The Dating Game

This story appears in the February 2000 issue of Startups. Subscribe »

There must be a better way of meeting people than hanging out in a bar, thought Jose de Lasa, now 32, while attending Tulane Law School in New Orleans and doing just that. The idea stayed in the back of his mind even after becoming a lawyer in 1996. So much so that he quit his $86,000-a-year job after a few months to start Group Encounters, a social organization, using the $10,000 his father had given him to pay off school loans.

While de Lasa went to Barnes and Noble to research how to write a business plan, Graham McAden, 28, a public relations account executive for consumer products such as Burger King, languished at his job and told friends about the "socializing service" he dreamed of opening. Then one day a friend told him someone had already done his idea.

Rather than giving up, McAden called De Lasa to "brainstorm" about the industry. A lunch powwow turned into a partnership, and by 1997, McAden had matched de Lasa's initial investment and the twosome headed a revamped activities service dubbed Social Circles. The service, which organizes outings such as rock climbing and swing dancing for singles, sends its members a monthly calendar detailing upcoming events. Interested parties then contact Social Circles to sign up. The New York City company gears all activities toward beginners and keeps the groups small, gender-balanced and segregated from outsiders. "When we send people to a wine tasting, it's a wine tasting for our group and those 20 people are just from Social Circles," emphasizes McAden.

Love is big business. With estimated sales of $400,000 for 1999 and a goal of $2.5 million within five years, Social Circles is among a plethora of profitable matchmaking businesses. The dating services industry is a $600 million market and growing, according to market research and consulting firm Marketdata Enterprises Inc. With 75 million singles in the United States whose time-pressed lives make them prime candidates for matchmaking services, you can see the big business potential. Well-run operations in major cities can take in $500,000 to $2 million per year.

"The matchmaking industry is hot for two reasons," says Trish McDermott, an industry veteran and director of communications at Match.com, an online personals service owned by TicketMaster. "From a sociological perspective, single people have a greater need today for some sort of formal intermediary in the dating process. They get married later in life, so they don't have the thriving social network of the college campus or club scene available to them. They work long hours at demanding careers and have little time to search for a romantic partner. And, finally, due to divorce, many people have to re-enter the singles scene after many years of absence."

But today's dating service are no longer stereotypical "video dating" companies. "The old method of matching up singles--charging consumers $1,000 to $3,000 for a contract specifying a certain number of matches--is no longer viable," explains John LaRosa, research director at Marketdata. "Overhead is too high [and] consumer price resistance too great."

What is hot? Activity-oriented matchmaking companies, like Social Circles, that appeal to affluent professionals. Niche markets, such as black or Jewish singles. Hottest of all are online dating services: Revenues in this category are expected to increase fivefold--to $75 million--by 2003, according to Marketdata.

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Sandra Mardenfeld (smardenfeld@juno.com) has written about small-business issues for six years.

Wanted: A Good Time

Matchmaking enterprises don't offer guarantees--just chances to meet Mr. or Ms. Wonderful. "People are looking for opportunities to meet other eligible singles," says McDermott. "They go to dating services because they don't have access to the type of single people they hope to meet and date in their day-to-day lives. Really, singles go to dating services to purchase access to other singles."

Singles on the hunt look for particular characteristics in their prospective mates, so it helps to find a niche before starting a venture. Inspired by visiting chat rooms, Jory Rozner, a single Jewish woman and CEO of Zipple.com, decided to capitalize on the Web's popularity in 1998 and start her own online Jewish community. Today, her Singles Scene section has thousands of clients from more than 20 countries and receives more than 500,000 hits a month. Rozner, 31, took $35,000 from her savings and persuaded three former business associates to pony up $65,000 more for a percentage of the company. The investment has paid off: Rozner expects sales to exceed $2 million this year.

"Singles are always looking for new ways to meet," says Rozner. "The Internet is perfect. It gives the most comprehensive forum for interacting, screening and meeting. With chat rooms, bulletin boards, pictures, profiles and essays, a person can really do a good job at selecting someone appropriate for them. It's better than being fixed up by your mother's friend who thinks every single Jewish boy in his late 20s or early 30s is `just adorable.'"

While developing her site, Rozner outsourced much of the design work but kept herself involved in the process. "I wanted the site to be cool, hip, colorful and fun," she says. "Jews who are already involved in Judaism will go anywhere on the Internet to get the information they need, but you have to make a special effort to appeal to young people and nonaffiliated Jews."

Online personals also appeal because of their low cost. "Often, online dating is associated with newspaper personals," says Will Bunker, 30-year-old CEO and co-founder of One-and-Only.com, an online dating site in Dallas. But Bunker believes the two hit different demographics, with newspapers used more often by blue-collar workers who earn less than $25,000 per year and Web sites frequented by white-collar professionals earning $50,000 or more.

"Brick-and-mortar dating establishments have typically been too expensive for the average single, take up too much time, and, more often than not, turn out to be a waste of time and money," says Bunker, whose company's sales hit $10 million in 1999. "Online matchmakers allow people to get to know each other from the inside out on their own time and at a price they won't regret."

Love For Sale

While most Internet dating services, such as Zipple.Com, offer free personals and generate their income through advertising, e-commerce and Web hosting, more traditional dating services usually ask for an upfront membership fee.

Social Circles, for instance, originally charged clients for each activity. "It quickly became apparent the service was worth far more than $10 per activity," says McAden, who now sells memberships at $650 for six months and $800 for one year. "There are people who will pay significant sums in order to augment their social lives."

Prices also serve a gatekeeping function. "Once we got our prices up over the $150 mark, we started to attract a good, steady, consistent type of person," said McAden. His clients come to Social Circles from all types of professions--some are accountants; on is even a Rockette.

As with any new business, getting the word out about your matchmaking service is paramount. Rozner visited every Jewish Web site she could find, from newspapers to synagogues, and e-mailed every Webmaster--about 6,500 people--to tell them about her site. The owners of Social Circles, which now has almost 700 members, say 40 percent of their new customers come from word-of-mouth. Besides using conventional means of advertising such as direct mail, they've had good luck with fliers--especially at the business's launch. "We would drive around on Saturday morning at the crack of dawn in Jose's beat-up Honda and leave fliers on every [ATM] in Manhattan," McAden recalls.

Matchmaking clearly lends itself well to entrepreneurship, since clients like personal attention and want to know the individual who ultimately hooks them up with a potential love match. "I think it's important for people not to see us just as businesspeople, but as real people who have real emotions and go out and participate in these things for the same reasons they do," says de Lasa. "That creates a kind of community effect, and people appreciate that."

Mix And Match

Want to get in on the dating game? Even an unrelated, existing business can undergo a love injection. For instance:

• The Uptown Valet not only cleans customers' clothes but also adds romance to their lives. This Washington, DC, dry-cleaning service posts photographs of single clients on a wall for anyone searching for that special someone.

• When Nancy Slotnick founded Drip, a coffeehouse franchise based in New York City (where Starbucks can be found on virtually every corner), she decided to compete with the giant by serving up love along with coffee. Drip patrons can sift through more than 26,000 personal ads placed in loose-leaf binders, selecting people through a numbered code. The staff arranges blind dates by phone. Dates are held at Drip, so if the match doesn't work out, the lovelorn can at least enjoy a good cup of java.

Vital Statistics

Marketdata Enterprises Inc.'s The U.S. Dating Services Industry, released in September 1998, covers market demographics, operating expenses/profits, emerging trends and more. The 110-page report costs $995; individual chapters are available for less. (You can receive a free table of contents by mail or fax). For information, contact Marketdata Enterprises at 2807 W. Busch Blvd., #110, Tampa, FL 33618 or (813) 931-3802; or visit http://www.mkt-data-ent.com

Contact Sources

Drip, (212) 665-1100, http://www.dripcafe.com

Social Circles,http://www.socialcircles.com