Finances

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.”

Spark Networks, Inc., the company behind many special-interest online personal sites including JDate.com, BlackSingles.com, and ChristianMingle.com, has reported financial results for the fourth quarter and full year ending on December 31, 2013.

"2013 marked our third consecutive year of growth as we continued to execute our long-term strategic plan," said Greg Liberman, Spark Networks' Chairman and Chief Executive Officer. "And, unlike the previous two years, in addition to delivering 12% revenue growth, we also demonstrated a meaningful 8% improvement in contribution for the year, punctuated by a 16% increase in Q4 contribution."

Highlights of 2013 for Spark Networks include:

• Total revenue grew Y/Y for 12^th consecutive quarter
• Total contribution grew 16% Y/Y
• Christian Networks revenue grew Y/Y for 13^th consecutive quarter
• Christian Networks ARPU grew Q/Q for first time since Q1 2013

Revenue in the fourth quarter of 2013 was $17.2 million, an increase of 6% compared to the $16.3 million earned the year before. Full year 2013 revenue was $69.4 million, a 12% increase compared to 2012. The Christian Networks segment was primarily responsible for that growth.

"Our dual engines – the Christian and Jewish Networks segments, anchored by ChristianMingle and JDate – once again drove our performance,” said Liberman. “In 2013, Christian Networks grew 27%, generated more than $40 million in revenue and constituted 58% of the company's revenue base. While impressive in a vacuum, that is even more notable given that Christian Networks generated less than $6 million and comprised just 14% of our revenue when we relaunched the business three years ago.”

Spark Networks clearly has another iconic brand on its hands with ChristianMingle, but it hasn’t all been good news for the company. Wall Street isn’t loving Spark nearly as much as consumers are.

Earlier this month, Spark dropped 19% to $4.66 – earning it the dubious distinction of being Wall Street's fifth-biggest percentage drop - after the company said 2014 could be a tough year for some of its online dating website. Revenue is up, losses are down, but Liberman found that many online dating newbies let their paid subscriptions lapse in the third and fourth quarters.

In the face of stiff competition from IAC/Interactive's Match.com and OkCupid, Spark Networks plans to switch up its strategy in 2014 by reining in advertising and marketing spending. "We're pivoting a little bit here and focusing on profitability,'' said Liberman. Hopefully the new strategy means a little less heartbreak for Spark Networks investors.

File this one under “Not a surprise.” IAC/InterActiveCorp – owner of Match, OkCupid, Tinder, and more – has released its fourth quarter 2013 financial results, and things are looking good almost all the way across the bar.

IAC’s performance was strong in Q4 2013. Match closed up the year well with 12% revenue growth and 21% OIBA (Operating Income Before Amortization) growth in the fourth quarter. Total revenue for Q4 2013 was $203.9M, up from $182.6M in Q4 2012. For the year, Match grew revenue 10.5% and OIBA 16%, and the company predicts an even better year of growth in 2014.

After pulling out of European markets to focus on the United States in 2009, Match has managed to successfully grow in the US as well as across the globe. The company doesn’t hesitate to call itself “the unquestioned global leader in dating,” with 30 million active users and 3.4 million paying subscribers in 2013.

Core, Meetic and Developing revenues grew 4%, 8% and 69%, respectively, to $115.7 million, $58.9 million and $29.4 million. That growth was driven by an increase in subscribers and as well as the contribution of mobile app Twoo, which was not in the prior year period. On the whole, profits increased due to higher revenue and lower customer acquisition costs as a percentage of revenue.

The most interesting source of IAC’s potential growth is Tinder, the rapidly growing social dating app primarily owned by IAC. Tinder clocked in at 100M daily profile views in August 2013, and is expected to hit 1B daily profile views in April. That’s some serious swiping. Although Tinder's implied valuation today is low, it could prove to be worth more than IAC's current market cap of $6.4B.

Even for IAC’s traditional dating sites, mobile has been big. 50% of all communication for Match.com US is sent from mobile devices. At OkCupid, the number rises to over 60%. Those numbers were single digits as recently as 2010, and IAC says it has just barely scratched the surface where optimization for geo-specific features and mobile markets are concerned.

2014 promises to be full of mobile product enhancements across the board, so IAC expects to see even greater engagement and customer acquisition resulting from smartphones. These are the kind of changes that allow IAC’s portfolio to continuously thrive, despite the changing world around it. The future looks predictably bright for the company.

Match.com's Singles in America study, now in its fourth year, examines the attitudes and behaviors of over 5,300 American singles from all walks of life in order to get a glimpse into how love and relationships are viewed today.

Dating is many things, but cheap often isn't one of them. In fact, according to Match.com's 4th Annual Singles in America study, singles spend $82 billion on their dating lives. Spoiler alert: that's a lot of billions. To find out exactly where all of them are going, Match asked singles to break down their spending habits per month.

Traditional dating (think bars, sports, religious activities, entry fees, drinks, tickets, and food) looked something like this:

• Min: $0
• Max: $3,044
• Mean: $55.84

Modern dating (which includes online dating, matchmakers, speed dating, dating apps, and dating coaches) looks more like this:

• Min: $0
• Max: $1,250
• Mean: $5.69

So not only are online and mobile services making dating more convenient, they're also making it easier on our wallets. Score!

The total dating cost, when you add traditional and modern methods together, comes out to $61.53 per single per month. That means $738.36 a year per single, and when you multiply that by 111 million singles (a number that comes from the 2013 U.S. Census CPS data), you get the $82 billion figure. That's a hefty chunk of cash.

Wondering what we're spending it on? The top three date expenses for men are personal entertainment (like movie or concert tickets), dining or going out, and personal electronics. The top three date expenses for women are new outfits, dining or going out, and personal electronics. So even though online and mobile dating may be cheaper in the long run, the initial cost of the device is going to set you back a bit.

And here's a fun fact: Match.com has an especially interesting history where money matters are concerned. When the economy crashed in 2008, Match.com had its best quarter to date. "To have your best quarter in the worst economic times I think is an astounding realization," said Whitney Casey, a Match.com relationship expert. "Sometimes the first things to go are gym memberships because people have lost their jobs. But it seems the last thing to go from their budget is love."

Secretly we're all romantics at heart, it seems.

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.

Four of the biggest names in the dating industry have released their 2013 third quarter financial info. And it's probably a surprise to no one actively involved in online dating that IAC, Meetic, Spark Networks, and MeetMe all saw growth.

IAC

Revenue for Q3 2013 was $756.9 million, a growth of 6% from Q3 2012, the majority of which came from Search & Applications. Websites revenue increased primarily due to the contribution from About.com (acquired September 24, 2012) and CityGrid Media (moved from Local to Search & Applications in July 2013).

IAC also saw growth in Match revenue. Core, Meetic, and Developing revenues grew 7%, 11% and 58% to $118.8 million, $56.3 million and $26.0 million, respectively, thanks to increased subscribers and the contribution of the introduction service Twoo. As of September 30, 2013, IAC had $768.0 million in cash and cash equivalents and marketable securities as well as $580.0 million in long-term debt.

Meetic

At the end of Q3, Meetic, the European leader in online dating, had increased revenue over the first nine months of 2013 by 2.7% to €126.1 million. Meetic's subscribers for the same period of 2013 increased by 72,998 or 9.5% year over year to 840,801 as of September 30 , 2013. Meetic owes the majority of its growth to its online offerings, but mobile is playing an increasingly important role in the company's success.

Spark Networks

Total revenue for Spark Networks grew for the 11th consecutive quarter in Q3 2013. Divided, Christian Networks revenue grew for the 12th consecutive quarter and Jewish Networks revenue grew for the 2nd consecutive quarter. Q3 2013 revenue totaled $17.4 million, up from $15.9 million in Q3 2012. Most importantly for Spark Networks, revenue growth outpaced the growth of marketing expense, meaning company-wide contribution hit its highest level since the first half of 2012.

MeetMe

MeetMe's 10.1 million in quarterly revenue for Q3 2013 was primarily driven by its mobile segment. Mobile revenue reached another quarterly record of 2.9 million, up 65% year-over-year and 12% sequentially from the second quarter of 2013. The MeetMe team is now focused on driving engagement and bringing new audiences to the MeetMe application, with a significant update planned for the first quarter of 2014.

David Clark, Chief Financial Officer of MeetMe, added, "Third quarter results build on the improvement in top and bottom line financial performance achieved in the second quarter. Together with the launch of our new apps, we are encouraged by the start of what is traditionally our seasonally strongest quarter.