How online dating became a $2 billion industry
While dominated by big name, mass audience sites, like Match.com and eHarmony, a growing number of niche sites are finding success targeting singles looking for something very specific.
Of course there are sites aimed at specific religious or ethnic groups, but there are also those who aim to match couples with very specific interests. The Passion Network, for example, is a small empire of 250 dating hubs like bronypassions.com, for fans of the My Little Pony TV series; stachepassions.com for mustache mavens; and even zombiepassions.com, for those obsessed with the walking dead.
Thanks to the growth of such sites, the industry has expanded at 3.5 percent a year since 2008 — right through the recession — to become a $2.1 billion powerhouse. Analysts expect the acceleration to continue over the next five years. Target marketing, changing demographics, and decreasing stigma about online dating are continually bringing new users to fore.
That growth is already beginning to attract investors. The field is already crowded, with almost 3,900 companies running dating sites, according to a report last fall from business research firm IBISWorld. The report projects the industry to add about a hundred companies per year over the next four years.
That means making a dent as a new player will be harder than ever since many will have to build a database of users from scratch, says IBISWorld analyst Jeremy Edwards. To survive, they'll need a novel marketing strategy and a focus on untapped potential daters — sites targeting niche markets have higher rates of membership growth, according to the report.
The biggest web dating companies have a huge lead over the competition — two control more than 40 percent of the market. Leader InterActiveCorp (IAC) owns at least 30 sites, including Match.com and OKCupid, followed by eHarmony.com, which targets a slightly older demographic.
The stats are staggering. Of 19,000 couples married between 2005 and 2012, more than a third met through an online dating site, according to a study in last May's Proceedings of the National Academy of Sciences. Last December, more than 1 in 10 American adults visited dating sites, spending more than an hour a day there on average, according to Market research company Nielsen. (The 1.8 million visitors to OKCupid topped the field for time spent, at three hours a day.)
Changing demographics are a big part of what's inflating the industry. In 1970, just 28 percent of American adults were single; today, the share is 47 percent, according to the Census Bureau. That means an expanding target market, and it doesn't include the unknown number of married people trolling the sites. Plus, more people are getting online all the time — 70 percent American adults had broadband access as of last May, up from 42 percent in 2006.
As ever more people meet on the web, they're also peeling away the stigma once associated with it. In a poll last October by the Pew Research Center, just 21 percent of Internet users agreed with the statement "people who use online dating sites are desperate," an eight point drop from the last poll in 2005. Disapproval has gotten especially rare among 20-somethings, who grew up with web dating as the norm, says eHarmony spokesman Grant Langston.
At the core of most companies' growth plans is expanding mobile use. Online daters now spend more time on dating apps than they do on the sites themselves. And by 2018, more than 80 percent of the population will own a smartphone up from 46 percent in 2012, according to IBISWorld. Langston says that for eHarmony, that's meant users are checking in more often — six to 12 times a day instead of two or three.
Offering geo-dating apps, which allow smartphone users to locate potential dates nearby — has become almost a prerequisite for keeping up in mobile. That's long been the province of niche sites like Grindr.com, whose users spend a huge two hours a day on the site, according to the company, and Tinder.com, which has apparently become a favorite among athletes at the Sochi Olympics. Now Match.com CEO Sam Yagan says they're working on that feature.
Baby Boomers in the 50- to 64-year-old range may be the group attracting the most industry competition, according to IBISWorld. That's not only because of their size but because their Internet use is expanding and they're more likely to be single than in the past: More than a third of adults that age are unmarried, according to the Census. Emerging sites appealing to them include SeniorPeopleMeet.com, OurTime.com, SilverSingles.com. Meanwhile, AgeMatch.com specializes in setting May-December relationships.
The biggest players also are adding cross-over lines of business. In the last few weeks, eHarmony has launched a personal matching feature called eh+ that Langston says will combine the company's huge database with a real-live matchmaker — for $5000 a pop. And in May 2012, IAC launched Stir, which holds about 1,600 singles events per year nationwide.
Even as the user base soars, it's not clear that sites' algorithms for pairing couples are improving their chances of staying together long term. A 2012 paper in the journal Psychological Science in the Public Interest concluded that sites "build their algorithms around principles — typically similarity but also complementarity — that are much less important to relationship well-being than has long been assumed." The Proceedings of the National Academy of Sciences study reported that marriages that started online were only slightly less likely to end in divorce than others.