Online
Dating sites enjoyed meteoric growth for many years. However, the
industry has
now matured and growth rates have settled down. Competition is coming
from several different angles. Are dark days coming for online dating?

Online
dating was one of the few paid-content success stories of the dotcom
boom. As recently as 2003, total revenue for companies in the online
dating market was growing at more than 70% annually.

"So many users found novelty and utility in this application
that sites found it easy to first get a critical mass of free users,
then convert a small percentage to paid subscribers, which still
resulted in plenty of money to go around to many players," says James
Belcher, eMarketer Senior Analyst and author of the new Online Dating: WhoseSpace?
report. "Sites had perhaps a short questionnaire regarding zodiac signs
and favorite movie genres, and that was about it — post your pic, fill
out the quickie form, and you were on your way."

No more. Today online dating is a hectic market, competition is
coming from all direction. As a result, online dating’s growth has
slowed significantly.

eHarmony is representative of how specialized the market is
getting. The site promotes an exhaustive testing process designed to
get you married (and soon!). Serious daters (aka those who pay for the
services) are only too happy to pay $50/month for this service,
compared to the $10/month of some earlier sites, and free/ad-supported
ones.

"The fact is that online dating is a mature market," says Mr.
Belcher. "Sites now specialize in matching people of specific races,
religions, interests and professions, and there are multiple sites
competing in each of these niches. Some sites now facilitate
webcam-based dates, video-blogging, and other technological marvels."

In addition to competition within the category, a new potential
competitive threat is arising: social networking sites. MySpace and
Friendster offer online dating as one of the ways people may connect
and communicate — and they’re free. Traffic on these sites has grown
far more quickly in the past year than for online dating sites as a
whole.

Do social networking sites spell the end of dating sites? Mr. Belcher doesn’t believe so.

"Free online dating sites, be they social networking or other,
are not after the same customers as subscription-based online dating
sites," says Mr. Belcher. "Free sites are pursuing advertisers.
Subscription-based online dating sites, on the other hand, are pursuing
serious paying online daters. This seems facile, as losing casual
daters to free sites might eventually deprive subscription sites of the
potential converts. The fact that serious online dating sites are not
only surviving, but in some cases are charging higher fees, reveals
that those who want such services will seek them out, and at a price."