Success story of eHarmony startup. Part I
This publication is a reproduction of an article from my blog about venture investments, venture investors and startups IdeaBlog.ru . It tells about the success story of a dating service for people looking for partners for serious relationships and creating a family eHarmony.com, which was created when everyone thought that the market was already divided, but despite this, it developed very successfully. The original article is here.
eHarmony.com is a dating service for people who want to start a family. The success story of this startup is remarkable for several features. First, everyone considered the online dating market to be finally divided between the two largest players in this market - the Match.com service and the Yahoo dating service. Does this situation remind you of anything? The Russian online dating market is similarly divided between Mamba and LovePlanet, and many believe that there is nothing to “catch” in this market. Secondly, this startup has violated many seemingly axioms of dogma - for example, that users cannot be frightened off by a long registration process (filling out a questionnaire with a new user on eHarmony takes at least 40 minutes). Third, this success story shows exactly how targeting a narrow target category allows for phenomenal success. And fourthly, this story shows how important it is to thoroughly know who your target audience is, what this audience likes and what is important to it.
The eHarmony dating service was created in August 2000 exclusively for people seeking a serious relationship or partner for creating a family. Investments in its creation and launch amounted to $ 3 million - a completely small amount for a market like the United States. Let me remind you that it was at this time that the dot-com bubble collapsed and nobody believed in the Internet business. Nevertheless, by 2005, the company's revenue was more than $ 100 million, and in 2006 it was a very good amount for $ 165 million for Internet businesses. In November 2004, venture funds Sequoia Capital and TCV invested $ 110 million in eHarmony, and according to rumors, almost $ 80 million went to buy a portion of the shares from the founders (that is, the founders made the so-called “cash out”, or, in Russian, “decided” during this round of financing, to which venture funds, as a rule, very, very reluctantly - as a rule, they require that all 100% of investments go into business development). According to rumors, as well as analysts, in 2004, the above venture funds valued the company at $ 350 million. This suggests that eHarmony’s business was so attractive to venture funds that they agreed to make a significant contribution to the founders. to share in this promising project. A very good result for a company that venture capital funds in 2000 and 2001 did not want to invest, considering that it would not withstand competition with leading players in the market - isn’t it?
')
Key success factors
A key factor in the success of a startup eHarmony is that he initially knew exactly who his target customers are - people who want only serious relationships, especially women, and in the course of their development have consistently positioned themselves only for them, without being distracted by the possibility of expanding the base. users at the expense of other categories of visitors of dating sites. By the way, it should be said that such a clear focus only on this category of users at the idea stage was not the result of any detailed study of the online dating market in the style of MBA holders. The founder of the service was a practicing psychologist with 35 years of experience Neil Clark Warren, who saw that the long-term results of his scientific studies of the psychological compatibility of people leading to a successful and happy marriage can be perfectly applied online. However, this does not mean that later, already at the stage of more thorough planning of a startup, the market in which the company was going to act, remained unexplored - on the contrary, as you will see later, the founders of the startup studied not only perfectly, but above all praise The main idea of ​​a startup was the fact that many people simply do not approach each other psychologically, and this is what causes them to break, and, therefore, to determine the psychological compatibility of people, it is necessary that they undergo detailed professional psychological testing.
As a result, in order to achieve the maximum final effect for their users (i.e., successful selection of a partner for a happy future marriage), the startup went to the fact that various gurus from the Internet business seemed a great nonsense: the company completely ignored the established ones in the online industry. dating dogma that seemed axioms. In particular, eHarmony does not allow its users to view the profiles of other users in order to select a suitable partner. Instead, the new user must fill in a huge questionnaire at registration, answering a wide variety of questions, and based on the results of filling in the questionnaire, the service and selects the most suitable partner for the marriage. It seems unbelievable for the online dating industry, isn’t it - to agree on a partner selection, without being able to even look at his picture! However, this decision was dictated by the excellent knowledge of the target audience of the service - it turned out that women who seek serious relationships, regardless of their appearance, do not like being assessed only by their appearance, and they trust much more if they know that their partner suits them many other parameters than in appearance. At the same time, by the way, we can also recall our mentality, according to which, for most men (and especially women), when choosing a partner for creating marriage, the psychological qualities of a person are much more important than his appearance. For short-term dating looks looks much more important.
Another incredible step for online services was that it takes more than 40 minutes for each user to register for a service — that is how long it takes on average to answer all the questionnaire questions. But this step was also carefully calculated by the startup based on the needs of its target audience: in addition to matching the pairs according to the result of this detailed questionnaire, such a long registration process scares away users who have no serious intentions. And at the same time, it additionally attracts the target audience of the service to the service - serious women looking for long-term relationships and wanting to start a family, but not wanting to spend a lot of time determining whether a man from this site is also looking for serious relationships, or he just wants sleep with someone, see that this service is the ideal product for their needs.
Thirdly, eHarmony did a great job of setting up such rules for the service, which would allow all users, without exception, to feel great satisfaction from the service. On traditional online dating services, 80% of letters that users write to an object they like remain unanswered. This is the so-called lightning effect - a small part of the most attractive users receive the vast majority of messages. This leads to a negative effect for everyone. Unsatisfied as those who write (mostly men) - they do not get any effect from the fact that they spent a lot of their time writing messages, and those (mostly women) who receive too many letters or vice versa, do not receive them in sufficient quantity. eHarmony, on the other hand, forces users to consider suitable forms and respond to messages from these forms - the questionnaire with suitable psychological characteristics are provided by the service in a limited number and, until the user matches with them all, the following forms are not provided. Thereby the service levels the conditions for all its users, and they all see that the service actually works to their advantage. By the way, both Mamba and LovePlanet do the opposite - they encourage inequality between users, because it is on them that they earn. After all, if the user does not send a paid SMS message and thus does not raise his profile, he will not receive any benefit from the service. Therefore, if eHarmony relies on the satisfaction of all its customers with its service, then Mamba and LovePlanet are much more profitable to maintain users dissatisfaction with the service (while simultaneously sticking to what satisfaction can be obtained by sending SMS to a paid number).
Competitive advantages of a startup
As a result of creating a product that perfectly suits a woman who is looking for a partner to create a family or a contractual relationship, there are four huge advantages for an eHarmony startup.
Firstly, it allowed them to set a rather high price for using the service and, as a result, to earn much more from a single user compared to competitors. Since the selection of a partner for creating a family is much more important for people than an acquaintance, people are willing to pay for it, and pay much more ($ 50 / month versus $ 20 / month for main competitors). And, by the way, if in Russia people are not ready to pay a monthly fee for using online dating services, then they pay for high-quality selection of a partner for creating a family even in the regions - just look at the number of offline marriage agencies. And the same Mamba and LovePlanet get their profit only from a very small number of their users - from those who are ready to send paid text messages. The rest of the "cool" on these services for free.
Secondly, it allowed eHarmony to be much more efficient than its competitors to monetize a female audience. Most traditional dating sites make the most money on men. By the way, the situation is the same in Russia - at the autumn press conference of Mamba, where I was also, its general director, Mr. Sherman, cited figures that it is from the male audience that she mainly earns. And eHarmony makes the main money on women - almost 60% of paid users are women.
Thirdly, the satisfaction of all customers with the service and the concern of the company to remove the “lightning conductor effect” described above led to tremendous customer loyalty to the company and to a huge word of mouth effect. In my opinion, the launch of LovePlanet and the rapid dialing of this service to a significant audience was possible due to the fact that most users using Mambu do not get the expected service from using it if they are not willing to spend significant amounts on paid SMS. True, LovePlanet did not offer anything new compared to Mamba, and most of its users just do not remain satisfied, but the fact is that if the service does not allow people to achieve the expected effect, they at least try other services in the hope that he is more lucky. I don’t even say that none of these services is “tailored” to the search for partners for creating a family or a serious relationship. Moreover, these companies, it seems, do not plan to develop in this direction yet. After the aforementioned Mamba press conference, I spoke with Mr. Sherman, who heads the Mamba, and asked if the company is planning to develop the direction of selecting the most suitable partner for creating a family, he answered cruelly that they were considering different directions, but at the same time I realized that this is exactly what they do not think about (at least at the moment). Although they can be understood - what they already have, brings them good money, and probably more properly concentrate on improving the existing scheme of earnings. And if some startup develops in another direction, then their main shareholder FINAM will be able to buy this startup. From the investor’s point of view, this is a good strategy.
Fourthly, concentrating on such a high-end online dating experience, such as choosing a partner for building a family or serious relationships, which is a very high priority for people, allowed eHarmony to build an extremely stable business. The number of single people looking for their soul mate on the planet is not decreasing, the time for searching for successful men and women who make a career (and, therefore, having money) becomes less and less, while ordinary dating services may well be for many users to be replaced by the same actively developing social networks. In particular, the growth of online dating in the USA in the last 3 years has almost stopped, and this is due both to the development of social networks and the increasing pressure of competition in this market. At the same time, the growth of eHarmony revenues, as we see from the dynamics of 2006 compared to 2005, increased by 65%.
In the second part of the article, I will analyze in detail the strategy for launching and promoting the eHarmony project - it’s not enough to make an ideally suitable product, it is important to correctly and effectively convey information about it to the consumer. This is especially important at the very beginning, because if the first registered users cannot get questionnaires from psychologically suitable partners due to the lack of a sufficient number of users from the project at the initial stage, then they will not pay anything and leave the service, telling all of this familiar and describing your negative online experience. We will examine the key success factors of the launch strategy and its promotion (eHarmony also violated many seemingly axioms in the online business rules), and an analysis of the very first investors coming out of the project will be made.
To be continued...
PS (especially for techies and programmers): please tell me - did you see at least one key moment of the success of the eHarmony startup, which would be related to the technical aspects of the project? No "features" and "ryushechki" never predetermine the success of the project! See how clumsy site Odnoklassniki.ru. What - the lack of AJAX'a and rather awful appearance of this service somehow affected its popularity? Examine your target customer, his needs, identify important points for him and think about how you can make him or her more happy with the help of your service or have more money. This is what is important for consumers, and not for the tricky software - for software, the main thing is that it works and performs its tasks. Well, of course, when the interfaces are beautiful besides, but these are only minor details in reality. Therefore, when doing a startup, go from the needs of your client and the market, and not from technology, and only then your startup will become successful.
At a reprint, an active link to IdeaBlog.ru and an indication of the author of the article (Arthur Welf) are required. The original article is here.
eHarmony.com is a dating service for people who want to start a family. The success story of this startup is remarkable for several features. First, everyone considered the online dating market to be finally divided between the two largest players in this market - the Match.com service and the Yahoo dating service. Does this situation remind you of anything? The Russian online dating market is similarly divided between Mamba and LovePlanet, and many believe that there is nothing to “catch” in this market. Secondly, this startup has violated many seemingly axioms of dogma - for example, that users cannot be frightened off by a long registration process (filling out a questionnaire with a new user on eHarmony takes at least 40 minutes). Third, this success story shows exactly how targeting a narrow target category allows for phenomenal success. And fourthly, this story shows how important it is to thoroughly know who your target audience is, what this audience likes and what is important to it.
The eHarmony dating service was created in August 2000 exclusively for people seeking a serious relationship or partner for creating a family. Investments in its creation and launch amounted to $ 3 million - a completely small amount for a market like the United States. Let me remind you that it was at this time that the dot-com bubble collapsed and nobody believed in the Internet business. Nevertheless, by 2005, the company's revenue was more than $ 100 million, and in 2006 it was a very good amount for $ 165 million for Internet businesses. In November 2004, venture funds Sequoia Capital and TCV invested $ 110 million in eHarmony, and according to rumors, almost $ 80 million went to buy a portion of the shares from the founders (that is, the founders made the so-called “cash out”, or, in Russian, “decided” during this round of financing, to which venture funds, as a rule, very, very reluctantly - as a rule, they require that all 100% of investments go into business development). According to rumors, as well as analysts, in 2004, the above venture funds valued the company at $ 350 million. This suggests that eHarmony’s business was so attractive to venture funds that they agreed to make a significant contribution to the founders. to share in this promising project. A very good result for a company that venture capital funds in 2000 and 2001 did not want to invest, considering that it would not withstand competition with leading players in the market - isn’t it?
')
Key success factors
A key factor in the success of a startup eHarmony is that he initially knew exactly who his target customers are - people who want only serious relationships, especially women, and in the course of their development have consistently positioned themselves only for them, without being distracted by the possibility of expanding the base. users at the expense of other categories of visitors of dating sites. By the way, it should be said that such a clear focus only on this category of users at the idea stage was not the result of any detailed study of the online dating market in the style of MBA holders. The founder of the service was a practicing psychologist with 35 years of experience Neil Clark Warren, who saw that the long-term results of his scientific studies of the psychological compatibility of people leading to a successful and happy marriage can be perfectly applied online. However, this does not mean that later, already at the stage of more thorough planning of a startup, the market in which the company was going to act, remained unexplored - on the contrary, as you will see later, the founders of the startup studied not only perfectly, but above all praise The main idea of ​​a startup was the fact that many people simply do not approach each other psychologically, and this is what causes them to break, and, therefore, to determine the psychological compatibility of people, it is necessary that they undergo detailed professional psychological testing.
As a result, in order to achieve the maximum final effect for their users (i.e., successful selection of a partner for a happy future marriage), the startup went to the fact that various gurus from the Internet business seemed a great nonsense: the company completely ignored the established ones in the online industry. dating dogma that seemed axioms. In particular, eHarmony does not allow its users to view the profiles of other users in order to select a suitable partner. Instead, the new user must fill in a huge questionnaire at registration, answering a wide variety of questions, and based on the results of filling in the questionnaire, the service and selects the most suitable partner for the marriage. It seems unbelievable for the online dating industry, isn’t it - to agree on a partner selection, without being able to even look at his picture! However, this decision was dictated by the excellent knowledge of the target audience of the service - it turned out that women who seek serious relationships, regardless of their appearance, do not like being assessed only by their appearance, and they trust much more if they know that their partner suits them many other parameters than in appearance. At the same time, by the way, we can also recall our mentality, according to which, for most men (and especially women), when choosing a partner for creating marriage, the psychological qualities of a person are much more important than his appearance. For short-term dating looks looks much more important.
Another incredible step for online services was that it takes more than 40 minutes for each user to register for a service — that is how long it takes on average to answer all the questionnaire questions. But this step was also carefully calculated by the startup based on the needs of its target audience: in addition to matching the pairs according to the result of this detailed questionnaire, such a long registration process scares away users who have no serious intentions. And at the same time, it additionally attracts the target audience of the service to the service - serious women looking for long-term relationships and wanting to start a family, but not wanting to spend a lot of time determining whether a man from this site is also looking for serious relationships, or he just wants sleep with someone, see that this service is the ideal product for their needs.
Thirdly, eHarmony did a great job of setting up such rules for the service, which would allow all users, without exception, to feel great satisfaction from the service. On traditional online dating services, 80% of letters that users write to an object they like remain unanswered. This is the so-called lightning effect - a small part of the most attractive users receive the vast majority of messages. This leads to a negative effect for everyone. Unsatisfied as those who write (mostly men) - they do not get any effect from the fact that they spent a lot of their time writing messages, and those (mostly women) who receive too many letters or vice versa, do not receive them in sufficient quantity. eHarmony, on the other hand, forces users to consider suitable forms and respond to messages from these forms - the questionnaire with suitable psychological characteristics are provided by the service in a limited number and, until the user matches with them all, the following forms are not provided. Thereby the service levels the conditions for all its users, and they all see that the service actually works to their advantage. By the way, both Mamba and LovePlanet do the opposite - they encourage inequality between users, because it is on them that they earn. After all, if the user does not send a paid SMS message and thus does not raise his profile, he will not receive any benefit from the service. Therefore, if eHarmony relies on the satisfaction of all its customers with its service, then Mamba and LovePlanet are much more profitable to maintain users dissatisfaction with the service (while simultaneously sticking to what satisfaction can be obtained by sending SMS to a paid number).
Competitive advantages of a startup
As a result of creating a product that perfectly suits a woman who is looking for a partner to create a family or a contractual relationship, there are four huge advantages for an eHarmony startup.
Firstly, it allowed them to set a rather high price for using the service and, as a result, to earn much more from a single user compared to competitors. Since the selection of a partner for creating a family is much more important for people than an acquaintance, people are willing to pay for it, and pay much more ($ 50 / month versus $ 20 / month for main competitors). And, by the way, if in Russia people are not ready to pay a monthly fee for using online dating services, then they pay for high-quality selection of a partner for creating a family even in the regions - just look at the number of offline marriage agencies. And the same Mamba and LovePlanet get their profit only from a very small number of their users - from those who are ready to send paid text messages. The rest of the "cool" on these services for free.
Secondly, it allowed eHarmony to be much more efficient than its competitors to monetize a female audience. Most traditional dating sites make the most money on men. By the way, the situation is the same in Russia - at the autumn press conference of Mamba, where I was also, its general director, Mr. Sherman, cited figures that it is from the male audience that she mainly earns. And eHarmony makes the main money on women - almost 60% of paid users are women.
Thirdly, the satisfaction of all customers with the service and the concern of the company to remove the “lightning conductor effect” described above led to tremendous customer loyalty to the company and to a huge word of mouth effect. In my opinion, the launch of LovePlanet and the rapid dialing of this service to a significant audience was possible due to the fact that most users using Mambu do not get the expected service from using it if they are not willing to spend significant amounts on paid SMS. True, LovePlanet did not offer anything new compared to Mamba, and most of its users just do not remain satisfied, but the fact is that if the service does not allow people to achieve the expected effect, they at least try other services in the hope that he is more lucky. I don’t even say that none of these services is “tailored” to the search for partners for creating a family or a serious relationship. Moreover, these companies, it seems, do not plan to develop in this direction yet. After the aforementioned Mamba press conference, I spoke with Mr. Sherman, who heads the Mamba, and asked if the company is planning to develop the direction of selecting the most suitable partner for creating a family, he answered cruelly that they were considering different directions, but at the same time I realized that this is exactly what they do not think about (at least at the moment). Although they can be understood - what they already have, brings them good money, and probably more properly concentrate on improving the existing scheme of earnings. And if some startup develops in another direction, then their main shareholder FINAM will be able to buy this startup. From the investor’s point of view, this is a good strategy.
Fourthly, concentrating on such a high-end online dating experience, such as choosing a partner for building a family or serious relationships, which is a very high priority for people, allowed eHarmony to build an extremely stable business. The number of single people looking for their soul mate on the planet is not decreasing, the time for searching for successful men and women who make a career (and, therefore, having money) becomes less and less, while ordinary dating services may well be for many users to be replaced by the same actively developing social networks. In particular, the growth of online dating in the USA in the last 3 years has almost stopped, and this is due both to the development of social networks and the increasing pressure of competition in this market. At the same time, the growth of eHarmony revenues, as we see from the dynamics of 2006 compared to 2005, increased by 65%.
In the second part of the article, I will analyze in detail the strategy for launching and promoting the eHarmony project - it’s not enough to make an ideally suitable product, it is important to correctly and effectively convey information about it to the consumer. This is especially important at the very beginning, because if the first registered users cannot get questionnaires from psychologically suitable partners due to the lack of a sufficient number of users from the project at the initial stage, then they will not pay anything and leave the service, telling all of this familiar and describing your negative online experience. We will examine the key success factors of the launch strategy and its promotion (eHarmony also violated many seemingly axioms in the online business rules), and an analysis of the very first investors coming out of the project will be made.
To be continued...
PS (especially for techies and programmers): please tell me - did you see at least one key moment of the success of the eHarmony startup, which would be related to the technical aspects of the project? No "features" and "ryushechki" never predetermine the success of the project! See how clumsy site Odnoklassniki.ru. What - the lack of AJAX'a and rather awful appearance of this service somehow affected its popularity? Examine your target customer, his needs, identify important points for him and think about how you can make him or her more happy with the help of your service or have more money. This is what is important for consumers, and not for the tricky software - for software, the main thing is that it works and performs its tasks. Well, of course, when the interfaces are beautiful besides, but these are only minor details in reality. Therefore, when doing a startup, go from the needs of your client and the market, and not from technology, and only then your startup will become successful.
At a reprint, an active link to IdeaBlog.ru and an indication of the author of the article (Arthur Welf) are required. The original article is here.
Source: https://habr.com/ru/post/18660/
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