FriendFinder Networks

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.

On FriendFinder Networks corporate site they are claiming to be the largest social networking company in the world. The numbers they give to support this are:

• 250,000,000+ total profiles in their database since inception (for all websites).
• On average, over 150,000 new members per day.
• Over 10,000 private label social networking and live video sites in their network.

While FriendFinder Networks may be the largest social networking company in terms of number of profiles created, but how relevant are all those profiles. FriendFinder got its start way back in 1996, 12 years ago. I am sure many of these profiles are unused now or duplicates within the same site and across multiple sites. Adult FriendFinder, the largest site in the Network, says on their home page they have over 29 million active members. An active member to FriendFinder is someone with a valid email account who has logged in within at least 2 years. Now 2 years is a long time to be considered an active member but at least FriendFinder publishes how these numbers are calculate. Most dating sites do not. I would consider the largest social networking sites to be the ones with the most number of active profiles. In my opinion an active profile is one in which someone has used it in at least 2 months (and this is stretching it). I'm sure this honour would go to either Myspace or Facebook.

While we are on the subject, why are more and more dating sites calling themselves social networking sites? Sure they have social networking features but the main goal of the site is dating and to match you with a compatible person. If you are not single, there is no point in joining any dating site or the ones that call themselves Social Networks. These sites really should be called Social Networks for Singles.

Here is FriendFinder Networks corporate home page. For more information on the FriendFinder dating site, read our review.

The Communications Decency Act (CDA) regulates indecency and obscenity on the Internet in the United States. It also declares that operators of Internet services were not to be considered as publishers unless they actually created the material. This makes them not legally liable for the words of third parties who use their web sites. This includes everything from forum posts and comments too submitted articles.

The Friendfinder Network recently got into legal trouble when someone complained that someone else had created a fake profile on the dating site that “reasonably identified” her. Friendfinder did remove the profile from the dating site but the profile information and photo was still being used in advertising. The reason the Communications Decency Act was not applied in this case is:

... the right to control the commercial use of one’s identity is it considered a general intellectual property right. The judge reasoned that Friendfinder wasn’t entitled to the CDA’s usual brand of immunity due to the intellectual property provision that states the CDA does not preempt intellectual property laws.

In section 5 of Friendfinders Terms of Use Agreement it states:

By posting content to any public area of FriendFinder, you automatically grant, and you represent and warrant that you have the right to grant, to FriendFinder Network, Inc. and its members, an irrevocable, perpetual, non-exclusive, fully-paid, worldwide license to use, copy, perform, display, and distribute such information, rights of publicity, and content and to prepare derivative works of, or incorporate into other works and other media, such information and content, and to grant and authorize sublicenses of the foregoing.] This basically gives Friendfinder ownership over almost anything posted on their site. This may raise alarm bells when you read it but, it is common practice among dating services, social networks and other web services in which you post information.

While I am far from being a lawyer it appears to me that FriendFinder got into trouble because the information posted in the profile by the other person did not belong to them to post in the first place. Since the information posted in the profile was about some other actual person they had no right to post it, therefore they did not have the right to give up the general intellectual property right of the material to Friendfinder.

It is a sticky situation. Overall the person who actually posted the material is responsible, but Friendfinder did continue to use the information in advertising even after they were made aware of the problem with the information from that particular profile. I'm not sure how old this case actually is but, when you see profile information in FriendFinder Ads now (at least from the ads I see) they have a note at the bottom explaining "Photos and other data are for illustrative purpose only". I guess for the most part they have stopped the practice of using actual profiles in their advertising.

For the full story plus another example legal case, read the post at Public Knowledge and for more information on the CDA visit Wikipedia.

It appears that Jangl is going out of business according to Mashable, but nothing has been posted on their website yet. Most readers of this dating reviews site and blog may not know what Jangl is. They offer text and voice messaging and chatting to dating and social networking websites. Jangl is pretty popular and had numerous large websites as clients. I am not totally sure how much they charged the companies using their service (if anything) but from my understanding is they made most of their money from audio ads inserted into the voice calls and text ads inserted into text messaging. Obviously this revenue model did not pan out since they are closing.

In a blog post one of the founders of Jangl, Michael Cerda, talks a bit more of the demise of Jangl. He also stated his opinion that Jangl:

... needed another 18-24 months worth of runway to realize its fullest potential ...

I guess the venture capitalist didn't see it that way.

Match.com uses Jangl for their anonymous calling, so does FriendFinder and Friendster. PlentyofFish also used it but, according to the owner Markus Find he is removing the links for the service from his site right now.

You can also use Jangl on Facebook and it was coming soon to MySpace.

I wonder what business Match.com and the others will be switching too now? Maybe they will develop an in house service instead? Voice chatting is pretty important to a dating service and I hope these companies have a contingency plan in place. When you use 3rd party services for important aspects of your business you always need a backup plan if something unforeseen should happen.

I've decided to do a little more research of my own on the Better Business Bureau in regards to dating sites. This was after seeing an article about rising complaints (see Increased Complaints Registered Against Dating Services).

First a bit more on how the BBB works. To do a BBB search on a company visit their home page. The best way I found to find dating sites was to type in the domain name without the www prefix. Just a note here, most free or small dating sites are not found on the BBB. Once you have initiated a search, a list of companies may then come up. Some have nothing to do with what you are looking for while others may deal with separate branches or offices of the company. As an example, do a search on "yahoo.com" and you will get 22 results. Another thing to remember (which I didn't realize at first) is a company doesn't have to be a member to have a report on them. Actual BBB members are denoted with an icon and usually contain a lot more information than companies that are not members. When you click on the name of the company it will bring you to the report page of the company on the local Better Business Bureau website. These local BBB websites are not all the same and some have a lot more information available than others. All the information I am giving below seems to be how most of the BBB websites display their information. Some BBB sites like the one serving Los Angeles displays the information differently. They grade the company and actually shows some or all of the customers complaints. This seems to be an update to the service and may be how other BBB sites will soon follow.

This press release notes that the CEO and owner of The Penthouse Media Group Inc. (Marc Bell) will be giving a presentation regarding their acquisition of Various Inc. Various owns the FriendFinder Network. This presentation will take place at the Internet Dating Conference which in running from January 31 to February 1, 2008 and is located at the Miami Beach Convention Center.

For more information on the Conference visit the iDate2008 web site. This should be an interesting presentation for those of us in the dating industry. I hope they will post a video of it.