Making a match can lead to big bucks if you know the rules of affiliate courtship.
Although Blake Killian is a Christian and believes there are benefits to Christian dating, he is forthright that the motivation behind his two websites, ChristianDatesOnline.com and Christian-dating.com, was purely financial.
It was the serendipitous result of some research of online dating keywords he was doing for his day job as an Internet marketer at Voodoo Ventures. Killian noticed that the search volumes for Christian dating keywords were really high but the bids were affordable. So, in March 2005, after committing himself to stop if he was losing money, he put together a website that reviews online dating sites and includes affiliate links on it. Initially he spent 20 to 30 hours per week. Now, a year later, he works on his sites about five to 10 hours a week and the monthly net profit is only $100 short of paying his entire mortgage payment every month.
“I knew there was money to be made. It has taken a lot of hard work since March but now the site is rolling. I love my job,” the 24-year-old New Orleans resident says. Is he experiencing beginner’s luck or is there still money to be made in online dating?
Super-affiliate-turned-author Rosalind Gardner, who famously made $436,797 in one year as an affiliate for online dating services (Sage-Hearts.com), started back in 1999 and continues to do extremely well. She says that although the current environment for starting an online dating site is “pretty complex,” nearly anyone can be making money today if you’re using Google AdWords. “There are still keywords and keyword phrases out there that people haven’t picked up on yet,” she says.
Even though online dating is vast – according to Publishers Association/comScore Networks, it represents the second- largest category of paid content online after music and video downloads – the boom years appear to be over.
In a JupiterResearch 2006 survey of 2,000 consumers online, the percentage of online users who visited dating sites in the last 12 months grew slightly from 2005 to 2006, while the percentage that posted online personal ads and subscribed to dating sites fell marginally during the same period.
A 2005 JupiterResearch report predicted that the industry would grow 9 percent to $516 million in 2005, down from 19 percent growth in 2004 and 77 percent in 2003. According to eMarketer, the overall market is often pegged at over $1 billion if ad revenue for the free portion of online dating sites is included.
Most experts agree that this decrease is just the beginning of a cooling of the market as opposed to precipitating a larger drop. Nate Elliott, an analyst for JupiterResearch, says, “We see continued growth for the next five years but it is plateauing – the rate at which consumers are subscribing to dating services online is flat. As a result the revenue growth is not going to be as high as it was.” James Belcher, an analyst for eMarketer, says, “I don’t see things shrinking in aggregate.”
Most experts agree the market is mature and headed for consolidation.
“I think there will be fewer sites. There will be some consolidation – you won’t have 15 versions of JDate.com. I think some of them will merge or fade away,” Belcher says.
“The market is saturated; you have all of the online dating sites you’re ever going to need,” notes Elliott.
One area that is thriving is “adult” dating sites – such as AdultFriendFinder, IWantU.com and SexSearch.com. According to Nielsen//NetRatings, traffic to AdultFriendFinder, the most visited adult dating site, rose 67 percent in January from a year earlier. Prices for these sites are comparable to traditional dating sites – most are in the $20 to $30 range.
Options for Increasing Revenue
For years, online dating sites relied upon significant growth in unique visitors to drive revenue. Nowadays, JupiterResearch’s Elliott believes that revenue growth is being driven by higher monthly rates rather than increased membership. Due to the slowdown in unique visitors, dating sites are faced with either improving their conversion rates or increasing the value of each customer.
Sites need to convert more visitors to paid subscribers to keep revenue growing. A 2006 JupiterResearch report found that only one-third of those who go to dating sites sign up for membership. This is the first time JupiterResearch has seen a drop in conversion rates since it began tracking the space in 2003.
Another way for sites to develop revenue is to increase the value of each member – sites are charging higher monthly subscription costs and are encouraging subscribers to maintain their memberships for long periods of time. Yahoo! Personals recently raised its one-month subscription price by 25 percent, and its six-month subscription price by 50 percent. Many of the more expensive sites justify their price by offering advanced services such as privacy enhancements, personality tests and security checks.
Increased prices, however, even those for premium features, seem to be backfiring. “Rising prices have kept a large number of users from converting to paid subscribers ” 37 percent of visitors who don’t convert say dating sites cost too much, making it their leading complaint,” explains the 2006 JupiterResearch report.
Another challenge the online industry is facing is a high level of dissatisfaction among users. Thirty-five percent of online daters were somewhat dissatisfied or very dissatisfied with the sites and only 29 percent were somewhat satisfied or very satisfied, according to a 2005 JupiterResearch report.
A 2005 Keynote Customer Experience benchmarking study found that the most common frustration reported by customers stemmed from a lack of trust or comfort in other members. Sixty-one percent of customers are concerned that other members are misrepresenting themselves and as many as one in three express a lack of trust in other members.
Looking for Love
According to the U.S. Census Bureau, there are 33 million U.S. adult singles that are online and open to pursuing a relationship. Dave Evans, who blogs about the online dating industry at Online Dating Insider, says he believes the number is close to two in five online singles who have tried online dating.
Not everyone is so bullish.
“Everyone who has wanted to do online dating has tried it,” eMarketer’s Belcher says.
However, JupiterResearch reports that only 5 percent of consumers online currently pay for an online dating service – down from 6 percent in 2004.
More than 34 million people visited the top five online dating sites in December 2005 alone. Evans claims the 80/20 rule applies. “The top five sites get 80 percent of the traffic. The remaining 20 percent is split up among the thousands of dating sites out there,” he says.
A January 2006 study by comScore MediaMetrix found the top five online dating sites were: Yahoo! Personals, Match.com sites (including Chemistry), Spark Networks (which owns AmericanSingles, JDate, ChristianMingle, etc.), True and Mate1. Other leading sites that consistently land in the top 10 include eHarmony and FriendFinder (if you include AdultFriendFinder).
“The top rankings seem to be fairly consistent but the numbers for unique visitors vary hugely between comScore and Nielsen,” Mark Brooks, editor of Online Personals Watch, says. “Hitwise uses partnerships with ISPs, Nielsen has a panel and data feedback from a toolbar download and Alexa uses data from its downloadable toolbar.”
Online Dating Insider’s Evans claims some new measurement is needed. “There needs to be a new metric which is a blend of visitors, members and features. Traffic rank certainly reveals popularity but that popularity can be bought and sold via toolbars, spyware, etc.,” he says.
The remaining 20 percent of online daters go to the thousands of smaller online dating sites – many of them niche sites. Niche sites aggregate users with similar interests into a more concise space; which purportedly promotes better, more relative connections. Many believe that niche sites raise the chances of finding more compatible partners rather than going to huge data warehouses like Yahoo! Personals and Match. There are dating sites that cater to Filipinos, Muslim singles, gays and lesbians, farmers, etc.
If a 50-something, female Asian lawyer in Boston wants to try online dating, should she go to a niche site? It depends on how closely she is aligned with the niche. She could go to a site that serves Asians or seniors or to a regionally focused site for the greater Boston area. If she wants to marry another lawyer, LaywersInLove.com would be a good avenue to explore.
“It’s the spear versus the shotgun approach. The shotgun approach throws money, time and energy without much regard for results. The spear approach is targeted, contextual, focused,” Evans says.
James Green, marketing manager for MingleMatch, a Spark Networks property, explains the opportunity of niche sites such as ChristianMingle by saying: “The volume is low but the conversion is high.”
Some niche sites do extremely well. Online Personals Watch’s Brooks says that, JDate, for Jewish singles, has “a lot of word of mouth and brand inertia. Most of their users come from type-ins and the extreme focus of their site.”
Financially, JDate, which charges $34.95 per month, generates average monthly revenue of $29.42 per subscriber and spends an average of just $8.09 to acquire a subscriber.
“It’s a golden site. They own the Jewish segment – no one comes close,” Brooks says. Compare that to a non-niche site like AmericanSingles, which generates an average monthly revenue of $22.16 per subscriber with an average acquisition cost of $43.29.
The range in monthly subscription fees varies widely. Yahoo! Personals and Match.com charge $19.95, American Singles and Date.com charge $24.95, while True.com charges $49.99 and PerfectMatch.com charges $59.95.
In general, serious daters are considered to be lucrative – they are more likely to be new to online dating and these unique users provide incremental revenue to sites. They are also considered to be willing to pay higher subscriber costs for advanced features and be longer-term members.
“People think that on serious sites, you’re going to meet people who are more motivated and committed. Because of that, eHarmony attracts people who are serious about finding the right relationship and they can charge $50 per month and require a two-hour profile questionnaire,” Brooks says.
Some sites, such as LavaLife.com, have a reputation for catering to casual daters, many of whom are younger. Because of the churn rate among the more casual sites, Yahoo! Personals and Match.com have each launched premium services, Yahoo! Personals Premium and Chemistry, respectively, to try to capture some of eHarmony’s market share.
Over the last several months, social networking sites such as Facebook, MySpace.com and Hi5.com have gained momentum. Some industry watchers perceive the social networks as a threat to dating sites – mainly because social networking sites are free and fueled by viral marketing.
“MySpace has been so successful because they empower the connectors – the connectors are the people that talk. MySpace hit people at their point of passion; they successfully appealed to the music lovers,” Online Personals Watch’s Brooks says.
Online Dating Insider’s Evans says social networks are hazardous to online dating sites because, “It would be very easy for social networks to add a dating component – all these sites need to do is add check box.”
Others disagree, claiming that dating sites and social networks cater to different customers. A 2006 JupiterResearch report found that the social networking sites pose little threat to the online dating industry.
“Just 14 percent of dating site visitors who don’t pay for subscriptions say they use free sites, like social networks, for online dating instead,” the report states.
Brooks agrees, “Social networking sites attract ‘freebie hunters.’ Serious daters come to online dating.”
While there is some disagreement as to how this will all shake out, nearly everyone concurs that 2006 will be a critical and decisive year in the results. Most agree that there is still opportunity if sites can determine how to capitalize on it.
According to Evans there is certainly potential for growth. “Remember that a significant amount of online users have not tried online dating. The services have to get better to lure them online and into the fold,” he says.
To attract price-sensitive users and to convert registered users who have not subscribed, smaller sites should adopt below-market subscriptions. Discounting and short-term subscriptions “offer the best way for dating sites to grow paid subscriptions and market share,” JupiterResearch’s Elliott says.
The Rules of Attraction
Another way to attract more people is to reach out to a larger universe of users, such as eHarmony’s campaign to target “marrieds” for counseling, or by continuing to spend heavily for online and offline advertising.
It appears that big spending on online and offline advertising will not diminish in 2006. Mike Jones, CEO of Userplane, says, “Everyone is upping each other on marketing dollars, so winning at online dating just becomes another spending war.”
eHarmony, which claims that more than three-quarters of its users come from television advertising and word of mouth, raised $100 million a few years ago and has spent tens of millions of dollars, and possibly more than a hundred million, on advertising in the last few years, according to Elliott.
“You have so many options; that is one of the reasons why eHarmony has put out so many ads – it cuts through the clutter,” says eMarketer’s Belcher. “Branding will be more and more important in the sector because people are familiar with the concept but not the individualized powerhouse of dating sites.”
To help distinguish a dating site from others, branding must be in line with the company’s goals. For example, True has spent a ton of money on advertising, especially with suggestive ads that may raise its profile, but may not attract paying subscribers like serious daters.
“I think we will see more and more high-profile psychologists and relationship advisors such as Dr. Phil getting behind Match.com; sites want some very specific personalities that people can attach themselves to,” Userplane’s Jones says.
Another feature to become more prevalent is personality testing. “I think personality profiling is the future. I think that people will pay for it – I see them charging $100 a month. The technology is just going to get better 10 years out. I don’t think we are there yet.” Tickle and Chemistry offer a variety of tests, as does True, which offers a sexual compatibility test,” Brooks says.
Jones agrees. “A lot of companies are embracing personality profiling systems to facilitate meeting people better.” He thinks we will see more testing on sites – “it will become a necessary component” – but does not foresee sites requiring tests in order to use the service, like eHarmony does.
Security checking is also a big issue for 2006. Illinois State Representative John Bradley proposed a bill that would require any online dating service with members in Illinois to disclose on its website whether it has conducted background checks on members. Not everyone would consider this to be a good thing.
Joe Tracy, the publisher of Online Dating Magazine, estimated that 30 percent of daters using online services are married; a number he believes has steadily risen. Because of this, there are married or recently divorced people who don’t want to disclose that information. “You have a portion of online daters that do not want background checks,” he says. Like personality testing, background checks could be a feature that sites offer but not necessarily require.
Another way that sites are looking to differentiate themselves is by offering the latest technological marvel. “Nowadays, most sites offer or soon will offer live communication tools, especially ones that are audio- and video-enabled,” says Userplane’s Jones. For example, in February, Vivox introduced Tempo, which allows users to connect using a variety of communication tools – voice, video and IM – across various platforms such as the Web, interactive voice response telecom, Internet protocol and mobile phones.
But these bells and whistles “will not be a differentiator for very long because they are easily imitated,” eMarketer’s Belcher says. What matters more in the long run is, “do you have enough potential people on the site that are close by and would be of your same interest group,” he says. “That’s far better than the kind of avatar that you can choose from for your IM on the dating site,” he explains.
For affiliates, the objective is to go after sites that convert. Conventional wisdom would recommend that affiliates focus on the big online dating players – the logic being that the more people who are in the network, the higher the chance of conversions. Also, according to Online Personals Watch’s Brooks, “The top sites have brand equity, which means that they convert better.”
But bigger isn’t always better. Some affiliates have had better luck with smaller sites. Killian of ChristianDatesOnline.com says the niche sites, which have fewer members than the big players, have served him the best – mostly because people who come to his site are “prequalified” – they are looking for Christians who date.
“I do the best on ChristianMingle – I have unbelievable conversion rates, like 70 percent,” he says. “I have not made one dime on Match.com.”
Super-affiliate Rosalind Gardner says, “Many folks are disenchanted with the really large sites that try to be everything to everybody. I actually do better with the smaller niche sites that appeal to specific demographics; for example, interracial or seniors dating.”
According to Brooks it’s a combination of factors.
“The best affiliates do the following: They have unique content where they drive traffic; they have some content that is really geared for getting natural search traffic; and they have PPC [pay per click] on it; or they do a combination of all three,” he says.
An online dating affiliate needs to provide compelling content that is timely and informative to please the visitors of the site and to boost natural ranking. Search engines such as Google are getting more selective and smarter about how it ranks content.
Gardner says the traffic boost from a blog can be huge and that it makes a big difference when running a content site. “I would do everything just like I did when I started but the only difference today is that I would expand my content base faster by adding a blog.”
Many online affiliates have been successful with reviews about each dating site. Some of the successful dating affiliates offer these types of service, including ALoveLinksPlus.com, OnlineDatingMagazine.com and eDateReview.com.
Because daters want to meet people in their area, another successful affiliate approach is to offer a site that has a regional focus, such as Seattle Singles. Michael Brucker, WebEx affiliate manager and former affiliate manager for Yahoo, says that for the affiliate site SinglesOnTheGo.com, “the owners spend a lot of time listing all of the singles events in each city; events such as bowling night, library night and Toastmasters.”
The relationship between affiliate and affiliate manager is paramount; for example, MingleMatch’s Green and Killian communicate almost daily. “I can instant message James a couple of times a day and he will get right back to me. That is not something that is going to happen with Commission Junction,” Killian says.
Stephanie Lewis, affiliate manager for Date.com, says Date.com offers both an internal program and one through Commission Junction. She says the big networks are attractive for new affiliates because they offer the promise of easy reporting and help getting started.
“Some seasoned affiliates are compensated better, they have more flexibility and they don’t have to pay a percentage to CJ. If we paid X amount to CJ, we could give that bonus to the affiliate. Or we could offer a co-branded partnership that we could not do within CJ,” Lewis says.
Payment structures vary widely. The compensations listed on the affiliate splash page are the public (or street) offers. Better affiliates get better rates, based on their value to the affiliate program and the specific requests from affiliates. Payments can be extended 30 percent (and higher) to better- quality affiliates.
Some affiliate programs pay on the first month and subsequent months – which makes a huge difference on what affiliates earn. Many top affiliates negotiate a revenue share based on the subscription and an ongoing percentage for every month the affiliate’s customers remain subscribed.
Gardner says, “I try only to do business with those merchants who offer a fair rev share. Fifteen percent on a digital service simply doesn’t cut it, especially not when I pay to advertise my affiliate sites. 50/50 recurring is my idea of a fair deal on online dating services,” she says. “While I do promote a few big merchants that don’t pay a fair commission rate, I use their names to get people looking around the site, and then direct them to more fair-minded merchants.”
Despite recent buzz that online dating has peaked, there is plenty of evidence that the dating market is just leveling off from its skyrocketing growth and that the segment is still a viable road for affiliates to travel. With the enormous range of sites out there that cater to every religion, race and hobby under the sun, there is sure to be a plethora of keywords and daters for affiliates to target.
Given the surge in traffic and subscribers to the adult dating sites, affiliates who are comfortable dabbling in those racier areas will be able to yield returns for years to come.
ALEXANDRA WHARTON is an editor at Montgomery Research Inc., Revenue’s parent company. During her four years at MRI, she’s edited publications about CRM, supply chain, human performance and healthcare technology. Previously she worked at Internet consulting firm marchFIRST (formerly USWeb/CKS).