eHarmony Internal Memo

OPW - Oct 20 - Dr Neil Clark Warren is my hero. The CEO of eHarmony kindly allowed me to share this internal memo with you as insight into what's been happening with eHarmony, and how they're doing. I've decided to run it in its entirety. Here it is....

Dr. Warren wanted to share his message below to the company regarding his comeback 2 years ago as you had shown interest in the company previously. Thank you for all that you do for the industry. It has been a brilliant but grueling turnaround.

It’s August 22nd, 2014, and it is the 14th anniversary of this little company of ours that is on the precipice of world-wide greatness. Let me tell you ten reasons why I believe this with all my heart.

1. We took over the leadership of this company on July 23rd, 2012. It was a total disaster!!! It was one day away from being put on the sales block and virtually given away to the highest bidder who would take it over. We began cleaning house and literally started over. We have only looked back a few times, and we have focused acutely on the target of a five-year turnaround that will surely astound the world of relational gurus and business school leaders.
2. And now!!! Look at us!!! We took our hard won stash of capital and used $153.2M to buy out all the “Class B” shares, and we began the pursuit of our own company. We asked five of our former and highly-esteemed board members to step aside and give us a chance to do more of what we needed to do to bring this company back. We made tough decisions (with Greg Penner’s guidance), let some people go, terminated vendor contracts. Moreover, we have cleaned up “our house” by appointing an all-new executive management team that is a more aligned team than we have ever had before.
3. Moreover, in less than three minutes (or so) we hired a new COO, Armen Avedissian, who is absolutely tireless, totally brave and brilliant, wonderfully “harmonious” with the CEO in relation to values and ideals, and massively ready to do what is necessary to make eHarmony everything it was on its way to becoming through 2009 when it totally lost its way. In addition, we appointed Grant Langston and Dan Erickson to the Management Team. eHarmony, under this new leadership, is determined not to be stopped any longer in its push to be the most prolific relationship company in the history of the human race.
4. Take a look at the numbers after just two years under this leadership. The comeback of this company, building on the multiple contributions each of you has made, is astounding. Instead of losing 100,000 end of period subscribers each year, suffering EBITDA losses of 50% every single year, our EBITDA for 2014 will literally be dramatic and the cash in the bank increasing substantially each month. EBITDA is currently running $9.4M ahead of plan as we work with our forecasts. Our end of period paying subscriber count has hit its all-time high, our spend on growth products is robust, and our vision for the future is brimming with hope.
5. We are ready to move our headquarters to one of the most exciting centers in America—and certainly one of the most exciting buildings in Los Angeles on Wilshire Boulevard in Westwood—where the crème de la crème of American business has met for years. Happily, our analysis shows the average drive time per employee will improve 10-12 minutes each way everyday. Now the sign on the top of the building will be none other than “eHarmony.com”. eHarmony will have all of the highest floors in the building (along with the rooftop which has a 360 degree view of all of Los Angeles.) Having our name all over this prestigious building will bring an incredible amount of attention and acclaim to our company’s efforts.
6. We have carefully outlined an entirely new strategy for our business—one in which we strive to build ten separate relationship businesses with ten separate revenue streams. We believe this will take tremendous pressure off of our marketing spend and set us up for scores of years in which profits will be more available because of a combination of seriously reduced advertising spend and seriously increased consumer efficiency. The scaling of our brand breadth and depth and the multiplying of our national and global impact are almost certainly going to increase the size and profitability of our business. As you know, we are intending to release our “Elevated Careers by eHarmony” by this next December—and our growth plans call for additional sites that are compatible with our matching expertise. We believe we will eventually have an all-purpose relationship business that will help millions of persons through the years.
7. Currently, we are a very lean staff of highly-trained experts. Whereas under prior regimes we had as many as three hundred employees, we now have only 190—including the staff we have in North America, the U.K., and Australia. It is our intention to offer various relationship services to a much greater segment of the world—first, in English only, and then in the languages of many countries. We believe this will give our business a scale we have never before realized.
8. We have serious doubts about ever selling our business. Fundamentally, we do not ever again wish to expose the ownership and management of our business to persons who know almost nothing about relationships—and have even less commitment to the sacredness of the relationships we are attempting to assist.
9. We are deeply determined to remain in a strong cash position. While our minimum figure may increase—even greatly—we are deeply determined never to allow it to drop lower than this amount.
10. Now that we have enriched more than 1.2M lives through marriage matching, hundreds of thousands of persons are on this journey with us. With their significant help, we are greatly encouraged and deeply confident we will succeed.

Thank you immensely for reading this entire note! We hope you sense the sincerity of it, for we hold to it will all our hearts. From our point of view, this is a company that has been entrusted to us, and frankly, we never intend to risk it ever again to the institutions which have little understanding of its mission and, perhaps, even less commitment to its ultimate success.

As a matter of fact, we deeply believe this can become one of the most important companies in the history of the world. After more than 600,000 marriages and with a divorce rate of only 3.86% (validated by Dr. John Cacioppo’s brilliant and ground-breaking study published in the prestigious journal, “Proceedings of the National Academy of Science”), we find ourselves imagining an entire world with a divorce rate in single digits, a world where over 90% of our citizens truly love their careers, a world in which every person knows more than 50% of what is going on in their brain, a world in which every person alive has at least 3 to 5 really close friends of the same sex and one or two close friends of the opposite sex, and a world in which contentment runs incredibly high in all of our citizens.

Bottom line, as a company, we want to bring about a world in which literally everyone has peace, love, joy, patience, kindness, goodness, faithfulness, gentleness and self-control. Then, we will know that we have reached our loftiest and most idealistic goals.

After 14-years, eHarmony has surpassed our wildest dreams. And now, I challenge each one of you to dream even more dramatically. May this company and each one of you experience the greatest journey you have ever known as we approach the beginning of this 15th year.

Yours sincerely,

Neil Clark Warren

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