Like dating itself, the online matchmaking business is complicated and exhausting.
For starters, it’s one of the few industries in which your customers, sifting through dozens if not hundreds of photos, messages, and suggested matches, will likely become increasingly disillusioned and unhappy with your product.
“It takes a lot out of you as a business leader, takes a lot out of you building the right product, because it’s just so difficult when someone is literally getting less satisfied by the hour,” said Greg Waldorf, who earned his MBA from Stanford Graduate School of Business in 1994 and is former chief executive of dating site eHarmony.
Waldorf was one of five Stanford GSB alumni who joined the panel discussion “The Business of Relationships” on Feb. 22 at Orange Silicon Valley in San Francisco. Sponsored by Stanford GSB Alumni Association and moderated by Lauren Weinstein, a Stanford GSB lecturer who earned her JD from Stanford Law in 2010, the sold-out event drew about 150 attendees.
How we find love has changed dramatically over the past 25 years as singles turn to technology to find that special someone, said Weinstein. (Although attendees mingling during the cocktail hour were encouraged to state their relationship status on their name tags.)
Panelists discussed some of the challenges unique to operating an online dating site and gave their own advice on finding love online. Following are some highlights.
One challenge for online dating sites is gauging their success at forging relationships. Sites rarely know if the matches they recommend, whether based on analyses of members’ profiles, “compatibility algorithms,” or other data analytics, ever pan out into marriage, a satisfying relationship, or even a few dates. The League considers the exchange of phone numbers a success, said CEO Amanda Bradford, MBA ’14. At The League, about one of four matches progresses from cyberspace to the phone or beyond, “so we see our success rate as 25%,” said Bradford, adding that “we lose sight of what happens” after the phone number swap.
And if members leave a service, it’s often impossible to know why they lapsed. Were they unhappy with their matches, or did they find a partner the old-fashioned way? If they come back to a site after a hiatus, though, they may feel satisfied with their experiences. “I look at someone who was active and then lapsed, and then they reactivate,” said Sam Yagan, cofounder and former CEO of OkCupid, which was sold to Match.com in 2011. “That to me is the biggest sign” that people are happy with the service, said Yagan, MBA ’05.
Enough Fish in the Sea?
Every dating site struggles with building the membership needed to allow any individual to find a good match. Some sites cast the widest net they can, placing ads on Facebook and other social media and marketing themselves to the general population. “You need mass,” said Gary Kremen, MBA ’89, founder of Match.com. “Quality is important, but people don’t want to be in a place where there are no potential dates,” he said.
However, some sites deliberately limit the size of their pools, targeting a specific segment of the population, and sometimes a narrow one. The League, for instance, courts highly educated, ambitious singles. “We modeled it after Stanford GSB’s 6% acceptance rate,” said Bradford, adding that The League uses “wait lists” to create an aura of exclusivity similar to that at highly selective colleges. “We’re for high achievers that are looking for high achievers,” she said.
Attracting women to the pool is challenging, said the panelists. Men comprise the majority of the overall population of online dating customers and are more active — logging on more often and sending more messages — than women. That disparity leads to men sending a slew of messages that go unanswered and women feeling “overwhelmed with so much attention,” said Dawoon Kang, MBA ’09, cofounder of Coffee Meets Bagel. To attract more women, Coffee Meets Bagel offers female customers a short list of “curated” matches who have previously expressed interest in them. “If you want to create a great experience for everyone, both men and women, you have to have a product and branding that speaks to women,” said Kang.
Waldorf recalled that during his time at eHarmony, the pool was mostly women, but the male members were more active, so “it actually created a good balance of the number of messages that were going both ways.” He added that “by getting the balance right, it worked for the business and worked for the users.”
Love and Money
Like many couples, online dating businesses struggle over money, in particular over choosing how or whether to charge customers for the service. Today, the vast majority of revenue in the overall industry comes from subscription fees, said Yagan. Requiring a paid subscription to use a service can help attract those customers who aren’t afraid of commitment. “Money is the barrier to show if a person’s serious or not,” said Kremen.
Some sites combine giving basic-level service free and charging for premium service. At Coffee Meets Bagel, for instance, customers can use the app and see a few matches free, but they can also pay, using a virtual currency the company calls “beans,” to see more matches. Coffee Meets Bagel also recently began offering a monthly subscription that targets its most active customers.
I’m Outta Here
While online dating sites may be socially valuable, they usually don’t offer their founders a financially satisfying exit strategy. Few dating sites earn a valuation comparable to that of technology companies, perhaps because the online matchmaking business has a low barrier to entry, with thousands of sites worldwide and countless new ones launching every year. And while many dating sites are high-quality businesses, few become large enough to lead to the coveted exit of a successful initial public offering or acquisition, said Yagan.
“This category has been really bad on the exit and liquidity side,” added Waldorf.
Stanford GSB Goes Steady
The consistent flow of dating sites led by Stanford GSB alumni is a head-turner. Panelists agreed they’d recognized the value of connecting people and had the sense of initiative to act. “Stanford GSB attracts people who want to take problems into their own hands, and I was taking my singleness into my own hands,” said Bradford. “There’s something to be said when the personality of Stanford GSB students meets an industry that’s relatively easy to enter.”
A Tip from the Pros
After years of observing customers’ online behavior and habits, panelists pointed out their best tip to daters: Be flexible. Many customers, for example, are overly rigid about the geographic location of potential matches, sometimes considering even a car trip across town an insurmountable obstacle. Or they might needlessly rule out a match who’s a few years outside their targeted age range for a mate.
“Widen your net,” said Kremen. “Don’t pre-judge.”