Finances

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.

I've been sick lately (and still am) so I have some catching up to do on news posting.

On December 23, 2008 FriendFinder Networks filed for a $460 million IPO. My first thought was it is an interesting time to file with the downturn of the economy. Adult FriendFinder is the major revenue generator of the FriendFinder Networks and with the latest posts about dating sites doing better in these market conditions, maybe the recession is not as much a concern. Still, there are less people out there with money to invest.

The other big issue is the proceeds of this will be used for the most part to pay off debt. Most investors tend not to like this type of scenario. I'm not sure where this debt came from. FriendFinder Networks was bought last December (see Story) by Penthouse for $500 million. I assume at this point, the FriendFinder accounting books where in a positive territory. I can't see Penthouse buying them for so much money if FriendFinder had a huge debt. This new debt must of come from Penthouse.

Spark Networks released their 3rd quarter financial results this past week. It wasn't a very good quarter for the company when compared to 2007 Q3 and last quarter.

Revenue for the third quarter of 2008 was $14.0 million, an 11% decrease compared to $15.8 million in the third quarter of 2007, and a 6% decrease compared to $15.0 million in the prior quarter. Revenue for the nine months was $44.1 million, a 10% decrease compared to $49.2 million for the same period last year.

Subscribers are also down.