More threads by David Baxter PhD

David Baxter PhD

Late Founder
Online Dating Faces Rejection
October 11, 2004
By Olga Kharif, Business Week Online

To stay afloat, existing online dating players will have to enhance what they're doing and dump a lot more dollars into new technologies and services, and that could affect their margins. is enhancing its system for pairing up subscribers to allow for more targeted searches, and Yahoo! Personals has improved its mailbox features.

Among the pumpkins of the dot-com boom, one of the few Cinderella stories had been online dating. While many Internet startups ended up with bottom lines scarier than a date from hell, searching for love online has became the largest category of paid Web content, after porn -- for which statistics are difficult to get.

Until this year, revenues for and Yahoo! Personals, two of the biggest players, had been doubling annually. Profits had been piling up even though fewer than 20 percent of these sites' users had paid to seek their mates.

Love is Fading
Then, e-dating's charm began to pall. In September, market leader, a property of IAC/InterActive (IACI), laid off 30 people and replaced its longtime CEO. Rival cut 90 employees, or 60 percent of its workforce. In August, MatchNet, which owns dating sites and, canned its initial public offering. The outfit cited unfavorable market conditions, and its president and CEO has resigned.

Growth rates for the established players are slowing rapidly. The U.S. market will expand a mere 19.4 percent this year, to US$473 million, according to market consultancy Jupiter Research. And growth will rise only 32 percent, to $623 million, over the following five years.

"The big growth in the U.S. is over," says Nate Elliott, an analyst with Jupiter in New York. "Things are going to get a little bit tougher. Companies are going to have to buckle down."

Smaller Shares
Why is the honeymoon over for these sites? "Some of the fad and excitement has worn off," says Peter Zollman, a media consultant with in Alpharetta, Ga. Also, as some customers' attempts to find the right match have failed -- check out the rants on or -- they're "going back to old ways of dating," Zollman says.

The lovelorn may also be finding other tech-driven options to make connections, be they social-network sites or mobile technology such as text messaging. These newer avenues may have revenue potential, even as the original online-dating players confront hard times.

It's not that Web surfers aren't still looking online to hook up. This September, the U.S. had 844 dating sites, up 11 percent from a year ago, estimates Bill Tancer, an analyst with online researcher Hitwise in Redwood City, Calif. It's not just a proliferation of players: "Over the last couple of years, our competitors have had more resources than previously, and they're committed for the long term," says Joe Cohen, chief operating officer of

Nor are users hard to find. Total traffic to online dating sites overall has increased by 16 percent over the past year, according to Hitwise, even as it has fallen for players like

People Vs. Profiles
Disrupting established players' happy-ever-afters are niche sites like, whose front page features the American flag and offers eager candidates for those who don't want to date Kerry backers., with a peace sign on the entry page, attracts those on the left side of the spectrum. You can now find sites for dating Ivy Leaguers, those over age 60, and Christians. Traffic of Christian site eHarmony, for one, is steadily climbing, according to Hitwise.

Social-networking sites, such as and, add to the competition. Already, both score higher on Alexa traffic tracker than traditional dating sites. Unlike the latter group's usual catalog of profiles, social-networking sites allow for more personal interaction. For instance, users of gather in chat rooms to exchange dating advice or play games. And allows users to talk, through voice over Internet protocol (VoIP) technology, via their PCs.

"When you deal with real people and not a catalog of profiles, you can't just walk away," says Stowe Boyd, president of tech researcher Corante Research in Reston, Va. "It's like breaking out of your social circle."

Mobile Action
Moreover, because these sites attract people with common interests, the situation can be more conducive to a match. And much of the e-dating category's traffic increase over the past year came from social-networking sites, says Hitwise's Tancer.

Younger users tend to gravitate to social-networking sites, rather than to traditional e-dating enterprises, which typically serve 25- to 35-year olds. But that demographic profile could change. Though youthful users are often the early adopters of new technologies, their older brothers and sisters often follow suit.

Yet another competitive threat -- from mobile devices -- is brewing. Text-messaging dating services are proliferating in places like San Francisco. Cell-phone owners using are notified when their friends come within their 10-block radius. A service from AT&T Wireless helps users find the closest sushi restaurant. Soon, someone might be able to come into a bar and pull up profiles of people sitting in the same bar and looking for a date, says Corante Research's Boyd. When these services become available, dating sites will be effectively competing against such wireless industry's heavyweights as Verizon Wireless, Cingular , and Sprint PCS.

AOL Committed
Corporate giants are entering the arena, too. Time Warner's launched in February. It allows AOL Instant Messenger users -- 36 million strong -- to become available for online-dating chats whenever their IM is on. "It speeds up the dating process," says Mitch Praver, general manager of

Time Warner, with $6.2 billion in cash and equivalents, can potentially bring enormous marketing muscle into the game. Even without advertising, the service should number one million members by year's end, says Praver. "Clearly, AOL is committed," he says. "We're in an early inning here, and, so far, the results have been pretty positive."

Another major entrant is career site, part of Monster Worldwide. In May, Monster acquired, which offers everything from IQ quizzing to career-personality tests. The acquisition's official goal was to enhance's career services. A less publicized aspect: Tickle, a social-networking site, is in matchmaking. While Monster has yet to commit to online dating, it could potentially expand its presence in this industry.

Spicing Up Offerings, a venture of Playboy Enterprises, is also exploring the possibility of an online dating service. For now, the outfit is mum on its exact plans, but with its saucy magazines' millions of loyal fans, finding visitors for a dating service might not be that hard.

To stay afloat, existing players will have to enhance what they're doing and dump a lot more dollars into new technologies and services -- and that could affect their margins. is enhancing its system for pairing up subscribers, to allow for more targeted searches. In the past few months, Yahoo! Personals has improved its mailbox features. It's also working to integrate its instant messenging and dating services.

"Over the past couple of years, the whole focus of this category has been on scale," says Tina Flammer, senior director of marketing for Yahoo! Personals. "Now, it's coming back to focusing on improving the consumer experience."

Plenty of Potential
Some of the e-dating sites won't be able to handle the financial pressure.'s Zollman, for one, expects more consolidation. But these sites won't disappear.'s Cohen figures that out of 25 million single Americans aged 25 to 60 who are online, only about 4 million pay to search for their mates online, so plenty of potential growth is out there, he maintains.

Clearly, however, he and other established e-dating concerns now face more competition and technology challengers. The lovey-dovey phase appears to be over for online dating. It'll take lots of sweat and commitment to grow from here.
Replying is not possible. This forum is only available as an archive.