Match point for internet dating firms

THE business of love is booming, but with more than 1,700 relationship websites operating in the UK alone, the online dating market is looking overcrowded.

It should come as no surprise that the process of match-making, which speaks to our most fundamental and intimate needs and predilections, has spawned an array of specialist sites catering to virtually every quirk. Lonely hearts with exacting requirements can turn to the major players who whittle through millions of members via questionnaires, while smaller niche operators bring together those bound by a central issue.

There are sites for single parents, millionaires, the overweight, interracial dating, transvestites, art lovers, pet owners, people with sexually transmitted diseases and those who prefer blondes, brunettes or redheads. The devout can click on to the likes of MuslimFriends, JDate or ChristianLove, while ideological adherents can search for their missing half at PlanetEarthSingles, HumanitarianDating or MindBodySoulMatters.

"There are many, many different wants and needs out there, and I am sure there is a specialisation for everything from over-55 dating to gay dating to salad-dressing dating," says James Murray at Experian Hitwise, which tracks a total of 1,717 UK relationship websites.

According to data collected by Experian Hitwise, the UK's most popular singles website is PlentyOfFish, whose founder last week accused an alleged hacker of trying to extort money from the Canadian-based website after a security breach involving the personal files of 345 members. The man fingered by PlentyOfFish chief executive Markus Frind is Chris Russo, who describes himself as a security researcher from Buenos Aires and has denied any wrongdoing.

Globally, PlentyOfFish has an estimated 28 million users, so last week's supposed theft amounts to only the tiniest fraction of the site's total population. However, this is an industry where trust is paramount.

Bill Dobbie, chief executive of Edinburgh-based Cupid, says: "I am investigating how we can inject more trust into our websites," referring to the technical security issues that are coming into increasing focus throughout the industry. Dobbie's rapidly growing business - which recently changed its name from EasyDate - covers a string of niche websites such as Flirt.com, Cupid.com, PlanetSappho.com and BeNaughty.com, and has more than nine million members in 29 countries.

According to Experian Hitwise, BeNaughty is the UK's eighth most popular dating website, accounting for 2.62 per cent of all visits in this category. Market leader PlentyOfFish has a 19.27 per cent share, followed by Match.com on 7.82 per cent and Gaydar on 6.4 per cent.Such figures, however, do not reflect a site's "success rate" in pairing up happy new couples. Nor do visitor numbers necessarily correlate directly to profitability.

Karl Gregory, UK managing director of Match.com, says his company brings in 20 to 30 times more revenue than many rivals with similar-sized memberships. This is because Match.com is one of a relative few that charges a subscription, rather than relying solely on advertising revenue.

MatchAffinity, launched in 2009 to cater for those intent on a long-term relationship, is the UK's ninth-most visited dating site with 2.55 per cent of all visits. However, Gregory says it already accounts for 20 per cent of the firm's UK revenues.

Despite the industry's high degree of fragmentation, Gregory has no plans to spearhead consolidation by leading an acquisition drive. He will instead focus upon the core brands of Match.com, DatingDirect and MatchAffinity, which are said to collectively have more registered users that any other UK dating site.

About 10 per cent of its two million or so active monthly users are in Scotland, where Gregory lived in the 1990s while earning a masters degree in international marketing from the University of Strathclyde. Like all businesses within French parent group Meetic, Match reinvests half of its revenues into marketing. "This category is all about brand and trust," he says. "Why? Because we are not selling dishwasher powder here. It is a very emotive industry, and people have got to be able to trust the brand they sign up with."

As part of Meetic, which runs dating sites in 16 European countries, Match does not disclose many of its UK-specific figures. According to group financials released on Friday, Meetic's revenues rose 18 per cent last year to 186m (157m).

Gregory says there is plenty of room for Match's core brands to expand, with industry projections estimating that the number of singles in the UK will rise from the 16 million to 26 million by 2026. With people getting married later in life and the social stigma of internet dating lifting, the trend points towards a growth market.

Mintel estimates the UK industry will be worth 150m by 2014, while Experian Hitwise has recorded a 25 per cent year-on-year rise in visits to online dating sites during January alone. Despite such growth, Gregory believes the market is cluttered with too many tiny operations that can't meet their users' needs.

"If you just look at it logically, the reason people are going online is because they want to broaden their opportunities, and using a niche site by definition narrows your options," he says. "The truth is that many of the people who sign up with niche sites come to us eventually."

Murray at Experian Hitwise is more upbeat about the prospects for the smaller players. He says the "sheer variety" of sites available shows that niche operators can flourish.

Dobbie says Cupid will continue to expand into new segments and new geographical sectors through acquisitions, which it is well placed to do. Since joining the Alternative Investment Market in June of last year - and thus becoming the UK's first listed online dating firm - the value of Cupid's stock has increased by more than 80 per cent. The company has also said that its full-year results, due to be released on 8 March, will come in ahead of previous expectations as trading remains strong.

Dobbie admits that the smallest sites would best be described as "lifestyle businesses", and that the lion's share of industry revenues are generated by probably just one-tenth of the operators. However, he maintains that niche sites can offer good business opportunities.

"To me it is very much like the pub and entertainment sector," Dobbie says. "There are plenty of people in that industry doing good business, and that includes a lot of independent operators, and not just the Wetherspoons of this world. It is a huge market out there, and there is plenty of room for lots of players."