Finances

Just when you think Facebook couldn’t possibly get any bigger than it already is, it goes and shatters all expectations. For the 8^th quarter in a row, Facebook’s earnings beat projections.

Much of that growth is in mobile, where Facebook is growing twice as fast as it is compared to its services as a whole. Facebook currently logs 654 million daily mobile users and 1.07 billion mobile users each month. Thanks to the continued increase in smartphone usage, 62% of the social network’s ad revenue came from mobile in Q2. In total, Facebook now has 829 million daily users and 1.32 billion monthly users. Altogether, they are responsible for a spectacular 2^nd quarter for Facebook. The company beat Wall Street’s estimated earnings of $2.81 billion to end Q2 2014 with $2.91 billion in revenue.

Here’s how that stacks up against Q1 2014:

• Facebook's total user count is up 3.125% from 1.28 billion total monthly users to 1.32 billion
• Total daily user count is up 3.36% from 803 million to 829 million
• Monthly mobile user count is up 5.9% from 1.01 billion to 1.07 billion
• Daily mobile user count is up 7.4% from 609 million to 654 million

Revenue isn't the only way Facebook is exceeding expectations. Some critics have said the social network is losing its influence with Western users, but its monthly user count in the USA and Canada grew by 2 million this quarter. And for anyone who dared to suggest that Facebook wouldn't survive the transition from desktop to mobile, Facebook's 391 million mobile-only users dwarf its 240 million desktop-only users.

Internationally, Facebook is showing equally impressive numbers. Ad revenue is up everywhere, and the site hit an all-time high average revenue per user in every region around the world.

The only low point was payments revenue, which Facebook largely derives from the 30% tax on the in-app purchases from its Web games platform. Total payments revenue dropped slightly to $234 million from $237 million in Q1. On the plus side, it's still up 9% compared to Q2 2013.

On the horizon for Facebook now is the launch of Facebook Audience Network, the company’s mobile ad network that will bring in revenue by incorporating its targeted ads in other companies' apps. Another big development is Slingshot, a photo and video messaging app that Facebook hopes will be a competitor for Snapchat.

When asked for his thoughts on Facebook’s remarkable 2^nd quarter, all CEO Mark Zuckerberg had to say was “We had a good second quarter. Our community has continued to grow, and we see a lot of opportunity ahead as we connect the rest of the world.”

To find out if this social network makes a good dating tool you can read our Facebook review.

There are many online dating sites and mobile apps competing for the same market of single men and women, looking for innovative ways to position themselves differently than “just another dating site/app.” But How About We continues to make innovative moves in this industry and buck the trends, including its initial hook – taking online dating offline for better results. Now they're also offering services to couples and getting into the digital content space.

Online Personals Watch recently interviewed CEO Aaron Schildkrout about the success and challenges of How About We, the choices he’s made, and what he wants to do next with the brand.

How About We is focusing on the couples space, since Schildkrout claims it will be "twenty times bigger" than the dating space will be. The fundamental problem with dating sites is that it works to their advantage for people to stay single and looking, so the focus is on gathering more subscribers, not necessarily making a product that helps customers meet their goals of finding partners. Shildkrout maintains that meeting up in the real world works better for singles, which is why they made it their focus.

Despite still facing the occasional naysayer, the Internet and dating have proved to be a match made in heaven. With consumers using the Internet more and more each year, demand for online dating services continues its meteoric rise. In particular, the ever-increasing popularity of smartphones has made mobile applications a booming business for dating services.

IBISWorld, a global business intelligence leader specializing in Industry Market Research and Procurement and Purchasing research reports, recently put together a comprehensive guide to the online dating industry's market size and growth prospects. By all accounts, the future looks bright for the industry's biggest forces.

InterActiveCorp is the one to beat. The largest company in the industry, IAC counts Match, OkCupid, and Tinder amongst its brands. The New York City-based company is expected to grab 27% of the estimated $2.2 billion market for US dating services in 2014, according to the new IBISWorld report. Analyst Jeremy Edwards predicts IAC's US Match revenue will rise 11.5% to $605.1 million this year, with operating income up 14% to $192.8 million.

Coming solidly in second place is eHarmony, a privately held company based out of Santa Monica, CA. eHarmony proudly dominates 13.8% of the US dating service market, IBISWorld says. The company’s projected US revenue for 2014 is $310 million, up 6.9%, with operating income up 9.6% to $35.3 million.

Spot #3 goes to San Francisco-based Zoosk, with 5.1% market share. 2014 has been a big year for Zoosk so far. The company filed for an initial public offering in April and IBISWorld predicts it will generate $114.2 million in US sales, up 24.5%, and operating income of $3.5 million. That's a nice change from a loss of $100,000 in 2013.

Finally, occupying fourth place, is dating service Spark Networks, with 3.2% US market share.

Altogether, the four largest companies account for 49.1% of US dating service revenue. The industry’s other winners are mobile dating (26%), matchmakers (14%), and singles events (7%).  IBISWorld expects the US dating service industry to grow at an annual rate of 4.2% from 2014 through 2019 - at which point it predicts sales will reach a whopping $2.7 billion.

"It is estimated that niche dating networks and services catering to the baby boomer generation will see the most growth," Edwards said. "In addition, revenue for the mobile dating market is expected to nearly double in the next five years, with rising smartphone adoption and new location-based features leading the market." 

Launched in August 2011, Chinese dating app Momo was one of the first location-based mobile apps in China. Like its American counterparts, the app allows members to upload personal information and photos, then locates the positions of other users in the area. And, again like its American counterparts,  Momo is plagued with a reputation for being a service for one night stands. Though Beijing Momo Technology Co. claims the app's purpose is to assist users in making friends and broadening their social networks, its salacious reputation just won't go away.

Despite being thought of as “a magical tool to get laid,” BMT is now working with banks including Morgan Stanley and Credit Suisse Group AG for the IPO in US, which Wall Street Journal reports is likely to happen later this year. According to WSJ, Momo was recently valued at around $1.2 billion in private fundraising. An earlier fundraising 1 1/2 years ago put Momo’s market value at just $500 million. The app seems to be on the right track, whatever reputation it has.

Zoosk just filed for IPO last month, but already the hype is huge. Upon the announcement of its plans to go public, Zoosk was dubbed ‘the Netflix of dating’ by the media and investor interest shot through the roof.

The "dating services" industry was valued at $2.1 billion in annual revenue by IBISWorld in September 2013. 68.7% of that figure comes from online and mobile dating services. IBISWorld predicts that the market as a whole will grow by 5% over the course of the next four years. The biggest players in the industry are names that are familiar to everyone, whether or not they have ever used the services: Match.com, OkCupid, eHarmony.

Zoosk may be smaller, but it’s no slouch. The online dating platform has over 26 million members, including approximately 650,000 subscribers across 80 countries. Zoosk’s membership grew from 18 million in 2012 to its current numbers, while the number of paying subscribers over the same period grew from 483,000 to 650,000. The company anticipates continued revenue growth based on its unique business model that’s similar to Netflix or Pandora.

What Zoosk has in common with those two Internet giants is its complex proprietary behavioral matchmaking engine. The technology analyzes your behavior on the site – from who you click yes on to who you linger on a little longer before saying no – to get to know you better (possibly even better than you know yourself). By tracking your actions on the website and evaluating your preferences based on it, Zoosk hopes to be able to anticipate your love life's every need, in the same way that Pandora guesses what kind of music you’ll like and Netflix suggests movies it thinks you should watch.

Of course, the stakes are a little higher when you can't just press pause or hit a skip button when you're not satisfied with the choice. Still, Zoosk is thriving. At the end of 2013, it was the highest grossing dating app and one of the top 25 highest grossing iPhone apps of the year. With a 2.9% market share, according to the IBISWorld report, Zoosk is one of the biggest players in the game.

That being said, Zoosk is not profitable. The company posted net losses of $2.6 million last year and admitted that it “may not achieve or sustain profitability in the future" in its S-1 filing with the SEC. For the future, if the IPO is to be successful (and the company as a whole), Zoosk will need to increase brand awareness via public relations, social media, and advertising. Zoosk must also create an effective system for retaining users and continue to expand its presence on mobile.

For more on this dating service you can read our Zoosk review.

IAC has released its first quarter 2014 financial results. All in all, the company reports $740.2 million in revenue for Q1 2014, more or less on par with the $742.2 million in revenue of Q1 2013.

Websites revenue increased thanks to the acquisition of the “Owned & Operated” website businesses of ValueClick (which the company acquired in January of this year), the contribution of CityGrid Media, and growth at About.com. On the other hand, applications revenue decreased, primarily due to lower queries in B2B. Adjusted EBITDA decreased as well, as a result of lower revenue in B2B and higher marketing expense in B2C.

The Match Group – which includes Match.com, Chemistry, People Media, OkCupid, and other dating businesses – saw 9% growth in dating revenue (broken down into 7% growth in North America and 12% growth in International). Non-dating revenue grew 53%. Despite the higher revenue, driven mostly by increased subscribers, IAC’s profits declined due to a significant increase in marketing expenses for certain businesses.

Dating revenue for North America totaled $134.5 million in Q1 2014, up 7% from $125.6 million in Q1 2013. International dating revenue jumped 12% to $70.5 million in Q1 2014 from $63.2 million in Q1 2013. Combining both, IAC’s total dating revenue for Q1 2014 is $205 million, an increase of 9% from $188.9 million in Q1 2013.

The question now, of course, is what does the rest of 2014 have in store for IAC?

One major change that stands to make a huge impact on IAC's bottom line is the monetization of Tinder. Though IAC has declined to specify its exact ownership stake in the company, it has said that Tinder is now completely owned by IAC and Tinder executives, with CEO Sean Rad at the helm. The hugely popular mobile dating app is the hottest company in IAC's portfolio, but it doesn't yet generate any revenue. IAC has announced that 2014 will be the year that changes, though they've been vague so far about the exact way that monetization will take place.

The most obvious strategy would be to run ads on the service. In fact, it wouldn't be the first time it's happened. Fox used fake profiles to promote The Mindy Project, as did the USA Network program Suits, though they did not bring Tinder or IAC any revenue and a company spokesperson maintains that the campaigns were "strategic partnerships" rather than advertising.

Happily ad-free Tinder users should enjoy the experience while it lasts – with all the money-making potential the app packs, it’s probably only a matter of time before ads become the new norm.