Match.com, LP

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Match.com, LP

FOUNDER ENROLLED AT NORTHWESTERN UNIVERSITY: 1981

CREATION OF ELECTRIC CLASSIFIEDS: 1993

SALE OF MATCH.COM: 1999

FOUNDER ENROLLED AT NORTHWESTERN UNIVERSITY: 1981

Match.com was founded by Gary Kremen. A child of teachers, he was raised in Skokie, Illinois, where during his high school years in the late 1970s he taught himself how to program computers and became involved in computer hacking and other petty acts of vandalism. At the behest of his parents, Kremen was one day kept an extended period at the local police station after being picked up for some infraction and received a glimpse of life behind bars. The experience was frightening enough to motivate him to focus more attention on his studies. Despite less than stellar grades he was able to gain admission to Northwestern University through a well-crafted admission’s essay that argued he could provide some diversity to the student mix. In 1981 he enrolled at Northwestern, majoring in both electrical engineering and computer science.

After college Kremen went to work doing computer security programming for The Aerospace Corporation, a government aerospace contractor in Silicon Valley, and was introduced to the precursor on the Internet, ARPANET, established by the U.S. Department of Defense. Recognizing the potential of the technology, Kremen decided he wanted to become an entrepreneur to take advantage of it, because as he told the San Jose Mercury, “while engineering is cool, money is where the power is.” In 1987 he enrolled at Stanford Business School to gain more skills. Two years later he graduated and became partners with a friend, Ben Dubin, to establish Los Altos Technologies, a security software company. Yet even as he was developing this business, which he and Dubin would sell in 1996, Kremen in the early 1990s began pursuing new business ideas based on the Internet.

Kremen was quick to realize the importance of the .com and .net domain names that were being offered free of charge in the early 1990s. “I saw the future,” he told DN Journal, “I could see the next 15–20 years laid out in front of me. I knew there would be a real estate grab and that generic domains would be big.” He also became convinced that the Internet offered a perfect medium for online classified advertising, and so he registered for domain names that might serve as classified ad headings, such as Jobs.com, Autos.com, Housing.com, and even Sex.com.

CREATION OF ELECTRIC CLASSIFIEDS: 1993

In 1993 Kremen teamed up with Peng Tsin Ong, a Singapore-born veteran of high-tech start-ups, to found Electric Classifieds, Inc., in San Francisco. In order to launch the business and prove that online classifieds were viable, Kremen decided to concentrate on personal ads. Someone was already operating a small e-mail-based dating service using the domain name Match.com. Kremen acquired it for $2,500 in 1994. Ong developed the database system. Other Stanford graduates were also brought in, Simon Glinksy to develop the business plan to attract investors, and Fran Maier, who was not only instrumental in tailoring the site to make it more inviting to women but promoted the idea of a membership business model. The developing business began to attract the attention of venture capitalists. Kleiner Perkins Caufield & Byers offered to invest, but Kremen declined the offer because the venture capital firm wanted to merge Electric Classifieds with Architext, a company that would ultimately become Excite.com, and Kremen would not be retained as chief executive. Instead, Electric Classifieds drummed up $1.7 million in seed money elsewhere, mostly Silicon Valley’s Canann Partners.

Match.com went live in April 1995. After two months it boasted about 3,000 listings, according to a July 1995 article in Forbes. DN Journal claimed that the site had 7,000 members at this stage and that the business was growing at a 10 percent clip each week. Money was made by charging responders $5 to $8 to send e-mail messages to that person. Given that this was a new technology, it was not surprising that most of the users were located in San Francisco and that the ratio of men to women was four to one.

Match.com received a good deal of media attention, and Kremen was not shy about telling the press that he decided to start the company because he was not able to get a date. One of the resulting stories used a picture of him holding flowers and looking forlorn, the headline reading, “Why the Founder of Match.com Can’t Get a Date.” The publicity helped Electric Classifieds to raise an additional $7.5 million in another round of venture capital funds. Kremen had planned to expand Electric Classifieds the following year to offer used cars and real estate ads, but according to DN Journal, “his investors were satisfied with the horse they were on and he wound up being outvoted.” Wired offered a different take on what happened next, maintaining “The board wanted him to start developing other classifieds and stop messing around with lonely-heart ads. ‘They were embarrassed by it,’ Kremen remembers.” What is not in dispute is that Kremen and his board of directors had a contentious relationship. Although regarded as smart, Kremen was also perceived as difficult to work with.

COMPANY PERSPECTIVES

Match.com has one simple mission: to take the lottery out of love. It’s been the idea that’s inspired us since 1995, when we first had the idea of using this new-fangled technology called the Internet as a better way for people to find each other.

In 1997 the investors engineered an $8 million sale of Match.com to Cendant, a Connecticut consumer services company. Kremen opposed the deal but was unable to block it. He received $50,000 and a lifetime Match.com account under the username “The Founder.” Kremen went on to become involved in a wide variety of Internet ventures, but became best known for a long-term battle he waged against a twice-convicted felon named Steve Cohen, who forged a letter to the company that controlled registered domain names, Network Solutions, claiming that Kremen had given him the rights to Sex.com. Cohen then made about $500,000 a month selling banner ads to other adult sites. Kremen spent years in court before gaining back the domain name, and then found himself a very much conflicted participant in the adult entertainment industry. He also won a $65 million judgment against Cohen, who then fled the country and remained on the loose until 2007, all the while claiming he was broke. About all that Kremen received from Cohen was a poorly kept mansion in Rancho Santa Fe, California, and a ramshackle house on the border with Mexico.

SALE OF MATCH.COM: 1999

With the money received from the sale to Cendant, Electric Classifieds attempted to build up nondating businesses, but it was unable to compete against Craigslist, which offered a free classified listing service that proved highly popular. Cendant held on to Match. com for less than two years, selling it for $50 million in May 1999 to Ticketmaster Online-CitySearch Inc., a unit of USA Networks, Inc., which later became IAC/InterActiveCorp. Ticketmaster Online-CitySearch offered such local online services as city entertainment guides, live-event ticketing, and local auctions. At the time of the sale, Match.com had built up its number of registered users to 1.8 million.

Match.com sought to achieve growth through partnerships with leading Internet portals, and through a network of affiliates in other countries. In 2000 revenues improved to $29.1 million. By 2001 Match. com had grown its number of daily page views to five million. By signing marketing agreements with America Online and Microsoft Network in April of that year the site doubled its number of page views overnight. To promote the brand and stimulate revenues, Match.com launched its first national television campaign in the fall of 2001. At this point it was the second largest company in its category, trailing Yahoo! Personals.

Early in 2002 a new CEO, Tim Sullivan, was installed. The vice-president of e-commerce for Ticket-master Online/Citysearch, Sullivan was familiar with Match.com because his sister had used the site to find a boyfriend, who eventually became her husband. He quickly took steps to expand the company, establishing MatchTravel, a service to host singles’ vacations around the world, and by the end of 2002 the company added to its office in London and Sydney by launching some two-dozen local-language dating sites around the world. Match.com surpassed Yahoo! and in 2003 grew revenues to $185.3 million.

While all appeared to be going well for Match.com, beneath the surface there was cause for concern. In 2003 Match.com experienced an erosion in its subscriber base, and the only reason the company continued to show growth was because of the acquisition of UDate.com. In fact, growth in the category was tailing off at a rapid pace, as many users seemed to grow disenchanted with online matchmaking.

In 2004 a new chief executive, Jim Safka, was hired to take Match.com to the next level. He was well qualified for the job, having served as brand manager for Intuit and heading online marketing for AT&T Wireless. Safka set out to increase the number of daters in all age groups in order to attract more daters and increase subscribers. After spending about three months studying the data, he concluded that older daters were more likely than younger daters to subscribe. It was hardly a revelation to the company’s founders. Fran Maier on her blog (http://franmaier.typepad.com) opined: “Back when Match.com was started we knew that women over 29 and men over 32 were much more likely to pay (and this was more than 10 years ago when the net was dominated by more men and younger people overall).” Nevertheless, Match.com and the other dating sites had spent the past decade chasing a younger market.

KEY DATES

1993:: Electric Classifieds, Inc., is established.
1995:: Match.com site goes live.
1997:: Cendant acquires Match.com.
1999:: Cendant sells Match.com to Ticketmaster Online-CitySearch Inc.
2004:: Jim Safka is named CEO.
2006:: Dr. Phil McGraw is signed to endorsement deal.

Safka directed his staff to make the site more user friendly to older daters. After just four months under Safka, Match.com increased paid subscribers by 10 percent. Business continued to grow in 2005 and early in the year the number of paid subscribers topped the one million mark for the first time. The company also added premium services, such as Chemistry.com, a site that relied on a personality test developed by anthropologist Helen Fisher of Rutgers University to screen candidates. By the end of the year revenues approached $250 million.

To make a further appeal to an older demographic and bring more legitimacy to online matchmaking, in January 2006 Match.com hired Dr. Phil McGraw, an arrangement that the company said was a partnership rather than a celebrity endorsement deal. His value to Match.com’s new strategy was clear: By being associated with Dr. Phil, the company hoped to reach his core audience, which skewed toward older women, and if they came to the site, the men would follow. Moreover, Match.com planned to charge an additional $9 per month for Dr. Phil’s MindFindBind program. To help these new users make sense of online dating, Match.com introduced a revamped Starter Kit in late 2006. Match. com also began to apply its new model overseas, where its chief rival, Meetic, continued to target young daters. However, it was not alone in marketing to an older demographic. A more recent entry in online dating, eHarmony.com, was enjoying strong growth among older Americans and was heavily promoted on television. In light of this competition and what appeared to be a slowing market, it was an open question whether Match.com would be able to maintain growth in the years to come.

Ed Dinger