This document is authorized for use only by KYLE MATTICE in MGT 509 Spring 2015-1 taught by Keith Yurgosky, University of Scranton from March 2015 to August 2015.
For the exclusive use of K. MATTICE, 2015.
personals websites in the veracity of information they provided about potential matches. The online
dating industry was plagued by people misrepresenting personal information—ranging from
subtracting a year or two from their real age or increasing their height by a couple of inches, through
posting 10-year-old pictures or losing 50 lbs. overnight, to outright fraud, by failing to disclose that
they were married. Because people were connected to their friends in online social networks,
however, they would find it hard to post a 10-year-old picture or forget to mention a spouse, without
eliciting comments from friends. Online social networks were also attractive to people who were
currently in long-term relationships and could not easily join a dating site without jeopardizing their
current relationship. Under the guise of interacting with their friends on an online social network,
they could scan the market for new partners. Indeed, some industry experts estimated that the most
traffic was generated by men in relationships looking at women they did not know. Whether such
actions translated into offline liaisons was still unknown. Finally, online social networks held a
significant advantage over dating sites for gay men and women. Due to inherent search difficulties in
this market segment, and the importance of compatibility between one’s partner and one’s friends,
online social networks provided a valuable search tool.
Despite these apparent advantages, online social networks presented a number of limitations
compared with online personals sites. First, online social networks did not make it easy to send a
clear signal about whether one was interested in forming a relationship. Even though online social
networks allowed people to indicate whether they had joined only to interact with friends or to
establish a new romantic relationship, at least 40% did not indicate their marital status at all, making
it hard to figure out whom to approach. Second, with more people concerned about the privacy of
their information, an increasing number of profiles were becoming private, with access available only
to one’s direct friends. This shift severely curtailed the usefulness of online social networks for
meeting or finding out detailed information about people one did not know. Finally, online social
networks were used less often than personals sites by people in their 40s and 50s, making them less
useful for that segment of the population. Weighing the advantages and disadvantages, experts at
Jupiter Research saw “no signs that the eruption of social networks has burned the paid online
personals market.”42 Waldorf shared this view: “I don’t believe that social networking will hit us in
ways that everyone expects….I think it will have less to do with pricing and more to do with user
expectations and the user experience. We have a new cohort of users from MySpace and Facebook
coming every day. Will they find the guided process to be a breath of fresh air or too constraining?”
Others within the industry concurred, believing that social networks played in a different space and
that among all the people meeting online, only about 5% had met through a social network site.
Direct Competitor Profiles
Match eHarmony considered Match its biggest competitor. Match was owned by
InterActiveCorp (IAC) and contributed roughly 5% of IAC’s revenue. IAC owned other online and
offline businesses, including Home Shopping Network (HSN), Ticketmaster, Interval Timeshare,
Lending Tree, Citysearch, ShoeBuy, ReserveAmerica, and Ask. In 2006, IAC boasted $5.9 billion in
revenue, but it earned margins of only 4%. Its biggest division, the Home Shopping Network, made
up 50% of revenue and more than 85% of the total margin. In 2007, IAC lost $150 million on $6.3
billion in sales.
IAC acquired Match in 1999, four years after it had been founded by Gary Kremen and Peng Ong.
Two years after the acquisition, the company boasted 382,000 paying customers, each of whom
contributed roughly $10 in revenue and $2 in operating profit per month. By 2003, the company had
signed extensive co-marketing agreements with AOL and MSN, which increased the number of
paying customers to 930,000 and revenues to $185 million. Match also made significant investments
in overseas expansion. In 2005, Match was present in 30 countries and boasted revenues of