretty big industry. It's twice as large as any other category of paid content online. This is a big industry. The reason it's gotten to this point is that the internet really is the ideal medium for searching for singles. Lots of companies think they can take their user-base and extend to other media, but they’ve had some real difficulties. It's not that they are doing it wrong. It's just that the users understand they are already in the best medium: online. Even when we get to a point where mobile dating offers a better experience, I don’t think it’s ever going to be massive. Mobile dating is good for some things; for people who are bored in line at the post office and college students who would rather look for profiles on their phones than pay attention to class. It's not as good an experience as online but it is useful for anyone with spare time away from their computer. At the end of the day, though, online is always going to be the biggest piece of the puzzle.
What observations would you like to share with the CEO's of the industry?
A lot of the smaller players look for bells and whistles to add to their sites. They're looking for angles they can use to differentiate on, and market their sites. It's got to be hard to compete with a couple of monsters like Match and Yahoo. Those two, plus eHarmony and Spark Networks, take up so much of the mindshare and the money in this industry that other companies are dwarfed. But at the end of the day consumers don't seem to care about the bells and whistles. They want a critical mass of users in their local area with lots of photos and deep profiles. Deliver that and you have a good product. Most users just want online personals sites to do the basics well. All the rest is superfluous.
He said: "I think personality profiling is interesting but clearly not necessary. Self-selection is the more important piece."
He is terrible wrong!!! The market will divide into two well-identified branches.
13-25 years old persons (teenagers) not interested in serious dating; they will use the service for fun. They are used to send a lot of traffic with emails, photos, videos, or simply stay in chat rooms for hours. They will need exclusive contents for members. They will want to be 24hs a day online or pending of their cell phone / PDA. Each person will have its private TRUMAN SHOW . Everybody will be TRUMAN for 5,000 "friends" (CASUAL ACQUAINTANCES).
AND
26-and more years old persons interested in serious dating. They will need quality CONTACTS (compatible real persons) like off line chains, reliability, code of ethics, legislation and Special Services (professionalism): the next generation of dating and matchmaking will be more scientific than ever, most probably the 16PF5 test (personality profiling) in different languages (or similar test) will be a "must have" in compatibility matching . They will know that "If any person does not pay for the service or does not want to pay for the service, he or she is not interested in serious dating, or is not interested in investing time and effort in building a new relationship with future in mind". They will pay for the service to avoid being hurt in their feelings by others.
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He also said: "$500 million a year is a pretty big industry. It's twice as large as any other category of paid content online. This is a big industry."
He did not even mention Legislation not Quality Norms like ISO9001:2000!!!!! I think the most interesting portion of the market is at the United States USD600million (English), then Europe USD600million? (different languages), Asia USD500Million? (mostly Chinese and Japanese), Australia and New Zealand USD150million?(English) and LatinAmerica USD100million?(Spanish) A market as big as USD1950million??? will require Legislation.
Any entrepreneur, Executive Director, VicePresident or CEO has two main tasks
to "see in advance"
and
to make things happen.
I can smell that by 2008: Quality Norms ISO 9001:2000, Legislation, confidential treatment of information provided (profiles), privacy, code of ethics and background checks (professionalism) will be expected for serious dating. Also "free users" will realize/understand that spending time and effort searching low-reliable profiles in "free dating sites" (a lot of hours contacting persons with low success rate, with low satisfaction index) is more expensive THAN paying a fee (USD300-USD800?) to a quality contacts provider!!!! Note OFF LINE chains charge nearly USD1,500 average
Kindest Regards,
Fernando Ardenghi.
Buenos Aires.
Argentina.
[email protected]
Posted by: Fernando Ardenghi | Sep 19, 2005 at 03:50 PM
Couple of points.
1. Nate is absolutely right, personality tests are worthless for the most part. More of a niche market then anything.
2. I think the unique visitor stats are way off. In the last few years americansingles, eharmony etc would use spyware/aware to drive huge amounts of traffic. Those practices have been reigned in because lifetime values of members were extremely low.
3. Critical mass of local users is all that matters.
As for Fernando, no point in arguing his points as he is just trying to sell his personality test. "CEO's that see in advance" clearly see that personality profiling is a small niche market. If there was anything more to it match.com and yahoo would have deeply integrated it into their sites by now.
Posted by: Markus | Sep 19, 2005 at 05:30 PM
Some great comments thanks. Here's my opinion...
The market is already definable by casual daters and those interested in serious relationships. Social networks generally cater to the younger, more casual daters. Myspace is the leader in this category, along with thefacebook and hi5.
The younger market by and large does not want to part with dollars for membership, and do not want to be defined as 'single.' They are young, interested in hooking up but aren't necessarily interested in hooking up for marriage. This younger market is less inclined to sit in front of the TV these days, favoring the internet, so sites focusing on the younger generation will make the lions share of their money from advertising to this ever more elusive, harder to reach audience.
Socially, we are trending away from the institution of marriage. Youngsters are most likely to have been burned by their parents bad marriages...so they are less inclined to bother at all with marriage. At least they will wait longer to get married and tend to have kids later.
Those youngsters that do eventually decide they are interested in making the leap into a lifetime of commitment are:
(i) already sold on the concept of using technology to help...heck, they use it for everything else
(ii) know they need as much help as they can possibly get...their parents probably failed in their marriage attempt. They want to get it right!
So things are looking quite rosy for the enhanced services that offer more than online personals classifieds. People do need a helping hand. Personality profiling holds high promise. Is it delivering right now...not really, but it's trying hard. We have a large enough pool of people using these services now that real research can be carried on a scale that has never before been possible. That's how we'll be able to improve the future generation of personality profiling services.
I look forward to the day that services charge $100-$200 a month, provide personality profiling, dinner events, a guaranteed number of dates each month, and guidance on how to keep a specific relationship together based on each persons character, lifestyle and communication type.
Money is a great way to sort the wheat from the chaff, the serious (and committed to the process) from the not quite so serious. Money (monthlies) in itself is a great filter. Users are not satisfied with the current services in general so I'm sure we'll see an upward trend in what they are willing to pay to find the level of service they really need. The net is a GREAT medium. Users are hooked, but not happy*. Many of our online personals users have limited time and limited patience and plenty of money. They want more than just hope. They want service.
Personality profiling services hold high promise...and high value in the minds of users. In time, as our audiences become more sophisticated they will realise that they get what they pay for. $10 a month, $20 a month, $50 a month. I think they want more handholding and will, in time, be prepared to pay for it. If real world services (table for six, it's just lunch, great exepectations) can extract $1500-$2500 from motivated singles, the online personals world, which is vastly superior in many ways, should also.
So how can we up the ante? How to meet and exceed users expectations? Ultimately, the promise online dating sites make is that they will put people in front of people on dates. That's the measure of a good online personals service: the number of first, second and third dates.
Not sure about ISO9000. I've never heard it brought up at any of the online personals companies I've worked with yet (see www.courtlandbrooks.com). Users don't and probably won't demand it, so I can't see it happening.
* Users are hooked but not happy.
There are two kinds of online personals users. Those that met someone and are happy, and those that did not meet someone and are unhappy. Many users have poor photos and profiles and don't invest enough time.
Posted by: Mark Brooks | Sep 20, 2005 at 12:48 AM
Now this is a blog! WOW super stuff great job!
Posted by: wallybanners | Sep 20, 2005 at 04:04 AM
Intereresting comments from Nate Elliott. I think he hit the nail on the head when he stated, "...at the end of the day consumers don't seem to care about the bells and whistles. They want a critical mass of users in their local area with lots of photos and deep profiles. Deliver that and you have a good product. Most users just want online personals sites to do the basics well. All the rest is superfluous. ..."
How very true. We couldn't hope to compete on features with a site like, say, LavaLife.com, or even some of our lesser direct competitors (one, which shall remain nameless, has feature sets up the ying-yang). However, what LavaLife.com lacks is they are not a Christian singles-only site (not that they care; it is not their focus, but it is ours), and our lesser competitors have been so fixated on "cool" new features that they have missed the boat. This particular one dropped off the map this year, as its profile count slowly disappeared.
What we have managed to do well is the basics which Nate talks about. Of course, constantly adding new features to make the site easier to use and better matching up of our members does help. It's just that without that critical mass of people all the other stuff is merely fluff.
Posted by: Sam Moorcroft, ChristianCafe.com | Sep 20, 2005 at 10:45 AM
Mostly a recap of stuff we already know but it's nice to see an analyst that has at least 5% of their focus on the industry. I do agree about deep profiles and meaningful search and people in your zip code.
Serious daters are becoming a larger segment of the market, but how can a niche site offer the high-end services that only top 5 sites can afford? Yahoo has failed to differentiate Premier Services from their regular offerings, match dropped their $500 service, and the next price point is $1,000. Where are the middling services?
I disagree that online dating is vastly superior to F2F services, although the two should be more tightly integrated.
Posted by: David Evans | Sep 20, 2005 at 01:37 PM
In a previous Mark Brooks' interview, Senator Cropsey said:
"Online dating companies need someone who has the authority to speak for the industry."
Nate Elliott did not even mention SITRAS, IDEAOASIS, IADW!!!
Who is / will be someone who has the authority to speak for the Industry?
Regards,
Fernando Ardenghi
Buenos Aires
Argentina
[email protected]
Posted by: Fernando Ardenghi | Sep 20, 2005 at 03:34 PM
Fernando,
I think that Senator Crospey would only qualify someone getting a piece of True's lobbying expentitures. Is that what they mean by follow the money? Of course you could never follow the money flow until they put RFID tags into the bills, but it doesn't take a rocket scientist to follow the rhetoric. Have you noticed how they all dodge the tough questions? Where did they all go? The Doc has all but disappeared.
Bill Broadbent
CEO
Instinct Marketing
Posted by: Bill Broadbent | Sep 21, 2005 at 05:06 PM
Propsing Legislation in the US to force Online Dating Services to disclose information on known freudlant account to members contacted by a freudulant account during the period of time that the freudulant account had been live.
This happened to me personally. If the online dating site I paid to join had informed me that I had been contacted by a fredulant user,
I would have terminated that contact immediatley. I did not know, and was taken in by a very slick Nigerian online dating Scam Network. This was not just one person involved, this was a network of persons with freudulant documentation includng flight schedules, passports, Airline personnel. I did all reasonable to check out this identity of the person, but unfortunatley was taken for $1400.00. I am a single Mom with 2 kids. This story was unbleiveable. Please help me to support such legal action and help stop Online Freud Scams.
Posted by: Catherine Jewett | Dec 26, 2005 at 12:59 AM