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Tuesday, May 25, 2010

Sean Cornwell

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United State-based dating site eHarmony is one of the global industry leaders, with revenue estimated at about $US250 million and more than 30 million registered users worldwide. In what is a highly competitive industry, the site has managed to stand out by focusing on old-fashioned matchmaking rather than brief encounters.

Today we're talking to vice president of international marketing, Sean Cornwell, about the keys to customer acquisition, the balance between quantity and quality in the dating world and why Australian married couples are happier than couples overseas.

Can you just give us a little bit of background of when you guys you started here and how big your presence is?

We launched the site in November 2007, so a little over two years ago, and really only started pushing heavily in terms of media and so forth at the start of 2009. And now you know we are one of the largest online dating services in Australia, we have more than 650,000 registrants and in fact in the first quarter of 2010, which traditionally is the busiest part of the year for online dating services especially with things like New Year's resolutions and so forth, we had 123,000 registrants. So that kind of gives you an idea of the growth trajectory that we are currently on.

It's a big spike in the first three months. Obviously as you said there are people trying to turn over a new leaf, but anything else you can pin down that growth to, is it partly driven from increased marketing?

I think there are two different things. One is just the seasonality of the online dating service. It's a bizarre phenomenon but literally on Boxing Day, the day after Christmas you have a massive spike in registrants to all online dating services and that lasts really through to Valentine's Day. I think it's partly the realisation people have after spending Christmas with their family and in-laws, it's like 'right, next year I'm going to have a partner' or whatever it may be and then you throw in New Year's resolutions into that and just the feeling of a new start and giving new things a go.

The growth that we've seen over recent months I think yes, partly it's down to increased media presence, but really we would only have done that if we were confident both in terms of how the service was taking off in Australia and how it's being received. We are not a typical online dating service where you go to it, it takes a couple of minutes, you sign up, create a profile and you can quickly search all the pretty boys and all the pretty girls. It's a much more sort of involved and committed matchmaking service and it takes more of a commitment from a consumer. But the response that we've seen in Australia has been really heartening.

So just take us through how much commitment it takes from a registrant. I know you're more focused on a more scientific approach to matchmaking.

The first thing to kind of emphasise is that eHarmony is all about long-term relationships, it's about finding someone for the long-term, a soul mate, finding the one if you want. It's not about finding someone to go on a date with tonight and because of that, it involves sort of a commitment, it's a more involved process.

So if you sign up to the service you have to take a personality questionnaire which is probably about 250 questions and really the aim of that is to basically understand people's personality, what really drives them and really understand as I mentioned the personality, proven in the science, in the psychology literature to really predict highly successful long-term relationships.

So it's all about understanding someone's values, what their beliefs are, what are their character drivers, things like their humour, their passion and so forth because those kinds of things are much more a predictor of whether two people will have a successful and happy long lasting, long-term relationship than things like whether two people both enjoy playing tennis or like soccer or whatever it may be.

From a customer offering point of view, it's probably a bit of a fine balance - you're offering the chance to find a strong match but that probably means that the user is going to see fewer matches, but better quality ones. Is that a difficult balance to get right?

You've hit on one of the most important aspects of our service - users only receive matches that are compatible with them. So what it does is it eliminates that task of searching hundreds if not thousands of profiles, wondering if what people have written is accurate. On the other hand yes, we are very deliberate feeding people between five and a maximum of seven compatible matches every day. And that's very deliberate so that people just take a little more time to actually take a look at their match, knowing that each one of the matches that we offer them on a pure kind of personality and on a psychological level they are highly compatible with them. That doesn't mean they're going to have instant chemistry or sparks, that's still for two people to determine, but yes we are very deliberate about that process. And you're absolutely right, the user experience depends on us having sufficient number of people in the network to be able to on a daily basis provide people with new matches and that to be completely frank with you, that's why we do so much media and so much TV advertising because it's very important for us. Customer acquisition is one of the most important parts of our business.

Are there instances where someone who's got a unique personality might go for a little while without getting any matches?

I mean probably in Australia that's unlikely. We certainly have a very strong and healthy matching pool. I mean every person is unique and what we don't do is just feed people matches for the sake of feeding them matches. We are very deliberate in terms of the threshold that matches have to pass before we offer them to people and so it is possible that sometimes people may only get two or three matches on any given day that they're compatible with, rather than the full seven. But certainly we do everything that we can to ensure on the marketing front and the acquisition front that people's user experience is as good as possible because at the end of the day if you don't offer a good user experience, people are not going to come to your site.

Tell us a bit about the business model, I know there are some dating services that are partly free and are partly paid for. Where does eHarmony fit into that model?

We're a subscription business so we're not free. You can sign up for free for eHarmony. In other words you can register on the site, you can take the personality questionnaire, you can receive a full personality profile which is a kind of a five page PDF document which tells you a bit about your personality and how you are in relationships. All that is free, you can receive matches for free but if you want to communicate with any matches then you have to be a subscriber and you can choose to subscribe for one month, three months, six months or 12 month plans and obviously the longer you commit to the service, the cheaper on a per month basis that it becomes. But that's pretty standard with a lot of dating sites.

In some ways you don't want to retain customers for too long because you hope they've found a terrific much, but if it doesn't quite work out for them I guess you want to keep them on the site. How do you get that balance right?

We're all about helping people to find a long-term relationship, hopefully to help them find "the one" as it were and it's like anything else, you know the more you put into eHarmony, the more you get out of it. In other words there is always a danger that there is that misconception that the first match that you receive and the first date that you will go on will be perfect and that will be your knight in shining armour.

But absolutely it is a high churn business. Not just eHarmony but online dating as a category, it's a high churn business and that's why as a percentage of revenues, media costs are unusually high in the category.

What works from a customer acquisition point of view?

We do a mixture of things and like any sensible business, we're always testing new marketing channels, new techniques, new tactics and so forth. We use TV, we use radio, we use all sorts of online channels and so forth. I think the difference between eHarmony and many other businesses in the category is that our service is more complex, it's more unusual because we're not just a traditional online dating site, we are a matchmaking site and a lot of people may not be familiar with that, in particular we attract a lot of users who are new to the category. In other words they haven't used online dating before so it may not be what they expect and so the challenge for us is always explaining what the service is and explaining that proposition and creating that kind of aspirational pull and that's why we use a lot of TV advertising.

And frankly you know when you look at our TV advertising it is very different to other advertising in the category which tends to be more jokey, more fun and so forth, whereas we're very overt and explicit about talking about love, about long-term relationships, even about marriage and we're trying to create that aspiration and that commitment and in particular we are focused on attracting the right quality of people because ultimately we want people who are serious about finding a long-term relationship. Because ultimately that will improve the experience for all our users and that kind of intent and that quality of user is most efficient and most successfully through TV we've found.

Have you noticed any differences in the Australian market to some of the other places that you're in? Are there any quirks here that eHarmony didn't expect when they came into the market?

I think one thing that we've learnt is that on one level this category is it speaks to a fundamental human truth which is that we all at some level want a long-term partner, we all want a soul mate and so forth. And so in many respects that is what the service is offering and that's what we're promising and in that respect Australia is no different to other markets, English speaking or non-English speaking,

I mean there are certain differences in the media markets, the Australia media markets has its own complexities and subtleties and in particular around TV and so forth. I think though what is more interesting from our perspective is in every market that we go into, we redo some of the fundamental research, which is behind the personality profiles and behind in particular the matching algorithms, in other words the compatibility criteria that define whether we match two people together or not. There are subtleties and differences between each market in each culture that have certain things that they tend to value more strongly than others.

One of the interesting things that we have discovered just through all the research we do, what we call eHarmony Labs, is around Australian couples. When we've compared them to the US or the UK, overall Australia's married couples are the happiest with their marriages. They tend to put in more effort, they tend to do things together more often than their counterparts in the UK and the US and they just seem to kind of get on better as a whole. It's quite interesting.

Well that's a feather in our caps I guess. What about the sort of users that you get? Obviously we address a professional group on SmartCompany, are there a lot of entrepreneurs that use these sites?

There are. People who tend to lead hectic lives, they have less time to meet new people, so business people, entrepreneurs etcetera who by nature are very busy and trying to do a million things, it's hard to meet new people and we find that for those kinds of people. And eHarmony in particular kind of is very attractive and speaks closely to them. More broadly I'd say that because of what we are, in other words we are a service for finding a happy, long-term relationship we speak less to a younger demographic. We certainly are not a service for the 18 to 25 demographic and really it's people in their 30s, 40s, 50s that tend to use our service. Often people who have been married before, divorced or even have had children from a previous relationship.

And just on the internet dating sector as a whole, can you give us a bit of an idea of where it's heading? When we look at US and UK publications, all of them seem to have some sort a dating service attached, often powered by a specialist. We haven't seen that so much in Australia, but is that something that could end up down here?

I think there are various aspects to that. I think the category as a whole is becoming even more popular so the stigma, if it hasn't already completely gone, is fast disappearing. Certainly markets like Australia, UK and US, I don't think there is a stigma around using online dating. Everyone knows someone who's kind of going out with someone they've met online or is married to someone they met online.

You're very right there are things like Guardian's Soulmates and newspapers that are definitely trying to push their dating offerings, not just in the UK and the US, I think also in Australia either on their own or through partnerships. I think that's because just the very well documented challenges newspapers face in declining readership and therefore advertising revenue and trying to find replacement revenue streams online or through eCommerce or subscription services like online dating.

The challenge I think with the category and the reason why so many third parties to whom online dating isn't the core services really struggle to build a successful service is really something to do more innately with the category, in that it's a very private thing and privacy, security, the desire just to do it on your own terms, is paramount. So you don't necessarily want to be mixing your online dating as it were with your reading your newspaper or your online network or social network. It tends to be quite distinct and so I think I'm very much of the opinion that standalone destinations are bigger and more significant than online dating services offered through any third party.

Has the rise of social networking helped or hindered you guys?

It's a fascinating question. I'm not sure that we have a clear answer on that. I think people's usage patterns and what they are comfortable and not comfortable doing on social networks is still very much evolving. In terms of people wanting to find a long-term relationship, that's not something they are very comfortable doing on something like Facebook, partly because the functionality is not there. I mean, you have to do it in a hidden way but partly also it speaks again to the kind of the privacy of the category and the mindset that people are in when they are using an online dating service. It's something very private and something you don't necessarily want to share with your whole network of friends.

I think where it's still evolving it's certainly in younger demographics, I'd say probably the 25 to 30 age group, certainly I think there is a greater comfort through finding potential dates and so forth through networks like Facebook and the like. But then again it's much more around the casual end of the spectrum rather than serious long-term relationships.

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