February 13, 2003
The Business of Matchmaking
How JDate has become one of the hottest sites to find your beshert on the Internet.
One hour after the JDate.com site was launched, it crashed. It crashed two times after that, too, while its operators made frantic efforts to add more and more servers to handle the load. During this crisis, JDate co-founder and president Alon Carmel sat in his Beverly Hills office and smiled.
"We thought traffic on the new site would grow by 50 percent, but it's grown by three times that," he said.
Today, JDate.com is the leading site in the niche of online Jewish dating and matchmaking. Like its other online competitors, the site is the antithesis of the traditional matchmakers, who have controlled the market for the past 20 years.
Unlike its other Jewish competitors, however, the site is backed by a publicly traded company, MatchNet plc (Neuer Markt: MHJC), which operates out of Beverly Hills, is registered in Britain and traded in Germany. MatchNet has eight international dating Web sites, not all of which are confined to Jews, operating in four languages, including Hebrew. The company offices, overlooking The Jewish Federation of Greater Los Angeles headquarters and ORT building, seem to be situated to keep an eye on events in the Jewish community.
Even after the evaporation of the boom and the industry-wide recession, the dating industry, particularly MatchNet's sites, have reason to be optimistic. Juniper Media Matrix believes that the number of dating-site users will climb from 15 million in 2001 to 24 million in 2004, and the market will expand to $150 million in the United States alone. It seems that the content of these sights is attractive enough to make surfers willing to pay the rising subscription rates.
The established sites report ongoing growth in revenue, and some are even making a profit, an uncommon phenomena in the dot-com industry.
"A person needs to do three things in life: breathe, eat and find love," Carmel explained. "The entire Western world is online, and the worst problem in that world is loneliness. Lonely people are searching for love, not just sex. You can get sex on the Internet for $1.50."
It sounds like three-penny psychology, but after losing money for two years, MatchNet has made a profit for six straight quarters, and its revenue is growing 5 percent or more a quarter. MatchNet is in the industry's top four, together with Match.com, owned by Barry Diller's Ticketmaster; Yahoo! Personals, the Yahoo! dating site; and Matchmaker.com, owned by Terra Lycos. MatchNet's strength is based on selection of niches and taking over competitors. Its leading site is the AmericanSingles.com general dating site, which it acquired, and which has 7.7 million users, but the niche sites -- the four JDate.com sites (global, Israeli, English language, and German); a separate site for homosexuals, male and female; and other initiatives being developed, such as dating sites for retirees and Asians -- are also very important. JDate.com has no real international Jewish competition.Â
Carmel asserted that the global JDate.com site has 1.4 million unique visitors a month, even before the improved site went up in December. Since then, traffic has tripled, and 10-15 more users register per day. The company estimated it had 400,000 registered users at the beginning of the year, and Carmel says the number is now 500,000. The number of paid subscribers is obviously much lower, and the company is not disclosing the numbers. (A monthly subscription, however, exceeds the $20 online industry average, and the subscribers account for 87 percent of the company's total revenue.)
JDate.com is racking its brain how to increase traffic on the site, turn site visitors into registered users and registered users into paying subscribers.
"It's not scientific," Carmel said, "but the formula for success is a critical mass of visitors to the site. As the mass grew, the registration grew, and also the conversion rate the ratio of those registered to the subscribers. This is a particular feature of Jewish sites." He chose this niche because "the Jewish community want serious relationships," he said.
Carmel, who markets himself as well as any Jewish single filling out a form on the site, said the size of JDate's database is unique. "If you find two girls in San Diego, you certainly won't pay for a subscription. If you find 10, maybe one out of five will pay. If you've got 1,000 members, many will probably pay, because it gives them a large selection."
The online dating business is certainly surprising, given the business career of Carmel and his partner, Joe Shapira. Carmel graduated with a degree in construction engineering from the Technion-Israel Institute of Technology and moved to Los Angeles in the 1980s. Among other things, he raised more than $100 million, together with Shearson Lehman, for a limited real estate partnership.
Shapira, a graduate of the ORT Singalovski College of Technology, also moved to Los Angeles, where he met Carmel 15 years ago in the course of a real estate deal. The two have been partners in both business and private family matters ever since. After their first company ended in legal disputes in the 1990s, Carmel and Shapira liquidated their holdings and began looking for new business opportunities. They encountered the online matchmaking business in 1997, at the height of the Internet hype. Shapira got a letter from an exclusive offline matchmaking firm, which offered its services for an annual $2,500 subscription fee. The two men joked about the antiquated business, but then decided it might be a business opportunity. Shapira uttered the magic word, "Internet."
"I told him, let's see what they're doing," Carmel said. "We went to their offices to see how it works. We decided to transfer the model to the Internet, and said, 'We start tomorrow.'" They bought a domain name for the site ("JewishPersonal.com and Jewish.com were already taken," Carmel said), invested $100,000 of their own money, and began operating, like quite a few entrepreneurs, out of their homes.
Why did they begin with the Jews, such a limited market?
"Going for the whole world seemed too big a task," Carmel said. "We wanted to start with a niche in which we'd be comfortable." He noted that the Jewish community is unique in that people seek serious relationships, not just hookups. "The uniqueness is not just in religion; it also involves a feeling of community, of belonging, like a family. After all, everyone belongs to some synagogue, community, or charity organization."
The company, with a staff of 70, has branches in Australia, Germany, London and Tel Aviv. JDate.com also operates a separate division that organizes parties and trips for singles, and is supported by the company database.
Carmel estimates the number of users at 500,000, which he says is a third of the Jewish potential for Internet dating, and 5 percent of the global Jewish population.
Now Carmel wants to move into the exclusive niche, in which wealthy customers pay high rates. "The regular matchmakers are passé," Carmel said. The new application will be exclusive personal services, a king of golden subscription, for those with means, who lack the time to screen profiles and meet prospective matches. "A consultant will help them put together a true profile. Customers will have to reveal themselves, including their economic status and also be willing to undergo a background check to confirm their information. The consultant will then search the JDate.com database for candidates meeting the customer's requirements, and contact the candidates in the customer's name. This service is a kind of shortcut, and is still being developed.
For Carmel, the venture is more than just a business. "I don't have any problems making a living. After 30 years of business experience, I am doing something worthwhile, all day, every day. I don't take away from people, I don't make them angry, and I don't take advantage of anyone. I really spend all day thinking how to give someone that special thing called love and romance."
And where did he meet his wife?
"I met her before there was an Internet," Carmel said with a laugh. Â