Already a Bloomberg.com user?
Sign in with the same account.
Cisco Systems Inc
Online dating can be a good way to find a special someone for Valentine’s Day. But as a business, the romance is wearing thin. The industry has grown at a measly 1 percent annually since 2006, according to research firm IbisWorld. That’s in part because sites such as EHarmony and Match.com face a quandary: Every time their product is successful, they lose two customers.
Shayan Zadeh and Alex Mehr, both 33-year-old Internet entrepreneurs from Iran, think they have a solution. They’re the co-founders and co-chief executive officers of Zoosk, a four-year-old dating site in San Francisco. It’s successful, with about 15 million active users each month, but lately the duo has been thinking of ways to spur growth by becoming more like LinkedIn (LNKD), a hub for job seekers that’s also a destination for people not actively looking for a new gig. Dating sites match couples and then say, “We’re done with you, now move on, there’s nothing here for you,” says Zadeh, speaking from Zoosk’s downtown headquarters in a former Yahoo! (YHOO) office. “We feel that we can change that paradigm and provide more services along the way and throughout your life.”
Zoosk works similarly to EHarmony and Match.com: Users can search through listings of other singles for free but pay as much as $30 a month for additional services such as sending and receiving messages or seeing who has viewed their profile. One big difference is that Zoosk piggybacks off Facebook’s audience of 845 million users rather than building its own, as competitors have done. Facebook users can link their social-networking profiles to Zoosk, effortlessly seeding a dating profile with biographical details and interests from their Facebook page.
Starting this month, Zoosk will begin offering features to keep happy couples engaged with the site. These include anniversary gift ideas, digital scrapbooks, restaurant discounts, and relationship advice from experts. If romantic partners each feature pictures of a trip to India on their profiles, for instance, they might get a coupon for a local Indian restaurant. If they’ve told Zoosk they met in August, they might get an offer for discounted play tickets that month. Zadeh and Mehr are also considering ideas like selling physical scrapbooks that feature photos and messages a couple has posted on Zoosk and a matchmaking service for people who want to set up their friends.
Most of the extra features will be free to any Zoosk couples who keep their profiles active. “It’s really smart,” says Laurie Davis, founder of EFlirt Expert, a consultancy that helps singles navigate the online dating world. “It’s hard enough in the dating industry to acquire a customer, and then they leave your site so soon. There’s got to be more opportunity.”
Allison DeLeo, a 28-year-old public relations executive in San Francisco, closed her EHarmony account in 2009 shortly after using it to find the man who later became her husband. “We’re done with EHarmony,” she and her then-boyfriend decided shortly after their first meeting. She says she’d be tempted to maintain a profile on a dating site “if they gave us deals and suggested opportunities to find the perfect date.”
Zadeh and Mehr are betting on it, although they readily admit they don’t know which of the new features will appeal to people. The pair, who met as students at Tehran’s Sharif University of Technology and moved to the U.S. in 2000 to pursue their graduate studies, have some time to experiment. Zoosk became profitable in the fourth quarter and revenue surpassed $90 million last year, according to Zadeh. That’s less than one-fifth the size of Match.com, which made $518 million in revenue last year, and about one-third of EHarmony’s $265 million, but Zoosk is growing much faster. It doubled revenue in 2011, while Match.com’s grew by 16 percent, excluding acquisitions. Zoosk has raised $40 million from investors that include Canaan Partners and Bessemer Venture Partners.
Other dating sites tend to view happy customers mainly as marketing tools. EHarmony and Match both operate websites encouraging successful couples to broadcast their stories. “We’ve always thought of them mostly as evangelists,” says Grant Langston, senior director of social media at EHarmony in Santa Monica, Calif. By early March, EHarmony plans to introduce a Facebook application called The Story of Us that will allow couples to merge their Timelines, a feature of the social-networking site through which members display their photos, status updates, and other information in reverse chronological order. Through EHarmony’s application, a married couple will be able to enter the date of their first kiss and find their joint site automatically populated with relevant photos from that time. Langston says that EHarmony has further plans to keep couples evangelizing, including special events and merchandise.
Dallas-based Match.com, owned by Barry Diller’s IAC/InterActiveCorp (IACI), is less concerned about monetizing couples than it is in getting them back on the site when their relationships hit the skids. “Caring about getting your customers to rejoin when they are single again is a good thing,” says Matthew Traub, a Match.com spokesman. “We’ve found that the best way to get them to return is to provide a great experience while they’re with us the first time around, so that’s where we focus our efforts.” He adds that half of Match.com’s subscribers come back at some point.
Zadeh and Mehr say they’re not worried about the incumbents. They have 100-plus employees jamming away at new features and last year lured an executive from Cisco Systems (CSCO) to be finance chief. They say their underdog status spurs them to keep innovating. “Human beings are naturally lazy,” says Zadeh. “If there isn’t pressure on you to do better, you’ll be happy with the status quo.”
The bottom line: With the online dating industry expanding at 1 percent annually, Zoosk expects to grow by appealing to couples as well as singles.