February 15, 2006

Just three short years ago, the combined revenue for companies in the Internet dating market was increasing at more than 70 percent a year. Up until about a year ago, Internet dating was considered by many as one of the few paid-content success stories that began on the Web.

But now that "social networking" sites such as MySpace.com and others have appeared in the past year, are the good times over for the older online dating sites?

"As a whole, many users have found this new phenomenon interesting". "It is fairly simple to first get a critical mass of free users, then convert a small percentage to paid subscribers, which will still result in serious money to go around to many players," says James Belcher, eMarketer Senior Analyst and author of the new Online Dating: WhoseSpace? report.

"Sites had perhaps a short questionnaire regarding zodiac signs and favorite movie genres, and that was about it — post your pic, fill out the quickie form, and you were on your way."

No more. Today online dating is a hectic market, competition is coming from all direction. As a result, online dating's growth has slowed significantly.

eHarmony is representative of how specialized the market is getting. The site promotes an exhaustive testing process designed to get you married (and soon!).

Serious daters (aka those who pay for the services) are only too happy to pay $50/month for this service, compared to the $10/month of some earlier sites, and free/ad-supported ones.

"The fact is that online dating is a mature market," says Mr. Belcher. "Sites now specialize in matching people of specific races, religions, interests and professions, and there are multiple sites competing in each of these niches. Some sites now facilitate webcam-based dates, video-blogging, and other technological marvels."

In addition to competition within the category, a new potential competitive threat is arising: social networking sites. MySpace and Friendster offer online dating as one of the ways people may connect and communicate — and they're free. Traffic on these sites has grown far more quickly in the past year than for online dating sites as a whole.

Do social networking sites spell the end of dating sites? Mr. Belcher doesn't believe so.

"Free Internet dating sites, be they social networking or other, are not after the same customers as subscription-based online dating sites," says Mr. Belcher.

"Free sites are pursuing advertisers. Subscription-based online dating sites, on the other hand, are pursuing serious paying online daters.

This seems easy, as losing casual daters to free sites might eventually deprive subscription sites of the potential converts.

The fact that serious online dating sites are not only surviving, but in some cases are charging higher fees, reveals that those who want such services will seek them out, and at a price."

Source: eMarketer