The story goes something like this: Londoners Julian Keenaghan and Alex Parish met in a band, got into Web development and, nursing hangovers after a boozy party one night, pondered one of life's bigger imponderables — how to meet more women. The discussion, recalls Parish, turned to dating sites and what those sites should stress. Naturally — they are musicians, after all — Keenaghan and Parish put music at the top of the list.
"It's a very good social indicator," Parish says by phone from his office in London.
The result is Tastebuds, which the two 20-somethings co-founded in 2010 and developed full-time beginning 2011. Tastebuds is variously described as a music-oriented, or music-themed dating site, where individuals connect through rankings of up to eight favorite bands or artists. Tastebuds has more than 100,000 users in more than 100 countries, although it has yet to launch officially in the U.S., a sendoff planned for later this year. Tastebuds will also launch its mobile app in the next couple of months.
A few weeks back, Tastebuds Media Ltd. raised its first outside funding, $600,000 from New York venture capital firm Black Ocean. That kind of money normally wouldn't warrant a footnote in investment circles. However, Tastebuds punches well above its weight. It's indicative of a new generation of what is often termed social discovery sites, something potential investors and industry analysts alike are watching with keen interest.
"This is loosely in-between social networks and Internet dating," explains Mark Brooks, who hosts the blog Online Personals Watch and helps oversee the international dating service AnastasiaDate. Brooks is about as close to an authority on the business of online dating as one can find. "Bumping into people and recognizing something in common. This is the way the real world works. In the future this is the way Internet dating must go."
Tastebuds also taps into one of digital music's most alluring, but largely elusive, prospects: Making money not off music itself, but off a particular band's most avid fans. Of all social interests, music resonates with particular passion. Of all shared interests, music is one of the most defining. "If you're interested in Anthrax, that suggests a whole batch of characteristics or lifestyle," Brooks says. (We resist commenting on what those particular characteristics might be or the ratio of males to females on that particular hit parade.)
Rewind the digital tape a bit.
Online dating is securely anchored in mainstream culture. It's also about as mature a category as one could find in e-commerce. Brooks estimates the market worldwide is about $4 billion, half of which takes place in the U.S. Some 120 million would-be romantics log on every month, according to Brooks.
However, growth has plateaued, he says. Some better-known sites are struggling. The publicly traded British online dating service Cupid plc, for example, announced in late May that it was negotiating to sell some of its sites after earnings plummeted this year.
While thousands of independent sites exist around the world and new ones pop up pretty much every day, one company dominates America and many countries overseas: Match.com LLC. According to various research firms, Match.com boasts nearly a 25% market share in the United States. Match.com's revenue, including subsidiaries, totaled $518 million last year.
Trailing with about half that market share is eHarmony Inc. Its estimated revenue last year was something in the neighborhood of $250 million. That's less than what it earned in 2008. Declining revenue caused eHarmony founder Neil Clark Warren to take back control of the company last year and scrap longtime talk of an initial public offering.
EHarmoney is hearing footsteps, or heartbeats, from upstart competitors as well. Founded only in 2007, Zoosk Inc. is now America's third-largest player, generating $40 million in revenue in 2013's first quarter.
According to digital analytics concern comScore Inc., Zoosk actually leads eHarmony in terms of total traffic. Zoosk saw 3.16 million unique visitors in June compared to eHarmony's 1.38 million. Match.com sites logged 6.45 million visitors. Another online dating concern, Plentyoffish Media Inc., logged 3.34 million visitors, according to comScore. Another data research firm, Experian Marketing Services, places Plentyoffish ahead of everyone in terms of total visits. However, Plentyoffish is a free site with revenue a small fraction of Match.com, eHarmony and Zoosk.
Zoosk and eHarmony have relied on organic growth. Match.com, owned by Barry Diller's IAC/InterActiveCorp., has done its best to corner the field through an aggressive acquisition policy. Then operating under the TicketMaster umbrella, IAC acquired Match.com in 1999. Over the course of the next decade plus, the group bought numerous smaller sites: Soulmates Technology, Singlesnet, People Media, Chemistry.com and DateHookup.com. These aren't giant deals. In the U.S., IAC's biggest add-on acquisition came in 2011 when it purchased OkCupid for $50 million cash plus future earnouts. OkCupid appeals to a younger demographic, something all dating sites are pursuing.
IAC hasn't limited itself to the U.S., either. Two years ago, it acquired a 20% interest in the Chinese site Zhenai.com, for an undisclosed amount. Last year, IAC boosted its stake in the French online dating company Meetic SA to nearly 80% in a deal that valued the Paris-listed company at close to $500 million. IAC first acquired a 27% stake in Meetic in 2009.
Match.com, Zoosk and eHarmony are the ultimate generalists, with millions of members drawn together by a questionnaire, a photograph and a desire to connect. Side by side are services that cater to a much more specific demographic. There are dating sites for wine enthusiasts, vegans, Trekkies and hundreds of other passions, quite a few unmentionable in polite company.
"People define themselves by their actions, not what they say," says Brooks.
Another trend runs parallel to this. Social networks themselves are moving from the general to the more specific. Many of these specialized services are built on platforms like Facebook Inc. and streaming music service Spotify. These "are great platforms to discover a user's general interests, but not equipped to decipher the next level of detail and not equipped to facilitate the sharing of that level of detail with others," says Dan Chen, managing director of Siemer & Associates LLC, a Santa Monica, Calif.-based investment bank that focuses on Internet media and software. "They simply can't drill down as deep as some of these emerging apps and services."
Tastebuds is testament to this, says Dickon Waterfield, a partner with Black Ocean. As a standalone operation, Tastebuds was adding just 100 users a day. After Tastebuds became a Spotify app in May 2012, 1,000 new users began to sign up daily. Increased usage is one advantage of piggybacking on these popular sites. Cost is another, says Chen. Siemer & Associates' sister organization, Siemer Ventures, is an early-stage VC.
To build necessary infrastructure for the likes of Facebook, Spotify and LinkedIn Corp., "it took a whole lot of capital to get to where we are today," Chen says. That existing infrastructure, he continues, enables "a whole new generation of startups which doesn't need that kind of capital to recreate the proverbial wheel," he says. "A whole host of angel funds, seed-stage VCs, incubator vehicles and high-net worth individuals can be and are becoming the funding source."
That doesn't mean success comes any faster or easier. These new social discovery sites must overcome major hurdles beyond the obvious need to attract users. They must achieve necessary credibility among their potential constituents and, far more difficult, figure out how to make money.
"It remains to be seen how many will truly be able to monetize," says Chen, although he's quick to add that the $1.1 billion acquisition last month by Yahoo! Inc. of Tumblr Inc. provides a dramatic example of how "unique access to a large audience can be value in and of itself."
Monetizing is especially tricky when it comes to anything music-related. Passions may run high, but pocketbooks are, if anything, shrinking. Innumerable startups have banked on selling music and failed.
In the case of Tastebuds, the business model will be centered on the dating side of the court. Users must pay for an ability to delve into individual profiles and connect one-on-one, says Waterfield. "If you want to use the site privately, we charge for that," he says, adding that market research indicates at least 10% of the site's user base would pay $4 a month for the privilege.
Waterfield, however, distinguishes between Tastebuds and traditional dating sites. "It's not just about dating, it's about meeting new people," he says. "A dating service can't use the same sense of sharing. That model has come and gone."
So saying, Tastebuds loves to trumpet its romance-related successes. "A Tastebuds baby is on the way," Parish says.
The site highlighted a wedding between two Los Angeles-based Tastebuds users, who bonded over some notable indie rock bands: Beach House, Sufjan Stevens, Band of Horses, Radiohead, and The Shins.
As for Parish himself, did the original motivation pay off? Indeed, he reports. He met his current girlfriend on Tastebuds. Credit Foals, Bon Inver and Arcade Fire with bringing them together.
For the love of the movies
When it comes to passionate likes and dislikes, movies give music a run for its money. "Film is very similar [to music], and hard-core movie fans compare to hard-core music fans," said Dana Loberg, co-founder of MovieLaLa.com, a Palo Alto, Calif.-based startup that hopes to tap into that obsession. "Everyone has a film she's watched multiple, multiple times."
Plus, Loberg added, "there's always something inherently social about going to watch a film."
MovieLaLa strives to help drum up interest, chat about mutual interests and gather groups of like-minded souls together. It is raising a $1 million seed round and anticipates a September or October launch.
Loberg stressed that MovieLaLa.com isn't a dating site, but a social discovery site centered on the movies. "It's more like Spotify than OkCupid," said Loberg, whose co-founder is Sahin Boydas, a Turkish entrepreneur.
However, Dan Chen, managing director of Siemer and Associates LLC, a Santa Monica-based investment bank, believes a site like MovieLaLa.com shares an affinity with Tastebuds, "an ability to draw users into activities, an ability to propose meeting up." He called it "the next evolution of the social Web."
MovieLaLa.com is also firmly targeting the 14-27-year-old bunch. That age group is the most important movies-related demographic out there and one predisposed to last-minute scampering for companions. "It's a great way to get people to meet," Loberg said.
MovieLaLa.com's revenue model isn't dependent on ticket sales, however. Rather, it's based on generating data that, Loberg believes, studios will pay for. That data will enable distributors to market movies more effectively.
Film marketing is currently enormously scatter-shot. Popular online movie-related sites, such as IMBD or Rotten Tomatoes, don't help much because they are largely historic. Ticketing sites such as Fandango and Movies.com are notoriously clunky, plodding and unfriendly.
"We want to be the bridge between Silicon Valley and Hollywood," Loberg said. That could be a busy bridge.