Fourth-quarter results from China's Jiayuan.com International Ltd. (UNKNOWN:DATE.DL) revealed a fascinating development in the world of dating platforms. Simply put, its personalized matchmaking services are growing much faster than its online offerings. What does this say about the company's future of the company? Or even online dating?
Jiayuan's fourth-quarter results
The earnings report was always going to be overshadowed by the news earlier in the week that Jiayuan's board had received an acquisition bid. It's unfortunate, because there are a lot of fascinating trends in the business, including the gradual shift in interest toward the company's personalized matchmaking services.
In a nutshell, these services are offered through Jiayuan's offices, where, according to company presentations, "representatives take a proactive approach in finding potential companions for our personalized matchmaking clients. Depending on the needs of the clients, we provide tailor-made recommendations, conduct detailed background checks and provide dating and relationship consultation and advice."
Fourth-quarter revenue of 172.8 million renminbi ($27.6 million at today's exchange rate) actually came in ahead of management's previous guidance of 162 million-164 million renminbi ($25.8 million-$26.2 million), but it's the trends within its sales that matter. Alongside personalized matchmaking services, Jiayaun makes money through two other business operations.
Online services comprise of a mix of its Internet dating platforms, in which fees are charged for messaging and/or value-added services such as raising your profile in the website's search rankings. Jiayuan also organizes events that, according to its SEC filing, are "large gatherings of approximately 100 to 200 participants with activities designed to facilitate social interaction." Think speed dating and dance parties.
|Fourth-Quarter Revenue||Growth||Share of Revenue|
|Personalized Matchmaking Services||60.0||205%||35%|
|Events and Others||7.4||28%||4%|
A changing business
In a sense, the decline in online services revenue shouldn't surprise investors given that two of the growth indicators for its Web business have fallen in the last year. Average revenue per user, or ARPU, is probably the key figure to follow, alongside average monthly payer user accounts.
In its earnings release, the company said the ARPU decline was due to the increasing numbers of mobile users who "contribute a lower ARPU." However, the stagnation in growth of paying user accounts indicates a broader-based slowdown.
Going forward, management plans to improve its matchmaking services in order to support future growth. Meanwhile, the company said it had "temporarily de-emphasized" monetizing its online services, instead preferring to encourage the transition to its mobile products.
What does it mean for investors and online daters?
The company's revenue appears to be challenged by the shift to mobile (which management claims has lower ARPU), and also by a general slowdown in online services growth. Meanwhile, personalized matchmaking is growing strongly.
At which point investors, and Jiayuan users, must ask themselves whether the online dating industry offering is a succession of formats sold to customers on a try-it-and-see basis, or whether it's a sustainable long-term business that can be scaled up through growth.
If it's the former, growth in personalized matchmaking will tail off in the future. If it's the latter, then the shift from desktop to mobile usage should lead to new monetization opportunities, and ARPU could rise again.
Alternatively, if personalized matchmaking is the only sustainable future of the dating industry, then the potential to take advantage of the benefits of scalability and operating profit leverage -- usually associated with online businesses -- is diminished.
All told, Jiayuan's results raise more questions than answers, for investors and online daters alike.