Kiss and tell: Learning e-commerce from the matchmakers
Internet dating services undermine cherished e-commerce myths
May 22, 1998
Web posted at 3:32 PM EDT
by Mark Gimein
-- Boy logs on. Girl logs on. Boy and girl exchange e-mails. They meet,
perhaps fall in love and an online matchmaking service makes money.
That's the idea, at least. The experiences of three services Match.com,
the MatchMaker Network and Goodcompany.com shed a great deal of light
on the truisms of the Internet.
In business, as in love, some rules are made to be broken. Here's
Rule #1: The only way to build a Web company is to burn through a
lot of money quickly.
Wrong. You can take a first date to dinner at the fanciest place in
town, but money can't buy you love.
MatchMaker started as a network of three bulletin boards nearly 10
years ago. It migrated to the Web three years ago with fewer than 40,000
users. The company's growth, most of which has come over the last year
and a half, has been driven by local advertising and user referrals
and funded by steady revenues.
Goodcompany.com, on the other hand, had substantial backing from Advanta,
a large financial-services company. It spent big bucks developing sophisticated
technology and planned to spend major marketing dollars on a service
that would remain free until the end of 1998.
But earlier this year Advanta shed its consumer businesses, and last
month Advanta told executives it would pull out of the venture. Now
Goodcompany has had to lay off two-thirds of its staff and is scrambling
for a buyer. (Editor's note: Since this story was written Goodcompany
has shut down its Web site.)
Rule #2: Web companies need multiple revenue streams.
Maybe. High income is good, but so is total commitment.
Match.com's business model centers around subscription and advertising
revenue, with other transaction revenue likely down the line. Founder
Fran Maier, a senior VP at Women.com, says that from the beginning Match.com
was built on the notion that subscriptions would let the service break
even and other sources would provide the profit margin. Match.com president
John Spottiswood adds that his first priority is extracting revenue
from nonsubscribers 500,000 Web surfers have signed up for Match.com's
MatchMaker marketing VP Stan Yunker, on the other hand, insists he
won't subject users to the indignity of online ads.
Rule #3: Giving away your product is the best path to Net riches.
Wrong. You can bring dates home, but you don't have to let them move
Match.com and the MatchMaker Network have been surprisingly successful
at getting trial members to convert to paid subscriptions. Goodcompany.com
had planned to remain free to all users until the end of the year, but
all bets are now off.
Spottiswood claims Match.com conversion rates range from 10 percent
to 30 percent in different markets; the overall rate is probably close
to 15 percent. MatchMaker Network does a bit better Yunker says that
at the most successful sites in the network, 45 percent of trial users
become paying subscribers.
Rule #4: Don't talk business in the elevator.
Right. Match.com and Goodcompany.com both have offices in the same
building in San Francisco's South of Market. The stranger eavesdropping
on your conversation could be your competitor.