$this->articleCE->primaryUrlById(2228891) = /ec-news/article.php/2228891/Online+Personals+Big+Profits+Intense+Competition.htm
Online Personals: Big Profits, Intense Competition - InternetNews.
RealTime IT News

Online Personals: Big Profits, Intense Competition

FEATURE: If money can't buy you love, what's the explanation for the overflowing cash registers in the online personals space -- where high-traffic destinations have found big profits in user-created content?

When success stories in the consumer-focused Internet are told, companies like eBay and Amazon.com will hog the limelight. But, for thousands of Web sites on the matchmaking bandwagon, there's no bigger gold mine on the Internet.

"We are the eBay for human beings," declared Jeff Titterton, vice president of consumer services at PlanetOut Partners, which runs online dating services for gays and lesbians.

"We've hit on something that people are willing to pay for on an ongoing basis. And, it's all user-driven. The users create the all content and the users pay for it. It's a forgotten part of the paid content sector," Titterton said in an interview.

It has become such a big business that most major newspapers, including the Boston Globe and the New York Daily News, have added online personals sections to their Web sites. And, you can see those thumbnail photographs and little blurbs of people looking for love on just about every high-traffic Web site.

A study from the Online Publishers Association (OPA) reckons the market for paid personals online exceeded $300 million in 2002, a three-fold increase over the previous year. This year, that figure is expected to jump even more, prompting moves by the bigger niche firms to expand into offline events and tour packages built around matchmaking.

Intense Competition
But, with the success comes intense competition and the proliferation of rival services has raised the stakes to the point where the online dating 'wars' are considered the most feisty, where fierce rivals look for every little advantage to differentiate themselves.

Match.com, which counted more than 766,000 subscribers for its $24.95 a month service at the end of the first quarter this year, said the business is now fully profitable. Match.com spokesperson Trish McDermott said revenues in 2002 topped out at $125.2 million, a 154 percent hike over the previous year. Profits in 2002 reached $36.1 million, up from $2.7 million the previous year, she added.

The business model is simple and straightforward, McDermott explained. Users utilize the Web site interface to create catchy profiles. That content is available for free to any visitor. However, if you want to make contact with the person listed in the profile, that's when the content goes behind the premium curtain.

In addition to the $24.95 per month fee, McDermott told internetnews.com there are other member options ($49.95 for three months; $79.95 for six months or $99.95 a year. On top of that, Match.com has added enhanced features to generate revenues.

For instance, McDermott said the company is extending the anonymity of online personals beyond simple e-mail exchanges and into the phone. "It's the next step in dating, whether you're online or offline but, people still want to maintain that anonymity," she explained. Now, Match.com members can pay extra to make a phone call to a prospective date without once exchanging phone numbers (Match.com is the backend provider for the phone service).

"For some people, anonymity is a tremendous benefit when dating online. More than 50 percent of our subscribers say that after exchanging three e-mails, they still didn't feel comfortable giving out phone numbers," McDermott said.

Like Match.com, competitors big and small continue to push the envelope, looking for the one distinguishing factor that gives them the edge in the crowded market.

Mega-portal Yahoo has launched an advertising blitz, including commercials on the Academy Awards telecast, to promote its service. That's on top of the free video and voice clips carrot it's offering to lure new subscribers.

That new feature lets users add free 30-second video and voice clips to their personal ads on the portal. It gives subscribers the option of recording a short voice greeting through the phone that accompanies their text advertisement. Those with a Web cam can record a video clip.

Like Match.com, Yahoo sells tiered subscription packages that range from $19.95 per month to $89.95 a year.

Boston.com, which is owned by the New York Times , recently launched a 'Second Chances' feature that allow unregistered users to publish short text-based notes to people with whom they had a chance encounter.

Lisa De Sisto, vice president and general manager of Boston.com, told internetnews.com the 'Second Chances' feature is used to lure new users to its subscription-based personals service. "If you had a chance encounter with someone but didn't get to connect, you can post a message on 'Second Chances' with your e-mail address. It's a free service. The idea is to get people into the service to browse through the ads," De Sisto explained.

There's an added incentive for Boston.com in that those posts generate page views, which translates into inventory for traditional forms of online advertising.

Boston.com isn't using the per-month subscription model. Instead, the company sells credits (for $24.95, users can purchase 25 credits). Those credits can then be used to buy access to reply to the personals. De Sisto said more than 65,000 members have registered for Boston.com's personals, with 10 percent of those purchasing credits.

Boston.com has also fitted an instant messaging (IM) feature into its personals, allowing users to exchange credits for a chance to send an IM greeting to users who have posted free ads.

"We're generating about 4 million page views a month. And, on those pages, we're serving targeted ads. We have advertising geared to the online dating demographic," De Sisto explained.

Boston.com's personals is powered by Spring Street Networks, a New York-based firm that's the back-end provider for many sites offering personals as a side business. Spring Street Networks builds integrated private-label services.

PlanetOut, which has also found profits in online personals at its Gay.com and PlanetOut.com sites, believes it has an edge on the competition because of the niche factor. At Gay.com, Titterton explained that the user-generated paid content is turning into a major cash cow.

The site allows members to post profiles and browse for free. Targeted only towards the gay and lesbian community, PlanetOut charges users to reply to ads, with fees ranging from $16.95 per month to $79.95 per year.

Titterton said the success of the personals space shows there is huge value in premium content online, if that content is presented in unique ways. "You cannot be a paid-only site and expect to do well. You have to give some stuff away and hook subscribers to pay for extras to attract critical mass. That's what we've done," he explained.

While PlanetOut is locked in the dogfight with all the other personals sites (the competition targets the gay and lesbian community as well), Titterton believes the "community aspect" has allowed the company to maintain its toehold in the market.

"We have an inherent advantage in that our audience is already familiar with our focus and they're comfortable with it. It allows us to expand beyond mere matchmaking. We can expand the business to include community listing and offline events. It's about giving people the methods for communicating with each other in a comfortable setting. That's why online matchmaking services are so successful," Titterton added.

On the intense competition, Titterton said there's room for everyone, noting that the market is still nascent, especially internationally. "This is the current gold mine. We've hit on something that people are willing to pay for on an ongoing basis. And the barriers to entry are really low, so it's logical that lots of sites are launching personals sections," he said.

"Any site with some traffic wants to get in and launch personals. Even sites that have no reason to have personals on their site. They have nothing to do with the community but because it's easy to plug in a bit of software, the space becomes very competitive. But, I believe that niche always wins. The niche players will always do very well," Titterton added.

Match.com's McDermott agreed, but noted that the bigger players must spend big on marketing to stay ahead of the competition.

Stigma Factor
Then, of course, there's the stigma factor. Finding a mate on the Internet is still somewhat taboo and most of the major players have tailored advertising campaigns to attack the stigma head-on. "We poke fun at the stigma in our ads," McDermott said.

Boston.com's De Sisto said the stigma factor has not hurt business. "It hasn't really been an issue for us. I think the stigma is disappearing because so many places offer online personals and speed dating services. People aren't embarrassed anymore to say 'I met my husband on the Internet'," she added.

While acknowledging the stigma is definitely a negative factor in the business, PlanetOut's Titterton said his company in a lucky spot because gays and lesbians were among the early adopters of the Internet as a matchmaking tool. "In the early 1990s, the AOL chat rooms helped to created this space. The stigma is still there but, in our community, we don't have to address that too much," he explained.

As thousands of sites look for that missing dollar among lonely Internet surfers, there is the worry that the business will inevitably fade.

Hardly, insists Titterton. "The money is in the international markets. That space is largely untapped. The next big wave is to go overseas and see what happens there," he declared.

Titterton's enthusiasm, unsurprisingly, is being echoed throughout the space. And, judging from the major dollar signs and noisy cash registers, who'll doubt him?