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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

(IDG) -- 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 our guide:

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.)

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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 trial membership.

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 in rent-free.

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.

 

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