Finances

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.

When you think of dating apps, likely you think of Tinder. And while Tinder continues to attract volumes of daters along with a lot of investment dollars, and is the one most people are familiar with, other app developers have been patiently waiting on the sidelines growing their businesses. Now, at least one is realizing the benefits.

Happn is just such an app, raising a $14 million Series B round through investment companies and individuals. The interest in the app is due to its explosive growth. In a very short time, the company has gained 6 million users and expanded to 25 countries. A year ago, the company had raised $8 million, and had only 200,000 users.

Happn was created in France, and uses a different technique than just GPS and swiping based on mutual interests and likes. Instead, it focuses on your real-life interactions, or – more specifically, interactions that never took place, but maybe you wish they had.

Happn works like this: if you pass someone on the subway as you’re going home from work who catches your eye, but didn’t have the courage to talk to him/ her, you can check your Happn account. If that person is on Happn, his/her profile will be added to the top of your feed. You are given an opportunity to connect again in real life, just by swiping right. If you mutually match, you can start chatting with each other.

The more you swipe through Happn’s potential matches, the further back you go in time. It is the ultimate app for romantics and star-crossed lovers, because it is offering you the ultimate second-chance on people you meet who strike your fancy, but for whatever reason, you didn’t connect that first time.

When Happn first launched Business Insider wondered if it wasn’t a bit creepy – like looking up someone you don’t know just because you caught her eye on your way home from work. Would it be a form of stalking? But Happn insisted its app was based on the idea of romantic love and serendipity – two things that only happen when two people see each other face to face. Why not give everyone a second chance at love?

It seems people agree with the notion of serendipity, and have gravitated to the app. With all the articles on “the dating apocalypse” and how online dating has become synonymous with casual hook-ups – which are decidedly NOT romantic, it is important to see that people do still crave a little mystery, a little romance. And they are still looking to dating apps like Happn for help.

MeetMe is a smaller player in the social networking space, but it has undertaken a number of initiatives to boost its customer base. Looking at the company's financial results for the second quarter of 2015, they appear to be paying off.

Highlights of Q2 include:

• Mobile revenue was $8.3 million, up 47% from the second quarter of 2014
• Mobile revenue represented 75% of total revenue, the highest in MeetMe's history
• Total revenue was $11.1 million, up 4% from the second quarter of 2014
• Cash and Cash Equivalents totaled $16.2 million at June 30, 2015
• Net income was $1.2 million compared to a net loss of $1.4 million for the second quarter of 2014

We're halfway through 2015 and IAC has good news to share. The company's profit in Q2 2015 exceeded expectations, thanks in large part to the overwhelming success of the paid version of its mobile app Tinder.

Match Group, the star of the conglomerate, has driven consistently strong results for the last few quarters, and this one has been particularly momentous. IAC announced its intent to pursue an initial public offering of less than 20% of the common stock of the Match Group. The IPO is expected to be completed during the fourth quarter of 2015.

“The IPO positions The Match Group for continued success with an independent currency, and allows us to focus our attention and capital on growing the rest of IAC’s assets,” said IAC CEO Joey Levin in a statement.

The Match Group also announced plans to purchase PlentyOfFish for $575 million on July 14, 2015. The transaction is expected to close early in the fourth quarter of 2015.

The paid version of Tinder, launched in March, has garnered good responses from users, despite concerns from many that the model would fail.

"Monetization continues to perform at or above our expectations on key metrics like renewal, conversion and resubscription rates,” said Match Group Chairman Greg Blatt. “We’ve seen no discernible negative correlation between monetization and growth."

IAC reported that the number of paid subscribers for its dating services grew 18% to 4.1 million in the second quarter ended June 30. Revenue at Match Group, which accounts for about a third of total revenue, rose 19%.

Outside of IAC's dating businesses, the company has other successes to report. Within Search & Applications, Applications queries increased 8% driven by 20% B2C growth. B2C revenue increased 18% versus prior year. In the Media segment, Vimeo grew paid subscribers 25% to nearly 630,000. In the eCommerce segment, HomeAdvisor revenue grew 26%.

On the downside, Websites revenue decreased 20% due primarily to a decline in revenue at Ask.com and certain legacy businesses. Applications revenue decreased 2% due to lower revenue in B2B. Revenue in Media was down 1% versus last year, despite the strong growth at Vimeo. Operating income for the match Group in the current year period was negatively impacted by a $4.2 million year-over-year increase in amortization of intangibles.

All in all, revenue growth clocked in at 2% for a total of $771.1 million. IAC's net income was $59.3 million, or 68 cents per share, compared with a net loss of $18 million, or 22 cents per share.

Late last year, a lawsuit was discreetly filed by Spark’s popular niche dating website JDate against dating app JSwipe. According to Forbes who broke the story, JDate claimed that JSwipe was infringing on the company’s trademark “J” by using it in the name of their app.

JDate isn’t the only Jewish online dating website that caters to the Jewish community and uses the letter “J” in its offerings. There is also JCrush, JWed, JPeopleMeet, Jewish Café, and Jewcier to name a few. In fact, it seems difficult to name a niche dating app catering to the Jewish community without using the letter J. But there is more to the story, which potentially puts all online dating sites and apps in danger of patent infringement.

In the lawsuit, JDate also claims it owns the patent on software that “confidentially determines matches and notifies users of mutual matches in feelings and interests.” JSwipe is similar in its process to Tinder, which also notifies users when matches swipe right on their picture. This is in violation of JDate’s patent.

Why then has JDate not sued other websites or dating apps, since this is such a broad definition of matching that almost every dating app and website uses? Notifying users of potential matches is the bread and butter of online dating. Why not go after an app like Tinder?

The key might lie in the competition JSwipe presents, especially if it is gaining market share in the niche online dating space. According to the Forbes writer who broke the story, JSwipe’s founder David Yarus confidentially confessed the lawsuit to him, though he is forbidden from discussing details. Instead of accepting JDate’s acquisition offer (which he considered too low), he decided to fight the lawsuit rather than sell. (For all you fans of Silicon Valley on HBO, this sounds vaguely similar to Pied Piper’s plight as an up-and-comer in the tech world.)

But JDate might have a case against JSwipe. According to Forbe’s research into intellectual property law, the language used in JDate’s patent was registered in 1999, and it is broad – broad enough (as mentioned earlier) to cover most dating websites and apps on the market today – so they could essentially claim IP infringement over any other company in the space. According to analysts, this might be a move by JDate to acquire JSwipe for a steal. Chances are if they tried to sue Match or Tinder, those companies' lawyers would be able to fight and win. JSwipe is too small a player.

Using the letter “J” in a dating app or website is apparently less clear-cut in legal terms. JDate would have to find evidence that users confuse Jswipe with JDate, which means asking users to testify that they thought Jswipe was part of JDate, or somehow affiliated, which would be trickier and more time-consuming.

JSwipe is fighting back. They have set up a crowdfunding website and asked for Jewish lawyers to take them on pro bono. 

For more on the Spark Networks dating site, you can read our review of JDate.