Is love in the air for Yahoo! (NASDAQ:YHOO)? The Web giant has taken a little break from the usual sparring withGoogle (NASDAQ:GOOG) to announce the launch of a premium, enhanced personals service. While it may indeed give some people one more reason to frequent Yahoo!, investors might shrug this one off as neither here nor there.
As luck would have it, I examined the online dating phenomenon during the summer, and my own personal suspicion was that it's way too competitive a space for any one player to continuously make a lot of money. Not to mention, it's an evolving industry and therefore subject to rapid change.
Yahoo!'s new premium service involves a $34.95 fee for matching using psychological profiling, the method that eHarmony popularized and one that some rivals such as InterActiveCorp.'s (NASDAQ:IACI) Match.com quickly sought to emulate. (Yahoo!'s regular personals service costs $19.95 per month.) Other rivals include True, MatchNet, and Spring Street.
Those are just the fee-based rivals. Free Craigslist serves as a platform for dating for some, and there are always the social networking sites, such as Friendster and, perhaps someday, Google's Orkut.
InterActiveCorp's last couple quarters have illustrated flat revenues over at Match.com. Yahoo!, on the other hand, doesn't break out the revenues that it derives from personals, although in its last conference call, it did describe personals as one of the segments that contributed to growth.
Most of the other players are privately held, and therefore, the information is not so easy to come by. However, earlier this week eHarmony announced a deal in which it gets prime real estate on Gannett's (NYSE:GCI) USAToday site.
Despite Yahoo!'s apparent luck in the space (comScore taps it as No. 1), signs have shown slowing growth this past year. Recent data from Jupiter Research forecasts that the U.S. market will grow only 19.4% this year, to $473 million, and only 32%, to $623 million, over the next five years. Just a year ago, revenues in the online dating arena were seen skyrocketing by 76%.
It's definitely a moment of respite from the search war and highlights a Yahoo! strength. Namely, the large audience it has established a strong connection with and its ability to offer premium services to subscribers who are willing to pay up, freeing it from the ups and downs of ad sales. Yahoo!'s betting that its audience, momentum, and innovation will woo additional subscriber revenues, but given the slowing growth of the industry, making this a lucrative bet requires that it stave off a ton of competition.
Single Fools talk about issues like online dating on -- you guessed it -- the Single Fools board, where one Fool recently revealed she met her fiancé on eHarmony.
Alyce Lomax does not own shares of any of the companies mentioned.
