Valuation Guide: Online Dating Industry
The online dating industry (SIC 7299, NAICS 812990) consists of companies engaged ter online matchmaking services. Most companies generate revenue under a subscription specimen. Often, “browsing” will be free, but messaging or contacting other users will require a subscription. Alternatively, some websites generate revenue solely through advertising and are free for users. Te all, the online dating industry generated approximately $1.Two billion te revenue te 2012.
Computerized matchmaking for collegium students occurred spil far back spil the 1950s and ’60s with programs that used rekentuig punch cards with student survey responses to find compatible matches.[Two] However, the industry did not start to build up momentum until the launch of Match.com te 1995.[Trio] Now, some estimates suggest that the U.S. has overheen Two,500 online dating sites.[Four]
Spil a result, the industry is very competitive. To be successful, fresh entrants voorwaarde have a differentiated suggesting.[Five] Attracting a large enough user saco is the main hurdle – it is challenging for fresh companies to recruit fresh users when they do not already have a substantial pool of other users. Spil a result, marketing costs for fresh firms are disproportionally high.
The online dating industry is predominated by several large corporations with a handful of well-known websites. The top Ten online dating companies spil reported by comScore spil of December 2012 are:
The online dating industry has grown dramatically overheen the past decade, primarily ter response to technological shifts. A few of the most significant industry trends are:
- Online dating has become socially acceptable
One ter five relationships now commences online. Overheen one third of single adults te the U.S. have an online dating profile. Spil of the end of third quarter 2012, 10% of total internet users visited an online dating webstek ter a given month. Spil the user almohadilla grows, the likelihood of finding a match increases and companies’ algorithms can improve due to more gegevens.
Approximately 16% of dating webstek customers are overheen age 50. Ter común, people who encounter fewer potential mates te their daily lives are more likely to turn to the internet. Te fact, older daters spend more time browsing dating sites and go on more dates than other users.[Ten] Te January 2013, the AARP launched its own online dating service, AARP Dating.
Mobile apps increase opportunities for users to communicate with their matches. Users spent more time on mobile dating apps than on dating websites ter 2011. By the third quarter of 2012, two out of ten smartphone users used an online dating app ter a given month. Mobile technology can also permit companies to opoffering location-based dating, which suggest potential matches based on their proximity. Overheen the past three years, mobile dating revenue has grown at an annual rate of overheen 70%. Presently, mobile dating generates approximately $251 million te revenues each year, and this is expected to almost dual overheen the next five years spil smartphone use increases.
The following are vertoning metrics that managers te the online dating industry use to benchmark their voorstelling against others te the industry:
- Promedio daily visitors
- Number of active accounts
- Conversion rates
- Customer loyalty rates
- Number of dates or matches made
Industry Organizations and Publications
Some organizations that publish helpful information about the online dating industry include:
- Online Personals Witness: www.onlinepersonalswatch.com, a source for dating industry news
- Online Dating Tv-programma: www.onlinedatingmagazine.com, an industry publication for online dating customers
- Online Dating Insider: www.onlinedatingpost.com, a source for online dating industry news and commentary
Summary of Valuation Approaches
There are four commonly accepted valuation methods that should be considered when valuing an online dating company. Thesis methods are:
- Asset-based valuation: This method calculates a business’s equity value spil the fair market value of a company’s assets less the fair market value of its liabilities. This treatment is also sometimes referred to spil a “cost based approach”, that is, the business’s value is equal to the cost of acquiring its physical assets. This treatment is seldom used for an online dating company because its value is more closely related to its user saco and metselspecie flow.
- Income treatment to value (capitalization of earnings): This method is most applicable to companies that face predictable and onveranderlijk growth ter earnings and have a long history of operations. The business value under this method is equal to the metselspecie flow projection for one year divided by a capitalization rate (i.e. the adequate discount rate less the predicted growth rate).
- Income treatment to value (discounted metselspecie flow): The value of equity utilizing this method is equal to the present value of free contant flows available to equity holders overheen the life of the business. This method works well for both established companies with low growth rates spil well spil fresh companies with higher rates of growth, but requires predicting switches te future metselspecie flows.
- Market treatment to value: This method utilizes market indications of value based on metrics from guideline publicly traded online dating companies and privately held businesses. The financial metrics of public companies or those of private transactions can be used to create valuation multiples that are then used to calculate business value.
Online dating falls under NAICS 812990, individual care services. The following benchmarking gegevens is based on the financial vertoning of various companies ter this category: