High risk, high reward: the business of betrothal

By Megan Gregg

12/11/10

"Match maker matchmaker, make me a match. Find me a find, catch me a catch." Most of us have heard these lyrics from the famous Broadway musical, "Fiddler on the Roof." The musical debuted in 1964, but was actually based upon a popular novel set in the early part of 20^th century Russia. But the business of matchmaking has been around long before it was the focus of a book or Broadway blockbuster. And today, more than ever, companies are tapping into every new corner of this age old market.

If you are one of the millions of people who use online or offline dating services, you are contributing to an estimated $2 billion a year global market. According to a leading market research firm, Americans contribute more than half the total, or $1.2 billion. The same study projects by 2013, American spending on dating services will increase to about $1.7 billion annually. It doesn't look like the uptick in the dating services industry is going to plateau anytime soon. Mark Brooks, a consultant for leading social networking and dating sites and founder of Online Personals Watch said, "There's a lot of market potential still, when you look at how many singles are on the planet."

And there are a lot of singles out there! The most recent census figures available show that, about 43 percent of Americans, age 18 and older, are classified as single or "unmarried." Massachusetts is well above the national average.  About 50 percent of the Bay State population can be interpreted as single. With so many singles out there, it's no wonder there are new dating services popping up almost daily to cater to this need. Dating companies are also narrowing their focus to increase their chances of turning a profit in the increasingly competitive market.

One of these new companies, Meetcha.com, was launched in April 2010 and is headquartered in Boston in the Charlestown Navy Yard. Chief Financial Officer Linda Natansohn said catering to a specific demographic is a "great formula for the local economy and for the dating world." At Meetcha, they are all about signing up singles from the baby-boomer generation looking to get back into the dating scene. The idea is to sign up online but utilize their "PODS" feature which stands for "People Out Doing Stuff." Members of Meetcha can sign up for PODS and not only spend time meeting new singles, but spend their money in new places. Natansohn indicated the formula is a win-win for the growth of their start-up site and local business owners. "The 40-plus audience of baby boomers have a trillion dollars in disposable income," she said, adding "that is the perfect person to be going into your venue."

While Meetcha may be new, dating services, in one form or another, are not.  The effect of these services on local economies also isn't new. Unlike Meetcha.com, a recent online start-up, companies like Events and Adventures have been driving money into local economies long before the advent of online dating. For more than two decades, this members club has catered to singles looking to meet through group events based on specialty interests. For example, members go on ski trips, wine tastings, boat cruises, just to name a few things. Boston branch Operations Manager Nancy O'Toole noted the trickle-down effect dating services have on the smallest local businesses. "It works out great for everyone," she says and "they [venues] discount us, we get to go to the event and it gives them a lot of business."

But not all dating services succeed in turning a profit, let alone turning business toward local economies. Harvard Business School Assoc. Prof. Michael Norton said the online dating industry in particular has a high "churn-and-burn" rate with literally hundreds of start-ups each year that never gain traction. He said "it will always feel like there is a new opportunity for a company with a different way of approaching it to be very successful." But feeling like there is opportunity and succeeding at it are very different things.

Brooks, of Online Personals Watch, is also realistic when analyzing the potential success rates for companies looking to infiltrate the industry. He maintains that despite an average 10 percent annual growth rate, the online dating industry is "definitely high risk." He said "most entrepreneurs seriously underestimate the budget necessary for stocking the shelves with singles, and the complexities of creating a working, profitable, high converting website."

The dating industry will likely remain a lucrative economic force for years to come simply from a consumer supply-and-demand perspective. Singles are out there and as long as they don't want to remain that way, businesses will continue to succeed or fail as they have done in some way or another for decades, if not centuries.