Zoosk Is Headed Towards An IPO

Zoosk's domination of the online dating scene isn't ending any time soon. The online dating site, which first rose to popularity by making romantic links between Facebook users, is preparing to create an important connection of its own - with investors in public markets.

Zoosk was founded in 2007 by Iranian entrepreneurs Alex Mehr and Shayan Zadeh, who met as students at Tehran's Sharif University of Technology. They moved to the U.S. in 2000 and launched the company seven years later. Zoosk acquired users quickly by tying itself to Facebook and the hundreds of millions of users who already used the ubiquitous social networking site to post personal information and photos. It's since branched out to mobile, the most rapidly-growing sector of the dating market, and has raised more than $60 million from investors including ATA Ventures, Canaan Partners, Bessemer Venture Partners and Crosslink Capital.

Zoosk is now taking steps to go public in 2014. The San Francisco-based company has picked Bank of America to lead its initial public offering, along with Citigroup and Royal Bank of Canada. Oppenheimer & Co. and William Blair & Co. will serve as co-managers.

In the $2.1 billion dating services business, Zoosk has a 2.9 percent market share, trailing behind Match.com and eHarmony in the competitive industry. Zoosk currently has more than 40 million active members, a success rate that can be attributed in part to the additional features the site offers. The challenge faced by most online dating sites is that, if their service is successful, their users have no reason to continue using it. Forward-thinking companies like Zoosk are counteracting that problem by offering other social features - like sending relevant discounts to couples or making date suggestions - to keep users coming back.

The approach is working. Close to 4,000 businesses compete in the dating services market, according to IBISWorld, yet despite that heavy competition, Zoosk said in May that its first-quarter revenue topped $40 million and that visitors to the website more than doubled from the prior year.

There's no question about Zoosk's impressive track record, but there are some questions about the success of these kinds of sites' attempts to go public. Following Facebook's troubled IPO in May 2012, there was a lull in social-networking deals. But Twitter Inc.'s debut last month seems to have put some people's fears to rest, and Twitter is now up 89% from its IPO price. Whose footsteps Zoosk follows in remains to be seen.