The $100M Revenue Club: eHarmony Captures Hearts Of VCs
VentureWire - July 12, 2010
By Tomio Geron
eHarmony Inc. may not be the trendiest or flashiest dating Web site out there, but it has steadily grown to become a big piece of the online dating space.
The company has done this by bucking the trends, both when it was founded during the dot-com bubble-when a slew of companies launched to marry the power of the Internet with the age-old desire to meet Mr. or Ms. Right-and more recently, when a new crop of sites has focused on casual dating through features such as social networking or video chat.
Now, as it expands internationally and prepares new services in its existing markets, the matchmaking site must continue to address its built-in challenge - how to keep its business expanding even when its most satisfied customers stop using the service.
Founded in 1999, eHarmony started off in a space with sites like IAC/Interactive Corp.'s Match.com and Yahoo Personals that catered more to men, emphasized free services and enabled users to sign up and begin using the service quickly and easily. But eHarmony emphasized privacy, which made it popular among women, focused on long-term relationships using an elaborate questionnaire to match users, and charged a subscription fee upfront.
The 275-person company parlayed that and its scientific approach into a strong subscription business model, where users pay to join and connect with other members. Subscriptions start at about $60 per month for a single month and about $20 per month for a year-long subscription. EHarmony has been profitable since 2004 and last year passed $1 billion in cumulative revenue.
Chief Executive Greg Waldorf would not discuss exact revenue figures but said reports of the company generating $250 million in revenue annually are "in the right ballpark."
EHarmony has had more than 20 million registered users since it started and
says an average of 236 eHarmony members marry every day in the
The two largest players in the
The two rivals have different target demographics, with eHarmony targeting
older, wealthier and more serious daters,
"It's pretty clear that people use eHarmony and they've got impressive market share but their pricing is significantly higher than Match," Muster said.
Despite this success, there are no immediate plans for an IPO, Waldorf said. The company has raised more than $110 million from Sequoia Capital, Technology Crossover Ventures and Fayez Sarofim & Co. and doesn't need any more venture funding, he said.
Doug Clinton, research analyst at Piper Jaffray, said he couldn't comment specifically on eHarmony's IPO potential but said Internet companies with paid subscription models, which eHarmony has, are interesting to investors, because they stand out from the typical, advertising-based Internet models. He pointed to LogMeIn Inc. and Ancestry.com Inc., which both went public last year, as such subscription-based companies. Both were trading above their offering prices.
"That shows investors are interested in companies with relatively high
growth rates and a stable recurring revenue base of users,"
As for acquisition prospects, Munster said AOL Inc. is a potential suitor
with a large enough Internet presence and balance sheet, though AOL may have
limits on the size of a deal it can do now that it has spun out of Time Warner
Inc. Other major Internet companies don't figure to be buyers - Yahoo Inc. has
outsourced its dating service to Match.com, and Google is considered an
unlikely suitor. Other less likely candidates are traditional media companies,