Why Advertising Won't Save Online Dating Sites

Julie Ruvolo IAC's Match.com bought OKCupid last month for $50 million in a deal that put a nail in the coffin of the aging online dating industry. Match, recall, is the industry heavyweight: It's been online longer than I have -- since 1995; it's the biggest online dating site (along with AdultFriendFinder); and it makes a lot of money. Revenue dipped in 2009 but just hit the $400 million mark in 2010. OKCupid is also a dating site, a lot like Match actually, but best known for: Being slightly cooler. Running the best corporate blog on the internet. Owning the No. 1 spot when you Google "online dating." Did you hear that? "Advertising-based category" is code for "also pays to acquire users," "does not grow organically" and "not a social network." See, despite the undeniable fact that the social era has arrived -- mutual friends, followers, first-degree connections, APIs -- the dating sites wallow in primordial username soup (so that's where you've been hiding, nycprince03!) and refuse to hook up to the social graph. The result? An antisocial network. Instead of connecting with people you know, you set up a username to mask your identity, hope no one you know sees you, and spend the whole time filtering. Age. Location. Income. Some members make it through to the date filter, then you filter them out, and if you're lucky you find a mate and get the hell off the site. So dating sites grow the only way they can by paying to acquire you, so you can pay them (a subscription!) to spend your time avoiding people you don't know, hoping to find your match. Otherwise sensible filtering criteria, like who you know in common, is not possible in a world of usernames, so you're left with "10 miles from 10005" and mysterious matchmaking algorithms. Usernames are why dating sites can't grow on their own, like social networks. They have to grow in spite of themselves. By advertising! Match historically spends about half its revenue on advertising to bring new users in the door (and through the subscription pay wall). They added 5.4 million paying members in 2009 and 6.9 million of them in 2010. In the world of online dating, advertising is a 100% data-driven process of acquiring, upselling, and replacing users. Cost per lead. Cost per acquisition. Revenue per subscriber. Average attrition rate. Repeat. So where does Match go to buy ads? You guessed it -- Facebook. A social network. The Social Network. They won't hook up to the social graph but they'll pay for ad impressions on Facebook that convert to signups that create usernames and unplug from the social graph. In fact Barry Diller says Match just can't get enough of Facebook ads. Outgoing CEO and Diller successor Greg Blatt says they're one of the biggest advertisers on Facebook. (But, get this, the ads are getting too expensive.) To Match's credit, it's not like they haven't tried to grow "organically." Notable experiments include a mobile dating service called MatchMobile they launched way back in 2003 (and again in 2007), and a 2007 attempt to integrate with Facebook, called it Little Black Book. As if ... as if online dating is something to be ashamed of. (Debatable.) Match's attempts were cosmetic at best because usernames are in direct conflict with the social graph. You don't invite your friends to join you on Match, you don't know what friends are already there, and you don't make new friends while you're (paying to be) there. Match seems to have figured that out, as recent efforts to grow have ignored the social graph altogether in favor of dating-site acquisitions and deals with other publishers. Last year it "became the exclusive online dating service on Yahoo" and saw an 8% bump in organic subscribers in the second quarter; a nifty integration with Glamour to sign up more ladies, featuring some cursive font, hearts and yes, usernames. IAC also set up a joint venture with Meetic in Latin America and bought Singlesnet in 2010. Which brings us back to the OKCupid acquisition, which I predict will to have the rejuvenating effect of a spray tan, which should be cause for concern. Diller's aging anti-social network brings in about a quarter of IAC's annual revenue. Maybe they should have tried to buy Grindr instead. Grindr won't call itself a dating webite. It's a "location-based mobile app" better known as the app straight people are jealous of. Gay guys see who's closest (50 feet? 200 feet?) and meet up if they both like what they see. Guess how much Grindr spent to acquire over 1 million users across 180 countries in less than two years? Zero. Nothing. They've grown entirely by word of mouth -- and just announced they're about to go straight, too. My prediction? The only dating sites that will survive in spite of the social graph will be the adult dating sites. That's the one place you don't want your friends, or your partner, or your family to join you. They wish they could advertise on Facebook too. ABOUT THE AUTHOR Julie Ruvolo is an entrepreneur and a writer.

Why Advertising Won't Save Online Dating Sites

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