Acquisitions

Is a company that's only 20 months old and has no revenue model really worth $5 billion? Spoiler alert: no.

IAC/InterActiveCorp recently bought back 10% of mobile dating service Tinder. Although it's easily the hottest mobile dating app on the market, it’s hard not to approach Tinder with a healthy dose of skepticism. $5 billion is, to put it bluntly, a completely insane number for such a young company.

According to the market research company IBISWorld, the entire online dating industry is worth just $2 billion. How on earth could a company that gives away its dating app for free be worth more than the entire dating industry? The answer is simple: it can't.

The number, first reported by Bloomberg and quickly picked up elsewhere, was based on the $500 million IAC had allegedly paid to buy a 10% stake in Tinder from venture capitalist Chamath Palihapitiya, but it's far from accurate. Sam Yagan, CEO of IAC’s Match Group (which includes IAC’s online dating companies) recently confirmed that a deal was made, but declined to comment further.

“I can confirm on the record that we did a transaction with Chamath, but this valuation is nowhere near the truth,” he told Forbes. Tinder CEO Sean Rad added that the Bloomberg report was “meaningfully incorrect.” Forbes found that an e-mail to Palihapitiya did not receive an immediate response, but noted that his statement on Twitter read “My Tinder sale for $500M is inaccurate. I sold my stake but value was much less. Thx @samyagan for official IAC pos’n. #wishfulthinking”

That being said, it's far too early to write Tinder off as worthless. Just because it has no revenue model to speak of to date, doesn't mean it has no value to investors. With 10 million active daily users, Tinder is fundamentally changing the way a massive number of people behave and engage with each other. That's bound to be worth something.

“Tinder’s really doing something that has been the Holy Grail for online dating: it becomes fun,” says Mark Brooks, a consultant to the Internet dating industry. Unlike traditional dating sites, surfing profiles on Tinder is fun, low risk, and not time-consuming. Users don't have to fill out tedious surveys and the swiping process practically eliminates the fear of rejection. Thanks to Tinder, mobile dating is exciting and mainstream, a major coup that the rest of the dating industry has never been able to figure out.

“IAC’s not valuing Tinder based on what it’s worth,” Brooks notes. “They’re valuing it based on what they’ll lose if they don’t own it. If Tinder can own mobile and own the younger demographic, then IAC is owning the future with Tinder. It’s an international phenomenon.”

While POF has garnered a lot of attention over the years for its free online dating service and hook-up potential, its founder wants to get back to basics and is focused on the goal – finding people matches for the long-term.

POF does have an advantage over other dating sites: namely, its user base. With 70 million registered users all over the world, it can rightly call itself the largest online dating site. Three and a half million people log on to the site every day to look for matches and communicate with others. The company also estimates that over one million relationships a year begin on its website.

What does this mean for daters? For one thing, the sheer numbers POF draws from memberships means the company can determine how people date from country to country, including their cultural preferences and overall approach to dating. They’ve found that while daters in the U.K. largely embrace online dating, the rest of Europe is a bit behind. They can focus on areas of growth and potential.

POF began in Canada, but the U.S. is by far its biggest market, followed by the United Kingdom, Canada, Brazil and Australia.

“People in the United Kingdom will wear turtlenecks in the photos they send,” POF founder Markus Frind told The Provence, commenting on the cultural differences of dating he’s witnessed through the POF user base. “Women are way more aggressive in Brazil. They initiate as much as men.”

POF was started in 2003 when Frind was working for another technology company, and created the dating site in his spare time. He ran the company out of his apartment for five years until it reached ten million in annual revenue. Today he employs about 75 people in a large office space in Vancouver, and since POF remains a free service for daters, most of the revenue generated is from advertising.

Though Frind won’t disclose how much revenue his private company makes, he has put aside $30 million for acquisitions and intends to keep growing. In September of last year, he bought speed dating company Fast Life, hoping to add value to his online dating service by getting into singles events.

And as for success stories? Frind met his own partner through work, not over an online dating site. But he has gathered some success stories resulting from POF matches, including a young married couple who met each other five years ago on the site.

With its popularity unwavering, POF is focusing its efforts on technology and growth. The goal according to Frind is still to help people find long-term relationships.

In an expansion to reinvent itself as a lifestyle media network, HowAboutWe announced the acquisition of long time dating site Nerve.com.

HowAboutWe caters to both singles and those in relationships with separate subscription-based memberships, one for meeting singles and dating and one that is more of a date-planning service for couples.

The addition of Nerve.com means HowAboutWe is acquiring Nerve Dating and a database of singles who had already been using the service. Members will be automatically rolled in to the HowAboutWe for singles service, and offered a free sixth-month membership to try it out.

Nerve.com's main attraction was not its dating site, but the edgy content of its online magazine, with articles that discuss all things sexual and offbeat. HowAboutWe will be doing a redesign and relaunch of Nerve.com, though they haven't announced what that would include or how much (if at all) the content focus will change. The strength and appeal of Nerve is the brand itself, which has been around since 1997 and was one of the first web-only magazines.

HowAboutWe is focused on becoming a media powerhouse as well as an online dating service. Its roster of online magazines also includes Swimmingly.com for couples and Famously.com for celebrity news and gossip, both of which were launched the last week of January. Also under the HowAboutWe media banner is TheDateReport, which centers around dating and the single life and will also get a fresh redesign by HowAboutWe.

Brian Moylan, a former Gawker writer who has been editing TheDateReport, is now editor-in-chief of the new HowAboutWe Media, which includes all four sites.

The founders of HowAboutWe are purposeful in their media pursuits: they recognize the competition in the online dating industry, where IAC owns the majority of branded dating sites such as Match.com, OkCupid, and a number of niche sites like BlackPeopleMeet and OurTime. But these dating sites are specifically geared towards singles looking for dates. They want HowAboutWe to be a destination for people not only to meet each other, but for singles and couples to get news, advice, and also ideas about what to do together and how to nurture their relationships.

With the new sites and new content, HowAboutWe is also hoping to cash in on new advertising revenue, instead of just relying on subscriptions.

"Every lifestyle publication is speaking, in one way or another, to people and their love lives," HowAboutWe co-founder and co-CEO Brian Schechter told Observer.com. "We think that there's actually a huge opportunity to address that consumer demand as opposed to just circling around it."

Talk about a power couple. PlentyOfFish, the world's largest online dating site, has acquired FastLife, the world's largest speed dating and singles event company. The combination of POF's massive influence in the online dating sphere with FastLife's global influence (the company currently operates in the US, Canada, Australia, New Zealand, and the UK) is a recipe that could have a major impact on the future of the online dating industry.

"The direction of online dating is undeniably headed towards a merging of the online and offline worlds, so this is a major move towards changing the way single people meet and interact," said Markus Frind, founder and CEO of PlentyOfFish. He's right. Match.com hosts Stir events. HowAboutWe is founded on the idea of taking online dating offline. And location-based mobile apps that hook singles up for insta-dates with people nearby are more popular than ever.

"PlentyOfFish has always understood the importance of live events," Frind continued. "Currently our users host over 300 events worldwide each month. Now more than ever, we understand the importance of offering singles innovative, new ways of connecting face to face."

FastLife is the perfect partner for the next evolution of POF. FastLife was created by a husband and wife team, Justin and Annabelle Parfitt, in 2002. The site offers two different dating experiences. Evolved Speed Dating events are designed for everyone. Participants just need to register in order to view and book upcoming events that match their preferences. Prestige Speed Dating events are premium events for high income graduates who want to meet other successful professionals. These events are invitation only, and all participants are screened for ID, age, background, and status.

Current FastLife events cater to a wide range of interests, including Fit & Trim, Food and Wine Lovers, University Educated, Tall Men, and Travel Lovers. FastLife holds more than 2,400 events each year that draw a crowd of more than 60,000 urban professional singles and generate annual revenue of more than $2.5 million. Now, as a united front, PlentyOfFish and FastLife plan to roll out singles events across hundreds of untapped US cities over the course of the next year.

This is the first major acquisition for PlentyOfFish, but Frind swears it's far from the last. "PlentyOfFish will continue to grow our reach within the online dating industry," he said. "We want to invest over $30 million in the next 12 months."

Watch out, IAC - Markus Frind may be coming for your crown!

For a long time, IAC (InterActiveCorp) has been the undisputed ruler of online dating. IAC's businesses include Singlesnet.com. SinglePeopleMeet.com, OurTime.com, OkCupid.com, and, last but certainly not least, Match.com. Add it all together, plus IAC's numerous successful ventures outside of the dating industry, and you've got a seriously unstoppable force.

Markus Frind, CEO of Plenty Of Fish, recently attempted to score another piece of the kingdom for himself and push IAC an inch more off its throne. True Beginnings, the Texas-based owner of True.com, entered Chapter 11 bankruptcy protection in 2012 and is attempting to sell its assets. Frind was poised to gobble the site up, but Texas Attorney General Greg Abbott has protested the sale.

Citing privacy concerns, Abbott objected in federal bankruptcy court to the sale of True.com's 43 million member database. "At a time when privacy is an issue of grave concern to so many," he said in a press release, "we are taking legal action to prevent an online dating service from selling more than 2 million Texans' personal information without their consent."

True Beginnings told the court they planned to notify users by email that their personal information would be sold, but Abbott contends that the company must obtain each customer's approval individually first. "The proper course is for True.com and its bankruptcy trustee to seek the customers' permission before selling their private information to a third party," he explained, "and that's exactly what our legal action asks the bankruptcy court to require before the case proceeds."

When signing up for True.com, users are told that their personal data - including phone numbers, passwords, financial billing info, and browsing history - cannot be transferred without their consent. However, Abbot notes, ambiguous language found in the site's privacy policy quietly adds that members' personal information held in the company's database would be treated as a transferable asset in the event the company was acquired by a third-party buyer.

Unsurprisingly, Frind is not pleased with the development. "Who in their right mind is going to buy a dating site with 43 million members if you are not allowed access to those members?" he wrote in a blog post. "This would be like buying twitter but you don't get access to twitters users unless they agree to the sale."

Under the current transfer process, True.com member data will be transferred automatically unless the customer takes direct steps to opt-out. Abbot is instead arguing that customers should opt-in and directly express approval for the transfer of their personal information. Whichever way this goes, it's bound to set a precedent for all future dating site sales.

Meetic announced on December 21st, 2012 that they had acquired Massive Media. Massive Media owns Twoo a popular social discovery service and the social network Netlog. Twoo.com was launched in April of 2011 and in under 2 years now receives 9.6 million unique visitors a month. Twoo's main competition in Europe according to information available is Badoo.

Meetic purchased Massive Media for $25 million USD (18.9 Euros) and interestingly enough is mostly owned themselves by IAC, which owns Match.com.

To find out more about this story you can read the press release.