Online Dating Insider

TGIF Edition of Online Dating Insider For March 12, 2010

dave@digicraft.com — Fri, 12 Mar 2010 17:38:44 +0000

Someone just turned me on to the Lady Gaga Telephone video featuring Beyonce. A certain dating site makes an appearance at 4:27. Warning, this is one weird and sexy video.

Great post from Tony Karrer, the initial acting CTO for eHarmony.

Match continues to say that they have 15 million profiles. I wish they would refer to the number of active profiles, which is a much more authentic representation of the size of the database. Or better yet, read the Flash cookie on my hard drive or IP address lookup and say that there are NNN,000 active members in my area. Remember when the number was 20 million a while back? I don’t know offhand how many profiles Meetic and People Media and Singlesnet bring to the table, or even if those are counted in the 15 million.

The Outlook Social Connector for MySpace looks interesting. MySpace for Outlook enables you to view activity updates for friends and colleagues in the People Pane, synchronize your MySpace contact list to your Outlook contacts, and get one-click access to profiles.

Even if the casual online dater belongs to one paid and one free dating sites, keeping track of emails, flirts and canned search results takes a lot of time. Don’t forget who’s viewed/bookmarked you, which I consider incredibly important to keep tabs on. Where is the dating management system for Outlook?

Dating Ad Network interviewed Sam Yagan, co-founder of OKCupid.

We have about 5 million unique visitors to our website every month.

…we analyze all of the interactions that are happening on our site. We aggregate the data, we do some statistical analysis to try to find trends and we publish those trends back out on our blog.

More please!

Steve Klebe of Vindicia on What will it take to make mobile payments mainstream in the US? Redg Snodgrass, who was at Skout, chimes in ad well. Redg is now Director of Digital Distribution, Alcatel-Lucent. He showed me some of the very cool monetization and tracking services aggregation he’s working on, very interesting stuff and potentially a game-changer in the social and mobile application space.

Shufflepeople stats.

According to PeopleMedia, there are a lot of single black people out there (6 out of 10 blacks are single). No

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The Marriage Ref

dave@digicraft.com — Fri, 12 Mar 2010 15:21:09 +0000

Did you watch the Marriage Ref last night? Jerry Seinfeld’s latest show is absolutely hilarious. Larry David, Madonna and Ricky Gervais (The Office) were on the panel.

Each week on the show, celebrity guests dole out advice to husbands and wives who find themselves in stressful yet often humorous (to outsiders, anyway) conflicts with their spouses. On Thursday’s show, one husband had a problem with his wife keeping her dead previous husband’s prosthetic leg in their closet.

Madonna just held her own and was on the defensive most of the time, it was David and Gervais who stole the show with their amusing anecdotes, quips and general tomfoolery.

If you are in a dysfunctional relationship, tell your story and you might get on the show.

When Ricky Gervais says “This is the weirdest show I’ve ever been on,” you know you have to tune in. The Marriage Ref is on Thursdays at 10/9 central.

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Plan, Do, and Deliver Less

dave@digicraft.com — Wed, 10 Mar 2010 20:07:38 +0000

As a consultant I often work with entrepreneurs working on their first startup. Sometimes I am asked to review business plans and financial spreadsheets. Some business plans are 32 pages long and cover every imaginable circumstance, down to the smallest detail.

I also see my fair share of seven-screen Powerpoint presentations. Guess what, the seven-page version can get funded as often as the 32-pager. Length and level of detail are not what gets you funded. A scalable idea with a great management team is often what investors are looking for. More is not always better.

Financial projections are often all over the place. The one thing that is common to most is that the revenue projections are so far out of alignment with reality as to be amusing.

Throwing caution to the wind, and old tried-and-true business adages to the wind, Rework, the new book from 37Signals, is a great read for anyone starting or running business, dating or otherwise.

Unless you’re a fortune- teller, long- term business planning is a fantasy. There are just too many factors that are out of your hands: market conditions, competitors, customers, the economy, etc. Writing a plan makes you feel in control of things you can’t actually control.

Why don’t we just call plans what they really are: guesses. Start referring to your business plans as business guesses, your financial plans as financial guesses, and your strategic plans as strategic guesses. Now you can stop worrying about them as much. They just aren’t worth the stress.

Great food for thought, as usual. As with all books about business, take what you want and leave the rest. Check out these workplace videos and testimonials and then go buy the book Rework
.

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Online Dating Industry News March 10, 2010

dave@digicraft.com — Wed, 10 Mar 2010 19:07:09 +0000

The HowAboutWe.Com Date Contest: Here’s the deal. Propose your best NYC date idea as a post on our Facebook Fan Page. The people (one guy, one gal) whose dates gain the most “Likes” win! And HowAboutWe.Com will pay for the winners to go on their dates for up to $150! (See details below about how to enter.) If you want ideas for the contest or want to hear more about the story behind the site, check out our newly released Blog.

Zoosk has a new Director of marketing communications, welcome to Kate Brooks.

Zoosk has 50 million members in just over 2 years with 100,000 new singles joining the community daily. Zoosk is clearly comparing themselves with the top five paid dating sites. Ballsy comparison, but one look at Zoosk and you’ll see that it’s basically morphed into a dating site, with some useful features like paying to show up more prominently in the search results.

Zoosk is spending an ungodly amount of money on advertising and their affiliate program seems to be liked by the big affiliates. I can’t visit five web pages or Youtube videos without seeing a Zoosk ad. Their numbers are going through the roof.

Zoosk’s primary competition wrote in to say that the AreYouInterested mobile application passed 100,000 downloads.

While updating my Yahoo IM avatar I ran across Yahoo Avatar Town. I liked the female welcome avatar, but I was unable to flirt with her.

I wish Online Personals Watch would stop promoting adultery by writing about it so often. That kind of behavior does not reflect well on their brand or the online dating industry as a whole.

I’ve been looking at Flirtomatic, the popular London-based mobile social network Similar to Zoosk Boost and various ways dating sites get people to pay to show up at the top of search results, Flirtomatic launches Flirtwords — ‘AdSense’ for users. What a great idea.

Flirtomatic launches an iPhone application.
Mark Curtis of Flirtomatic shows us around their office.
Pondigo is a dating site for single alumni from our nation’s top colleges, universities, and graduate programs. Ring-knockers rejoice, the service verifies that all of its members are graduates of a short list of top academic programs ranging from Harvard University to Stanford Business School, Amherst College to the University of Virginia Law School.
Seduce people on Chatroulette and French Connection will send you a voucher to spend on their clothes.

Double Your Success With Online Dating in One Easy Step

The new GirlAskHimOut dating site is pretty self-explanatory.
RentaFriend can help you find a local Friend-For-Rent fast and easily. Whether you are looking to hire a friendly companion to attend a social event or party with you, someone to introduce you to new people, or someone to go to movie or a restaurant with, RentAFriend.com can help. Hire a Friend to show you around an unfamiliar town, teach you a new skill or hobby, or just someone for companionship.
Breaking Up? Call Death Bear.

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Speed Dating Goes Mobile

dave@digicraft.com — Wed, 10 Mar 2010 18:25:29 +0000

SpeedDate released a new version of it’s iPhone app that allows users to quickly meet and connect with singles using their smartphones.

Speeddate claims that the application is a giant leap forward in the online dating industry as it’s the first to deliver instant notifications once email messages have been read and allows unlimited browsing of millions of photos and profiles anywhere, anytime.

I get the same features on several dating apps. Not sure about the validity of this claim.

SpeedDate Mobile is fully integrated with SpeedDate.com, giving singles the ability to manage contacts and update their profile from a smartphone.

Download SpeedDate Mobile at http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewSoftware?id=303604914&mt=8&s=143441.

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Shareholder Battle Over Spark Networks Escalates

dave@digicraft.com — Wed, 10 Mar 2010 02:38:43 +0000

The following letter was sent to the board of Spark Networks Inc. (NYSE Amex:LOV) March 8, 2010 in opposition to Great Hill Partners’ bid to acquire the company.

Dear Board Members,

Osmium Partners beneficially owns 6.1% of Spark Networks common stock. We are outraged and deeply disappointed to see that Great Hill Partners (GHP) offered a 5% premium to market to acquire the 56% of Spark Networks that it does not already own, for a paltry 5.2 multiple of enterprise value to heavily depressed adjusted EBITDA. When GHP invested 5 years ago, the valuation equated to $6.95 a share or 11.2x current EBITDA, and after growing EBITDA significantly over that time frame GHP now expects to buy out fellow investors at a multiple of 5.2 times adjusted EBITDA. Recent results are encouraging with Jewish Networks’ subscribers growing 10% over the last two quarters. We believe in a fair sale process that included Match.com, eHarmony, and others potential bidders that the business could sell in the $6-$7 range today.

Spark Networks’ management has in JDate what they term an “iconic” business with a “dominant brand and very high margins” which translates into approximately 92% contribution margins. However, these attractive economics are obscured by management’s investments in the Other Affinity segment, which only has 33% contribution margins. Furthermore, Spark Networks is one of the least efficient operations in the industry, generating only $224,000 per employee versus a peer range of $650,000-$1,000,000. All of the decline in total subscribers over the last three years can be attributed to a management ordered intentional run-off of the General Markets segment. Other factors that have hurt the company’s ability to grow include a 14% price hike on JDate in April 2008, a 50% cut in JDate’s marketing budget, and a large investment in subscale brands with deteriorating economics. Despite all these factors Spark still generates 23% adjusted EBITDA margins.

In our opinion, Great Hill Partners is focusing undue attention on overstated negative factors while ignoring the improvement in subscriber growth in an attempt to acquire our stock at a valuation of less than half of what we think an industry buyer would pay. The current valuation reflects only 4.8x an average of the last four years free cash flow.

We believe management considers JDate an “iconic” business with a “dominant brand” due to the following JDate subscriber attributes (from June 2009 investor presentation):

80% come to the site organically

1/3 of members earn over $100K, 2/3 make over $55K

45% have graduate degrees

94% have college degrees

55% women 45% men

90-93% contribution margins (revenue less marketing)

In summary, Spark is an extraordinary business with extremely high returns on capital, a dominant brand in JDate, a recurring revenue subscription model, and strong user demographics.

Let us review recent history:

In December 2004 and June 2005 GHP invested $47 million for a 33% stake in Spark Networks at a $143 million weighted average whole company enterprise valuation. On current numbers GHP entry investment was made at 11.2x EV/EBITDA.
Between 2006 and 2008, Spark used almost $45 million to repurchase shares at a weighted average stock price of $4.20, equating to a 7.4x EV/EBITDA multiple based on 2009 results.
In January 4, 2008 NY Times reporter Andrew Ross Sorkin wrote an article claiming that eHarmony, Yahoo, and Match.com were rumored to be interested in paying up to $185mn to acquire Spark Networks or $9.05 a share which represents a 16.7 EV/EBITDA based on 2009 results.
In June 2008, the current CEO bought 70,500 shares at $4.15 a share ($84.5mn enterprise valuation) or 7.4x EV/EBITDA based on 2009 results.

Finally, GHP now expects to buy the 54% they do not own for a meager enterprise valuation of $55 million or 5.2 EV/EBITDA based on 2009 results.

Industry margins and valuation multiples have remained fairly steady over the last several years. Private transactions have occurred at 9.1x EBITDA, which would equate to $5.43 a share, and public market comparables trade at 11.3x EBITDA, which would imply $6.73 a share. We think both implied valuations are understated due to the current inefficiencies in the business. Please see the valuation exhibits below.

In our opinion the company has not done enough to increase its exposure as a public company, such as seek Wall Street analyst coverage, attend conferences, road shows, or do anything proactive to court prospective investors. These actions have been costly; in fact, since GHP has been an investor with a board seat, the value of the company has dropped from $147mn to $62mn.

Why might a strategic buyer pay more than a financial buyer such as GHP?

From a customer acquisition standpoint the larger the marketing budget the lower the per customer acquisition cost. (Spark Networks’ two largest competitors have 6-9 times the revenue.)
Match.com’s ownership of People Media and Spark’s affinity brands are typically #1 and #2 in each category they compete in. We believe combining these businesses would be extremely accretive.
Subscription fees are typically based on regional subscriber concentration; the bigger the network typically the higher the monthly subscription fees. Competitors have significant membership bases to cross sell and significantly grow the various brands while increasing ARPU.

From September to December 2009 we had several conversations with the management of Spark Networks, in which we conveyed our belief that the company was significantly undervalued and that JDate could be readily sold for $6-7 on a standalone basis. Management agreed that Spark Networks’ valuation at the time was “ridiculous,” but said the company was uncomfortable undertaking a formal investor relations program given the drop in subscribers over the years even if the stock was highly undervalued at around 4x cash flow. Nevertheless, management acknowledged that JDate’s value inside of Spark Networks was significantly higher, but they considered taking action to realize this value “uninteresting” and indicated that they were playing for something significantly greater over time. We were frustrated, but as patient long-term oriented investors we agreed that there was significant upside which would be realized over time.

Spark investors have been waiting years to reach this inflection point and in our opinion Great Hill Partners is attempting to acquire our asset without proper compensation including a reasonable change of control premium. How many “iconic” businesses with 92% contribution margins sell for approximately 5x depressed EBITDA or 2x JDate contribution margin? Given ample evidence, we believe Spark Networks is inexpensively valued in the $6-7 dollar range. Therefore, we consider Great Hill Partners’ offer outrageous and grossly inadequate, and intend to aggressively defend our rights as shareholders.

Sincerely,

John H. Lewis
Managing Partner
Osmium Partners

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Seeking Couple Who Have Tested Dating Sites Matching Systems

dave@digicraft.com — Tue, 09 Mar 2010 15:52:07 +0000

Katy says: I’m a Columbia News Service reporter interested in speaking with couples who have met offline, who have later joined dating sites to see if they would be matched up or to test the site’s claims. I’m also interested in speaking with people who won’t join established dating sites like eHarmony and Match.com, but will use Facebook and other social media to find dates. Please contact me at kbo2104@columbia.edu.

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The Disastrous Effects of Online Dating

dave@digicraft.com — Tue, 09 Mar 2010 15:45:15 +0000

The Disastrous Effects of Online Dating provides new rules for 21st Century dating, what you can do when the rules are broken, and ways to get through the tough times. Learn what men and women think of the new rules, read typical online dating profiles of men and women, and listen to first-hand experiences with online dating. Finally, we hit the pause button for a moment to consider ways we can instill more dignified dating and make the modern views of monogamy and commitment work for us.

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eHarmony is Taking Social Media Risks

dave@digicraft.com — Mon, 08 Mar 2010 23:16:58 +0000

Here’s a Facebook update from eHarmony. They get a lot of people answering their questions, regardless of the topic. I like how the first person bashes them, gets called on it, and then the stories begin to flow. That’s how this stuff works. Everyone has an opinion and you can’t censor them because that often leads to a PR nightmare. Ignore the haters and focus on the positive and try something new tomorrow. Nobody really knows what works and what doesn’t, experimentation is key.

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Jon Stewart on Chatroulette

dave@digicraft.com — Fri, 05 Mar 2010 22:17:36 +0000

The Daily Show With Jon Stewart

Mon – Thurs 11p / 10c

Tech-Talch – Chatroulette

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Health Care Reform

Perhaps not the last post I do on the latest Internet phenomenon, but easily the best. Amazing the Stewart got so many top broadcasters to play along.

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