Finances

Friends Reunited won’t be available to message, post and keep in touch anymore. The once-popular social site, founded in 2000, was left in the dust by rivals such as MySpace and later, to a larger extent, Facebook.

Friends Reunited has a turbulent history. At one point a tech darling after quickly gaining three million subscribers in 2003, it was sold to ITV in 2005 for 125 million pounds, or about $208 million US. At its peak, 23 million users were on Friends Reunited.

But what the company didn’t intend was that employers would begin to use the service to check on potential and current employees, gauging what they said on social media as opposed to how they conducted themselves at work. It led to businesses using the site as a way to spy on employees, gathering information such as whether an employee was looking for another job, what they were saying about co-workers, or what interviewees and potential employees were saying online that could be potentially harmful.

At one stage, according to UK newspaper The Telegraph, Friends Reunited was blamed for a spike in the divorce rate on the grounds it encouraged classroom sweethearts to rekindle romances.

Instead of a positive, uplifting social experience where people felt secure to engage and share, the company found its platform being used as a way to spy on people for bad behavior. Naturally, users over time stopped posting and using the service. Membership dropped, especially when Facebook entered the picture a couple of years later. While Facebook continued to gain users, Friends Reunited found itself floundering.

The company was sold yet again in 2009 to DC Thompson for only 25 million pounds, and had only a fraction of its user base still active on the site. In 2012, the company decided to do a reboot and rebrand itself “Memory Box,” hoping to take on Facebook’s rapid growth. Memory Box did not succeed.

In 2014, DC Thompson offered the platform back to the original founder of Friends Reunited Steve Pankhurst, who thought he could restart the fledgling website. But in an announcement made on self-publishing platform Medium, Pankhurst announced its closure in January.

He wrote on Medium: "The first part of our plan was to put Friends Reunited back to make it more like the original site  --  that is, listing your schools and memories of your school days." However, this didn't really happen.

Pankhurst is now working on a new social media site called Liife, which allows you to upload photos and mark and share them with friends to identify significant “moments,” like trips, awards ceremonies or graduations. He said the new site would in no way replace Friends Reunited.

The related service Friends Reunited Dating still appears to be in operation and is not affected by the closing of the social service Friends Reunited. For more information on dating site please read our review of Friends Reunited Dating.

A year after laying off 15% of its staff, Zoosk is ending things with another 40 employees. The break up will see the San Francisco-based dating platform part ways with 1/3 of the company.

Despite $61 million in funding, Zoosk has hit hard times. The old-school web dating app first hit it big building extensions for MySpace, Facebook, Hi5, and Bebo. Two years after launch, it reached 40 million registered users and 12 million active users. Bessemer Venture Partners, ATA, Crosslink, and more offered millions in funding. Other money came from selling subscriptions for premium features, like additional ways to contact dates.

Despite its early success, Zoosk has struggled in recent years. The company has found it difficult to adapt to the changing, increasingly mobile-focused times. Apps like Tinder, Hinge and Coffee Meets Bagel now dominate the market, edging out older dating services that haven't evolved to incorporate modern technology.

Zoosk has felt the sting severely. The company was forced to abandon its plans for an initial public offering in 2014, after filing for a $100 million IPO. At the same time, its founders stepped down and former CFO Kelly Steckelberg became CEO. The management shuffle was followed by a layoff of 15% of the company in January 2015.

Circumstances have failed to improve, leading Zoosk to its latest decision to let go another 40 team members. Steckelberg gave TechCrunch this statement:

“This reduction will increase operating efficiencies and streamline responsibilities as we prepare to bring several innovative product announcements to market in 2016. Our optimism for these developments that we expect to positively impact our growth does not diminish the reality of today’s news felt by our staff. We are committed to treating the impacted colleagues with respect and support during this transition.”

Zoosk is not the only one suffering in the current climate. As funding becomes harder to find, a number of startups are having to part ways with staff to stay in business. The online dating market is particularly difficult to compete in, as there are so many options for consumers.

Britanny Carter, an analyst for the research firm IBISWorld, spoke to the Wall Street Journal about the issue. “In terms of revenue, the online-dating industry has matured," she said, "but there are too many players and not a lot are generating sufficient revenue for these sites.”

Unless Zoosk has a major overhaul in store – something that can drag the dated service back into relevance – it may be doomed. It's best hope now could be a buyout from a bigger dating company. For more about this service you can read our review of Zoosk.

Online dating provider Spark Networks has released its financial report for the third quarter of 2015, revealing a mix of highs and lows.

The company suffered a 22 percent drop in its year-on-year revenue, taking in a total of $11.7 million for the third quarter. Along with the dip in profit, Spark Networks also saw a net income loss of $822,000 for the quarter, compared to its $95,000 loss for Q2 of 2015.

But it's not all bad news. The report also highlights positive results that could mean things are looking up for next year:

• Both Jewish and Christian Networks show simultaneous subscriber growth for first time since Q1 2013
• Spark's mobile presence now exceeds over 200,000 monthly active users across five brands
• The acquisition of JSwipe expands Spark's offering for the Jewish community
• The re-launch of both JDate and ChristianMingle is on schedule for Q4 2015

CEO Michael Egan stated, "The last three months represent a true inflection point for Spark Networks and the clearest indication yet that we are on the right path towards turning this business around.” He notes four achievements in particular that he believes will be instrumental in getting Spark Networks back on track.

First, the subscriber base grew for the first time in two years. The growth was modest, but it came during what is traditionally a seasonally slow period. The momentum could carry into Q4 and Q1 2016, which are typically the strongest seasonal periods for Spark.

The second accomplishment is a record contribution margin on ChristianMingle. A new marketing strategy, and more sophisticated communications with members, has proved to be highly beneficial for the service.

Third is the launch of a handful of new mobile applications. Only a year ago, the company didn't have a single native mobile app. Today Spark Networks has nine apps across five different brands representing over 200,000 monthly active users. CrossPaths, targeted at millennial Christians seeking to meet others who share their faith, has been especially valuable.

Finally, in early October, Spark Networks closed the strategic acquistion of Smooch Labs. As the developer of popular Jewish millennial dating app JSwipe, Smooch Labs is a powerful new ally for Spark. With JSwipe added to JDate, which traditionally serves an older audience, Spark Networks now offers well-rounded romantic solutions to all singles of the Jewish faith.

Successes aside, Egan knows there is still work to be done. “We remain committed to driving revenue and EBITDA growth and continuing to execute against our product improvement roadmap,” he said. “Through both organic development and acquisitions we are proving that we can build and grow fantastic brands that serve important market niches. It is a very exciting time for Spark."

For more information on the popular Spark Networks dating sites and apps you can read our review of Christian Mingle and JDate.

IAC made major strides in the third quarter of 2015. Not only did earnings beat analyst expectations, the company also announced the $575 million acquisition of PlentyOfFish and plans to go public with an IPO.

IAC's third quarter financial results show a company that continues to dominate in its field. Highlights include:

• IAC will continue its partnership with Google for four more years. Google will provide IAC and its network partners with sponsored listings and other search-related services.
• The Match Group revenue increased 19%, or 25% excluding the effects of foreign exchange, to $274.2 million. The Match Group Adjusted EBITDA increased 37% versus Q3 2014.
• Within Search & Applications, Applications queries and revenue increased 28% and 2%, respectively, the first quarter of revenue growth since Q3 2013.
• In the Media segment, Vimeo grew paid subscribers 22% to over 650,000 with revenue increasing 27%.

Greg Blatt, Chairman of The Match Group, believes the company has plenty to look forward to. “We expect to complete our acquisition of PlentyOfFish this week,” he said in a prepared statement, “adding another of the leading global dating brands to our portfolio, at which point we will have over 59 million monthly active users and 4.7 million paying users. All in all, a solid quarter with lots of positive activity.”

Tinder is still one of the hottest topics in the dating world. The Tinder subscription business continued to perform well in Q3 2015. “We have been able to deliver optional paid features that a portion of our users highly value,” said Blatt, “while enhancing the vibrancy of the community through their introduction.” Though monetization is important for Tinder's success, the app focus primarily on growth initiatives going forward.

The other big news for The Match Group is the forthcoming IPO, which is expected to be completed during the fourth quarter of 2015. IAC will sell a 14 percent stake in Match Group, offering 33.3 million shares priced between $12 and $14 to the public. At the midpoint, Match Group will raise $433 million.

The IPO is not without its detractors. In an article for Forbes.com, Peter Cohan outlines four reasons the IPO isn't worthy of a right swipe from investors. He notes that the structure gives the public shares very little voting power, that the proceeds go to repaying the parent company's debt, that the valuation is far below what analysts expected, and that the underwriters are weak.

Multiple similar companies have pulled their IPOs in 2015, including online dating platform Zoosk. It will be interesting to see where The Match Group goes in the final quarter of 2015. For more information on IAC's flagship dating services, you can read our Match.com review and our Tinder review.

Plenty of Fish may have taken a backseat to services like Tinder in terms of cultural recognition, but 2015 has been a big year for the company nonetheless.

In March, POF released its revenue numbers for the first time. The dating app and website reached 100 million users worldwide and announced that its run rate – the revenue a company can expect to bring in if business continues as it has so far that year – for 2015 was expected to hit $100 million. That's a dollar per year per user, even though most POF users don't pay a dime for the service.

In July POF was acquired by Match Group, an IAC/InterActive subsidiary, for $575 million in cash. Match Group had purchased a number of dating services over the previous six years, including How About We and OkCupid. Add those to Tinder, which Match had funded early in its lifetime, and Match Group became a serious power player in the online dating world.

After much speculation, Match Group filed for an IPO in October of this year with a tentative offering amount of $100 million. It will operate under the ticker symbol "MTCH" on NASDAQ.

And that's not where the big news ends for Plenty of Fish in 2015. As part of Match Group's filing with the SEC, the company revealed POF's current financial status. This is only the second time the public has seen POF's revenue numbers.

POF's revenue is divided into two categories: subscription and advertising. The majority of the website's funding comes from subscriptions, which make up 75% of POF's income compared to 25% from ads. POF currently estimates 2015 revenue to be $80 million.

With a little math magic, we can find out how many paying users Plenty Of Fish has. Seventy-five percent of $80 million is $60 million per year from subscriptions. Divide that by 12 and POF pulls in $5 million per month. Then divide again by $10, the average monthly revenue per paid member, and the final number is 500,000 paid members. That's a remarkably small percentage of POF's 100 million users.

There's a reason the company relies so heavily on subscription revenue over ads. As singles increasingly favor mobile devices over computers, services like Plenty Of Fish are forced to adapt to smaller screens. Ads are more distracting and harder to read in the cramped space of a smartphone screen.

In other ways, mobile has strongly contributed to the success of POF. “Since our shift to mobile we’ve seen rapid growth both in terms of users and revenue,” says founder and CEO Markus Frind.

“Our revenue model has also evolved from one driven by advertising to one driven by paid membership,” he adds. “Now more than ever, singles are willing to pay for an enhanced user experience.”

Match Group is hoping to live happily ever after with Wall Street. The company, owner of more than 45 online dating brands including Tinder, OkCupid, and Match.com, has filed for an initial public offering of its stock.

Match Group filed for the IPO of common stock with U.S. regulators on October 16 with an offering amount of $100 million, but that figure is a placeholder that could change in the future. The company is set to operate under the ticker symbol "MTCH" on NASDAQ.

Following the IPO, IAC/InterActiveCorp., which owns Match, would retain control of more than 50% of voting rights under its ownership of Class B shares, which have 10 votes apiece. Match will contract with IAC for “administrative and other services,” but the exact amount of distance between IAC and Match Group going forward is so far unknown.

Here are some of the highlights of Match's SEC filing:

• Match makes serious money. The company had $888.3 million in revenue and $148.4 million in after-tax profit in 2014. For the first six months of 2015, revenue was $483.9 million and net earnings were $49.3 million. Match might hit $1 billion in revenue this year.
• Growth is steady, though not explosive. Wall Street wants to invest in technology companies that grow rapidly. Match Group doesn't meet that criterion, but growth between 2013 and 2014 was 10.6 percent. Between 2012 and 2013 it was 12.6 percent. The rate is nothing for the record books, but it's healthy and sustainable.
• Paying customers make up a surprisingly small percentage of total users. Match Group claims 59 million monthly active users across 38 languages and 190 countries. Of those 59 million, only 4.7 million pay to use the services. The company's income is in the hands of only 8 percent of its customers.

Although the online dating segment seems saturated, the IPO prospectus includes opportunities for future growth. According to the filing, the addressable market is currently about 511 million. That number is expected to grow to 672 million by 2019. Increased adoption of mobile and the Internet, the aging of the population and the increase in the number of singles are all positive trends for the industry.

Of course, there are risk factors too. Cybersecurity is more important than ever, and Match Group admits that it can't guarantee protection from attacks. Match also notes that one of its most important assets, Tinder, could essentially be destroyed if Facebook alters the terms and conditions for connecting with the social network. It remains to be seen if these issues will cause risk-averse Wall Street to balk.

The underwriters for the IPO include J.P. Morgan, Allen & Co. and Bank of America Merrill Lynch.

For more information on the dating services owned by IAC, you can read our reviews on Match.com, OkCupid, and Tinder.