The Business of Matchmaking


One hour after the JDate.com site was launched, it crashed.
It crashed two times after that, too, while its operators made frantic efforts
to add more and more servers to handle the load. During this crisis, JDate
co-founder and president Alon Carmel sat in his Beverly Hills office and
smiled.

“We thought traffic on the new site would grow by 50
percent, but it’s grown by three times that,” he said.

Today, JDate.com is the leading site in the niche of online
Jewish dating and matchmaking. Like its other online competitors, the site is
the antithesis of the traditional matchmakers, who have controlled the market
for the past 20 years.

Unlike its other Jewish competitors, however, the site is
backed by a publicly traded company, MatchNet plc (Neuer Markt: MHJC), which
operates out of Beverly Hills, is registered in Britain and traded in Germany.
MatchNet has eight international dating Web sites, not all of which are
confined to Jews, operating in four languages, including Hebrew. The company
offices, overlooking The Jewish Federation of Greater Los Angeles headquarters and
ORT building, seem to be situated to keep an eye on events in the Jewish
community.

Even after the evaporation of the boom and the industry-wide
recession, the dating industry, particularly MatchNet’s sites, have reason to
be optimistic. Juniper Media Matrix believes that the number of dating-site
users will climb from 15 million in 2001 to 24 million in 2004, and the market
will expand to $150 million in the United States alone. It seems that the
content of these sights is attractive enough to make surfers willing to pay the
rising subscription rates.

The established sites report ongoing growth in revenue, and
some are even making a profit, an uncommon phenomena in the dot-com industry.

“A person needs to do three things in life: breathe, eat and
find love,” Carmel explained. “The entire Western world is online, and the
worst problem in that world is loneliness. Lonely people are searching for
love, not just sex. You can get sex on the Internet for $1.50.”

It sounds like three-penny psychology, but after losing
money for two years, MatchNet has made a profit for six straight quarters, and
its revenue is growing 5 percent or more a quarter. MatchNet is in the
industry’s top four, together with Match.com, owned by Barry Diller’s
Ticketmaster; Yahoo! Personals, the Yahoo! dating site; and Matchmaker.com,
owned by Terra Lycos. MatchNet’s strength is based on selection of niches and
taking over competitors. Its leading site is the AmericanSingles.com general
dating site, which it acquired, and which has 7.7 million users, but the niche
sites — the four JDate.com sites (global, Israeli, English language, and
German); a separate site for homosexuals, male and female; and other
initiatives being developed, such as dating sites for retirees and Asians — are
also very important. JDate.com has no real international Jewish competition.Â

Carmel asserted that the global JDate.com site has 1.4
million unique visitors a month, even before the improved site went up in
December. Since then, traffic has tripled, and 10-15 more users register per
day. The company estimated it had 400,000 registered users at the beginning of
the year, and Carmel says the number is now 500,000. The number of paid
subscribers is obviously much lower, and the company is not disclosing the
numbers. (A monthly subscription, however, exceeds the $20 online industry
average, and the subscribers account for 87 percent of the company’s total
revenue.)

JDate.com is racking its brain how to increase traffic on
the site, turn site visitors into registered users and registered users into
paying subscribers.

“It’s not scientific,” Carmel said, “but the formula for
success is a critical mass of visitors to the site. As the mass grew, the
registration grew, and also the conversion rate the ratio of those registered
to the subscribers. This is a particular feature of Jewish sites.” He chose
this niche because “the Jewish community want serious relationships,” he said.

Carmel, who markets himself as well as any Jewish single
filling out a form on the site, said the size of JDate’s database is unique.
“If you find two girls in San Diego, you certainly won’t pay for a
subscription. If you find 10, maybe one out of five will pay. If you’ve got
1,000 members, many will probably pay, because it gives them a large
selection.”

The online dating business is certainly surprising, given
the business career of Carmel and his partner, Joe Shapira. Carmel graduated
with a degree in construction engineering from the Technion-Israel Institute of
Technology and moved to Los Angeles in the 1980s. Among other things, he raised
more than $100 million, together with Shearson Lehman, for a limited real
estate partnership.

Shapira, a graduate of the ORT Singalovski College of
Technology, also moved to Los Angeles, where he met Carmel 15 years ago in the
course of a real estate deal. The two have been partners in both business and
private family matters ever since. After their first company ended in legal
disputes in the 1990s, Carmel and Shapira liquidated their holdings and began
looking for new business opportunities. They encountered the online matchmaking
business in 1997, at the height of the Internet hype. Shapira got a letter from
an exclusive offline matchmaking firm, which offered its services for an annual
$2,500 subscription fee. The two men joked about the antiquated business, but
then decided it might be a business opportunity. Shapira uttered the magic
word, “Internet.”

“I told him, let’s see what they’re doing,” Carmel said. “We
went to their offices to see how it works. We decided to transfer the model to
the Internet, and said, ‘We start tomorrow.'” They bought a domain name for the
site (“JewishPersonal.com and Jewish.com were already taken,” Carmel said),
invested $100,000 of their own money, and began operating, like quite a few
entrepreneurs, out of their homes.

Why did they begin with the Jews, such a limited market?

“Going for the whole world seemed too big a task,” Carmel
said. “We wanted to start with a niche in which we’d be comfortable.” He noted
that the Jewish community is unique in that people seek serious relationships,
not just hookups. “The uniqueness is not just in religion; it also involves a
feeling of community, of belonging, like a family. After all, everyone belongs
to some synagogue, community, or charity organization.”

The company, with a staff of 70, has branches in Australia,
Germany, London and Tel Aviv. JDate.com also operates a separate division that
organizes parties and trips for singles, and is supported by the company
database.

Carmel estimates the number of users at 500,000, which he
says is a third of the Jewish potential for Internet dating, and 5 percent of
the global Jewish population.

Now Carmel wants to move into the exclusive niche, in which
wealthy customers pay high rates. “The regular matchmakers are passé,” Carmel
said. The new application will be exclusive personal services, a king of golden
subscription, for those with means, who lack the time to screen profiles and
meet prospective matches. “A consultant will help them put together a true
profile. Customers will have to reveal themselves, including their economic
status and also be willing to undergo a background check to confirm their
information. The consultant will then search the JDate.com database for
candidates meeting the customer’s requirements, and contact the candidates in
the customer’s name. This service is a kind of shortcut, and is still being
developed.

For Carmel, the venture is more than just a business. “I
don’t have any problems making a living. After 30 years of business experience,
I am doing something worthwhile, all day, every day. I don’t take away from
people, I don’t make them angry, and I don’t take advantage of anyone. I really
spend all day thinking how to give someone that special thing called love and
romance.”

And where did he meet his wife?

“I met her before there was an Internet,” Carmel said with a
laugh. Â