Profits Don't Always Woo Investors

MERCURY NEWS -- Nov 1 -- In Palo Alto, Andrew Conru looks like a typical Silicon Valley entrepreneur. The bespectacled, sandy-haired 38-year-old Stanford Ph.D. runs one of the best-known but least discussed Web destinations, Adultfriendfinder.com (25 million users, #58 on Alexa). In comparison, Facebook (9.5 million users, #56 on Alexa) is for sale for ~$1 billion. Most investors can't do anything about Various other than watch it expand. Many firms have "sin clauses'' with their financial backers that outline the types of companies they are strongly discouraged from backing, such as adult entertainment outfits. An IPO is an option, but stocks of publicly held adult content companies get discounted heavily because so many investors, like mutual fund managers, can't buy the shares. There also aren't many potential purchasers and Conru says his company is worth more than they can afford. There's no easy way to "exit'' Various. He employs 300 people, including 100 programmers. According to one former employee of Various who asked not to be named and his company has been making money since 1996, mostly through Adultfriendfinder.com and Alt.com. Conru owns 90% and is worth $100 million+ (The other 10% is owned by Lars Mapstead, whose start-up, Cams.com, was acquired by the company last year.)

The full article was originally published at Mercury News, but is no longer available.

Mark Brooks: I worked for Andrew in 2003 as his PR manager, amongst other things. Tough role, great guy. After working with Friendster I realised I needed to work for a real company and learn the ropes.  Whenever I advise my clients I often ask myself, "what would Andrew do." I heard Various will bring in $400 million this year. I'm sure AdultFriendFrinder will contribute well in excess of $100 million to that revenue number. In 2003 the official, but very rarely mentioned revenue number was $75 million. That number was, if anything, conservative.  Here's what Matt Marshall of VentureBeat had to say...

Owner of Adultfriendfinder Raking in "$100s of millions"

We're left with some questions. We're not sure why Conru needs the cash if the company is profitable and raking in so much revenue. The article says Adultfriendfinder is the 58th most popular site on the web, just behind Facebook, citing Alexa web-measurement data. Alexa data is notoriously unreliable — especially when it is used to compare something against Facebook. Alexa can be seriously gamed, because it relies on software downloaded by relatively small number of people to track traffic patterns.  Perhaps there's no one else willing to track this area? ;) FULL ARTICLE @ VENTURE BEAT

Mark Brooks: He doesn't need the cash. But, he'd like to take a break. But, there's noone he can trust (besides Lars and Charlyn) to run the company. It's no small entity. Andrew knows every single corner, facet and feature and is master of his kingdom. The real problem is, he's a genius. Which makes his job of replacing himself rather tough. The thorn in Andrew's side, of late, is the sexier, sleeker, rising star SexSearch.com which is slowly but surely, using every means possible, stealing away adult/casual dating market share.

Comments

[Saïd Amin]

With Conru's cash flow and war chest I would imagine that he might be able to make a compelling offer to acquire SexSearch.com. Yes, no, maybe?

I am in awe of of how early he got in the "dating" game and how far he has taken his company; quite inspiring.

In time exisitng and new adult oriented social entertainment networks will chip away at AdultFriendFinder and Alt. In addition to the first to market position and a tremendously robust affiliate program/network, the localization of their sites in X languages (or should I say "XXX" languages) is a huge advantage they enjoy over competitors.

Peace,
-S

[Mark Brooks]

It would be better for Dr Conru to throw the money that he would pour into such an acquisition into motivating his affiliates more. He doesn't need another top tier brand, he has one.

An acquisition of a top tier dating site makes most sense for media companies intent on quickly entering the online personals space.