Finances

This story was originally from December 28, 2008 and has been in my draft folder ever since. I thought it was about time I should finish it up.

As we know FriendFinder Networks Inc. (formerly Penthouse Magazine) filed to go public in late December, 2008 and intends to list under the symbol FFN, on the New York Stock Exchange. (see Story). In order to do this they released some financial and subscriber numbers for investors. Lets review the reason for the IPO first. Penthouse bought FriendFinder Networks from Various in December 2007 for $500 million (see Story). Since then Penthouse decided to change their name to FriendFinder Networks Inc. for a number of reasons including to help market themselves as a Social Network to would be investors. The main reason for the $460 million IPO is FriendFinder:

We wrote recently about Match.com selling their European operations to Meetic (see Story). For the sale we knew that Match.com will receive 27 percent share of Meetic plus a 5 million euro note. What we didn't know is, according to Ross Williams, CEO of WhiteLabelDating:

There was a clause in the announcement that didn't make many of the headlines, but I think will tell you the direction IAC is going in: Match has the option to buy Meetic in its entirety in about three years.

This makes things interesting. Before I knew about this piece of information, I had thought Match.com had decided to maybe concentrate on the North American market like everyone else. If Match.com has the option to buy Meetic then this makes more sense in the long run for the two companies. I could never see why Match had decided to get out of Europe since revenue wise they were doing well and, they have numerous other partnerships in places like South America and Asia (therefore they are not just concentrating on North America). If the sale does go through then, Meetic's CEO and founder, Marc Simoncini, will still be the main shareholder with over 20% and 36% of the voting rights.

Visit Mad.co.uk for the full article called Love is in the air.

I am surprised at the Economist. They posted this article on Thursday about how Online-dating websites prosper in the recession. While this may have been true 5 months ago, it is not the case anymore. They should of really done more fact checking. Take a look at a few traffic monitoring sites like Compete.com and they show most dating sites in February actually stayed flat or lost 5 percent or more of their visitors, when compared to January. February is suppose to be a dating sites most busy month. Granted traffic monitoring sites are not 100 percent accurate but they do give you a rough idea when you take several of them in consideration.

The Economist should also realize that traffic alone does not determine a website success. Revenue and Net Income ultimately determines if any business will survive. Not once is this information mentioned. They talk about OkCupid and how their registered active users is up but no where do they mention how online advertising has dried up in the last few months, OkCupid's primary source of revenue. eHarmony is also mentioned but, traffic patterns do not support this. Plus, there is a huge goof in the article:

eHarmony, a wholesome marriage-oriented site with more than 20m paying subscribers.

eHarmony has had 20 million people register on the site since they launched in 2000, this is both free and paid members. In 2008 we had estimated eHarmony only has about 90,000 paid members at anyone time (see this page for more details).

Another thing the Economist should of considered is, none of the major dating sites have had a press release lately touting the continued growth during the recession. This is another sign things may not be as good as back in November-December 2008, when we saw press releases from dating sites like Match.com, eHarmony and Perfectmatch. This was when they talked about the recession and the increased growth they received.

For more information on the dating sites mentioned in this post, read our eHarmony review and our OkCupid review.

Spark Networks had a disappointing quarter 4 in 2008. From the press release:

2008 was a mixed year for us. We achieved moderate annual revenue increases in Jewish Networks and Other Affinity Networks, improved Contribution margins to 74%, cut Operating Expenses by 19%, drove annual Adjusted EBITDA to record levels at a 28% margin and returned capital to stockholders by using cash flow to repurchase 21% of the shares outstanding at the start of 2008 ... we are disappointed with second half trends and in particular the fourth quarter, as revenue and subscribers decreased sequentially in each online segment. 2008 revenue, excluding General Markets, was flat while fourth quarter revenue, excluding General Markets, declined 3% sequentially. Jewish Networks was flat in 2008 but saw its third consecutive quarter of declines.

General Markets was Spark Networks flag ship dating site once, Americansingles.com. For over the last year American Singles has lost a large number of members. Spark Networks current flag ship site is JDate, the online Jewish Network.

Since InterActiveCorp announced the sale of Match.com European Operations on Thursday, February 19th, by Friday IAC's stock price ended the day up 4 percent or 57 cents to $15.05. Match.com European operations are estimated to be valued at $110 million according to analyst Jeetil Patel. Match.com European operations also earned about $12 million in the fourth quarter of 2008 which is 13 percent of Match.com's total revenue.

For a more complete picture, read the Forbes article.

According to Forrester Research Inc, in 2008 the online dating industry comes in as the third largest in terms of revenue.

1. Video Games - $1,866 million
2. Digital Music - $1,732 million
3. Online Dating - $957 million

Check out Robert L. Mitchell Computerworld Blog for more details.