OPW Interview - Nate Elliott, Jupiter Research

OPW INTERVIEW -- June 9, 2006 -- You’ll often see Nate Elliott (and David Card) cited in the press. Nate works for Jupiter Research and is a leading analyst for the online personals industry (internet dating and social networking). Here’s my interview with Nate…  -  Mark Brooks

Who’s numbers does Jupiter Research use these days?  Do you use ComScore?
No, it’s generally all of our own numbers.  A lot of those numbers come from consumer surveys both in the U.S. and in Europe. In the U.S., we run more then a dozen consumer surveys every year and in Europe we run several per year as well covering the six major European markets. In addition, we have access to ComScore data that we sometimes use supplementally. But typically, we just use that data to double check what we get back from our surveys. In addition, based upon our survey data and executive interviews, as well as, publicly available information, we craft forecasts for the online dating industry in the U.S. and 17 European countries for the next five years.

How does the European online dating market look?
It’s doing very well. It’s still growing pretty strongly and we see it continuing to get stronger over the next several years. Similar to the U.S. market, the European market is starting to slow down. The good news is we don’t see the sudden slow down happening in Europe that happened in the U.S. In the U.S., we went from nearly 80% growth to less then 10% growth over the course of two years. In Europe, the transition will be much more gradual in large part due to the fact that we’re dealing with several markets instead of one single market and the fact that there are several markets across Europe that are maturing at different rates. That will help insulate the industry from the kind of sudden slowdown that the U.S. industry has seen.

What is the fastest growing market in Europe?
Well we look at Southern Europe as the fastest growing region within the online dating market. In particular the Italian market will more then triple between 2005 and 2009. It will be the fastest growing market in Europe over that period of time. The Portuguese market is also going to grow very quickly.  Overall, we see the online dating market in Europe more then doubling between 2005 and 2009.

Which services do you think will be most successful in the future?
The ones that are successful today in terms of revenue and users, and I respect that they’ll continue to be very successful, are Match.com and Meetic. They appear to be just about neck and neck in terms of revenues. Having spoken with them, I think they both have intelligent strategies to try and grow their business as this market starts to slow down a little bit. So certainly those two would be the most notable and they would be the ones that everyone has to keep their eye on.

Are there any notable and fast growing social networks in Europe?
There are a handful but I think it’s important to distinguish between social networks and online dating sites. We have more data out of the U.S. than we do in Europe because the social networking phenomenon is stronger in the U.S. then it is in Europe. But generally speaking, our surveys indicate that online consumers are not interested in using social networks to find a date. We’ve also found that online daters don’t leave dating sites for social networks. When we ask online consumers what functions of a social network are interesting to them and what functions they’re using, finding date’s scores very low?  Most people, in fact, like to communicate with their existing friends on social networking sites.  It’s more about people talking to the folks they already know, than going out and meeting new people. 

Where do you see mobile dating going in Europe and the USA?
Well, mobile dating is really interesting. I’m as interested as anyone else to see if any of the online dating sites can turn mobile dating into a serious stream of revenue. One of the slightly disturbing things we’ve seen from Meetic’s public statements is that their mobile dating revenues have actually declined as a percentage of their overall revenues over the past couple of years.  Now, in part, that’s because their overall revenues have grown very aggressively and their mobile dating revenues have been growing less quickly. I’m not sure the dating sites can count on it as a serious revenue driver over the next several years but I absolutely encourage the sites to look at the mobile platform and be well positioned in the future, if it does turn into a revenue stream. In the mean time, it certainly is an interesting way to drive people back to their website, which is where they make their money. 

How about video dating? Is there a future?
We don’t have a lot of data on people who are interested in video dating. The last time we asked that question in a survey was about two years ago and we saw very low interest at that point in time. It stands to reason that interest would have gone up just a little bit over the last couple of years but speaking from personal opinion, I can’t see video becoming a very important part of online dating over the next several years. If you remove a level of control from online daters about what their appearance is, I think a lot daters will be cautious about using webcams. For that reason alone, I think the uptake might not be significant for video dating, but again, we don’t have a lot of recent data on it.

What overarching trends are you seeing? What’s hot?
All the prices have gone up at the dating sites over the last year and a half. It’s more of an issue in the U.S. where user growth has slowed to a crawl.  To continue growing revenues they have to raise prices.  Yahoo Personals went from $20 to $25 to $40 depending on which service you take. These prices aren’t high but they’re higher then they used to be and I think in some cases they’ve become a bit too high.  As a result, you see fewer users who browse online personals. So, certainly raising prices is one way to generate more revenue from the consumers and it does increase the average revenue per user but if it comes at the expense of growing your main user base, then that’s a concern. I think there is an opportunity right now for some companies to come in and undercut the leaders. Dating sites that are sort of on the second or third tier, that are looking to challenge the leaders, may take advantage of the high prices that the leaders are currently charging, either by permanently undercutting the leaders or offering more creative pricing. 

One of the things that we’ve seen out of the U.K. that we like is the short term subscription. At Dating Direct you can subscribe for just a couple of days for a reduced price. It gives you a chance to communicate with someone; it gives you a chance to reach out to someone if you like a profile without making a large financial commitment.  But by registering for just a couple of days, for about the price of a drink or two in a bar, you’re potentially widening the number of people who would be willing to pay for your services.

What message would you like to leave the executives with?
The good news is, the industry is growing. Even at this stage where we’re seeing a few bombs in terms of use, it’s a big industry, it keeps on growing, and largely the services are doing things right. It’s just a question of defining strategies and growing the paid user base. I look forward to watching the leading data sites refine their strategies and seeing their continued growth as an industry.

Comments

[Fernando Ardenghi]

Nate Elliot said: "I think there is an opportunity right now for some companies to come in and undercut the leaders."

I strongly agree!!! New quality online dating sites offering more power_calculation and better personality_matching_methods will have a great opportunity to World Wide succeed!

He also said: "It's just a question of defining strategies and growing the paid user base."

Strategies:
Quality Online dating sites need to convince their clients with valid reasons to pay for the service. Clients will subscribe and pay a fee for quality_contacts / compatible_real_persons, they will also pay to avoid loosing precious time with fakes_profiles & low_quality_matches and to avoid being hurt in their feelings by dishonest/unscrupulous persons.

Kindest Regards,

Fernando Ardenghi.
Buenos Aires.
Argentina.
[email protected]

[Markus]

Nate Elliot said: "I think there is an opportunity right now for some companies to come in and undercut the leaders."

Statements like this show just how much little credability that company has. If he took 5 minutes to look at alexa, ranking.websearch.com, hitwise or even comscore data he would have come to the conclusion that.

1. Plentyoffish is #1 in Canada.
2. Plentyoffish is in the top 4 in the USA.

I guess you just don't exist if you don't buy their research reports.

[Fernando Ardenghi]

Dear Markus:

Perhaps you are only TRANSFERRING free_users tired of Match.com, tired of Lavalife.com, tired of Date.com, tired of YahooPersonals!.com and tired of other sites TO PlentyofFish.com; from their databases to PlentyofFish's database.

Technically speaking, PlentyofFish.com makes money off the ads upselling to other sites. It has all free users (the daters) and some paying clients (the advertisers)!
Is PlentyofFish.com really within the Online Dating Industry? or only in the Internet Ads Industry?

Revenue source: Ads. Is PlentyofFish.com only a CHEAP CHANNEL for deliver ADS, cheaper than Google.com, yahoo.com, and others; flying in automatic pilot?

Also Nate Elliot did no say even a word about:
* Market Segmentation.
* Future Legislation.

Kindest Regards,

Fernando Ardenghi.
Buenos Aires.
Argentina.
[email protected]

[Alexander Shetinin]

Oh my G-d!
I've never seen an analyst as incompetent as Nate Elliott with his "creative pricing to undercut the leaders" idea. My respect for Jupiter Research fades away.
First of all, there is no gray area between dating pay sites and free one like PoF. It's either u make users to pull out their cr.cards or u don't. And once u do, u'll have not only to add to the back office but allocate lots of extra expenses for customer service. Once people pay a dime they think they own u. It'll cause an avalanche of call and e-mail. Try to ignore them and u'll face tons of charge backs. And cr.card companies don't care what the charge back is, either it's $2 or $200. A merchant will be charged $20-$25 every time cr.card company opens a file.
On top of legitimate charges, there will be tons of cr.card fraud. Yes, one can fight it ignoring some IP's and doing some extra work, but u can never defeat it.
Therefore, even technically speaking charging a little is a losing game.
Marketingwise, charging a little will cause losses a lot given to the cost of the traffic in such a competitive area and dating. It can be used as an entry maneuver to stuff the database, but the tactics requires tons of $$$ to survive. Nowadays, we are talking hundreds of thousands to a few millions.
Analysts should crunch numbers and draw their conclusions from facts rather than fantasizing about something they have a very remote understanding about and no hand-on experience. That's my opinion.

Alexander.Shetinin
DuetNetwork

[Mark Brooks]

Let's focus on attacking the issues. ;-)

Mark Brooks
editor, onlinepersonalswatch.com

[Andy Arnott]

Yes it seems as though "free" sites were left out of this report. Though plentyoffish tends to just "up sale" to other dating sites, they now have a user base that will make them very powerful, if they choose to be.

I believe the gap in the market is a truly competitive free/paid hybrid dating site, one that rivals the quality of sites like Match.com.

Yes the main function of our site is to cross promote users by allowing them access to other dating sites users, but we will also provide a rich dating experience that we hope will make people want to just use one dating site. Ours...

Do people really think a math equation or some words written by Dr. Phil will find them their best match? Maybe, but our goal is to let people interact, and with this, true compatibility will follow.

Andy A.
CTO
Collaboradate.com

[Shimrit Elisar]

I am not at all sure that what the UK market is lacking right now is cheaper sites to undercut the major players. I think the market is beginning to level out and mature now and the daters are becoming more discerning. It's beginning to no longer be enough to simply have a dating site, no matter how cheap it is. People are slowly but surely beginning to expect more from their service. I think one of the things we are likely to see happening is more segmentation and niching, which has already happened in the US but is only just beginning to seriously happen here.

Shimrit Elisar

Allegran Limited