|MATCHMAKER: CEO Jim Safka has brought men and women together and money to the bottom line. photography by Dan Sellers|
If Match.com was a patient hooked up to a heart monitor,” Jim Safka says, “you’d have thought it was dead.” That was the diagnosis in September 2004. Safka had just been hired away from his four-year stint running AT&T Wireless’ e-commerce division, and Match was ill.
It was a surprising predicament for Match. The Dallas-based company, a division of Barry Diller’s IAC/InterActive Corp., had invented the online dating business back in 1995 and had mostly prospered ever since. Even after the dot-com bust, Match’s revenues soared, climbing from $29.1 million in 2000 to $185.3 million in 2003. But with increasing competition from other paid online dating sites, including cross-town True.com and free social networks like MySpace, revenues were suffering—seven consecutive quarters of no overall growth. Only overseas growth was keeping Match in the black. In response, Match laid off 30 people, and, with the entire industry in apparent decline, more cutbacks seemed likely. In early 2004, Jupiter Research was already carving the tombstone for the online dating business in the U.S., declaring, “the big growth … is over.”
Safka didn’t buy that. The suburban Seattle native, who holds an M.B.A. from Northwestern and had begun his business career hawking Molly McButter butter flavor sprinkles, had come to Diller’s attention after establishing a track record of online success at both E*Trade and AT&T. And, as far as Safka was concerned, online dating was not dead, even if Match’s heart seemed like it had stopped.
Here are four ways he’s brought the company back to life.
1. The Match-oscopy and the Match-ectomy
Safka’s first order of business: perform what he calls a “Match-oscopy.”
“That was in my first 90 days,” Safka says today from his office in Match’s headquarters, just off the Dallas North Tollway near Northwest Highway. “I went into the company and started looking around and talking to people.”
The Match-oscopy revealed, well, let’s call it internal bleeding. “The company looked like a medium-sized bank,” says Safka, 38. “There was a product management group. There was a marketing group. A finance group. An HR group. It was organized functionally, definitely not like a fast-moving Internet company. In addition to that, there were a lot of initiatives that had mushroomed up around the edges of the business. Many of them were in response to what was going on in the industry around Match, things that Match tried to replicate, but really executed in a half-hearted way.”
He does not actually say “half-hearted.” He says something else. But let’s keep with the coronary metaphor for now.
|›› THE TAKEAWAY|
|1 Do not assume that you are the customer or understand the customer.|
|2 Baby Boomers need love—and will pay to find it.|
|3 Internet-surfing singles are overseas, too.|
Among the initiatives: Match tried to compete with MySpace by launching its own “Friends”-like feature, where you could, in addition to finding a romantic partner, also find a tennis partner. It didn’t work. Also, Match tried to compete with eHarmony’s “29 points of compatibility” by offering its own “35 points of compatibility” and a system called the “Total Attraction Matching System.”
“Yeah,” Safka says. “Right.”
During the Match-oscopy, Safka discovered that the general counsel of the company was spending 80 percent of his time working on the legalese of live events—speed-dating events, cruises, concerts, and the like. The events accounted for exactly one percent of Match’s revenue.
Time for the Match-ectomy. After figuring out what was causing the company’s, er, heart problems, Safka started cutting those things out. He got rid of the various functional divisions in favor of a streamlined business model organized around exactly two things.
“How many new subscribers are we signing up each day? And, how long are our customers staying with us? Those are the only things that matter,” he says. “So we put someone in charge of each of those areas and set very specific, quantifiable targets that we could measure each day until we got hitting on all cylinders again.”
2. Going Grey
“This is what I’m going to listen to during our conversation,” Safka says, cueing up a Justin Timberlake song for my benefit. Justin was in town for a concert the night before our conversation, and the Match.com headquarters, some 250 people strong, is abuzz about it. Unfortunately, the volume is low and I can’t tell what song is playing. Maybe it’s “What Goes Around.” Possibly “SexyBack.” Could be “Cry Me A River.” Either way, I know the names of far too many Justin Timberlake songs, and by straining to hear before I chuckle, I ruin Safka’s joke.
No worries. He has plenty more. Safka, who is sporting dark jeans and a vintage-looking Dallas Cowboys t-shirt—it’s got a helmet with a single-bar facemask—seems awfully laid back for a green eyeshade kind of guy. Safka holds a degree in accounting from USC, and though his business at Match might seem a soft one—he is making love connections, after all—the study of hard data dominates his day.
Luckily for him, the bottom line numbers have been excellent since his arrival. Match’s revenues are up some 68 percent, from $185.3 million in 2003 to $311.2 million in 2006. Operating income is hovering around $40 million annually, according to some reports. (That makes Match one of the best performers in IAC, a group that includes well-known Internet brands like eVite, Citysearch, and LendingTree.) And the number of paying subscribers—who pony up anywhere from $17 to $35 a month to meet people on Match—stands at 1.3 million, Safka says. That’s up nearly a third from when he took over, and it makes Match by far the industry leader in that category, with more than twice the number of paying members as any of its rivals.
Online Ad Spending
|As the marketplace for online dating services gets more competitive, the ad dollars for those services, not surprisingly, increases. And, not surprisingly, many of those ad dollars are spent online. Here’s a look at the top spenders of last year. (Jan.-Nov. 2006)|
Source: Nielsen/NetRatings AdRelevance
Safka pays close attention to that subscriber number and its daily fluctuations. He’s constantly checking in to see how many subscribers are lost in a single day and how many are gained, and, for that matter, who those people are. He also pores over customer feedback every day—dialing into the customer service line to listen to calls or reading e-mails that come into the suggestion box.
“That’s a good way to discover problems that we didn’t even know existed,” Safka says. “A lot of people say I’m one of the best quality assurance guys in the company.”
A funny thing happens when the CEO is doing QA: He might also find out who the customer really is. Surprise: It’s not Safka. “When people find out I’m the CEO of Match, the immediate assumption is that I’m some kind of uber-bachelor who has this giant harem,” Safka says. “That couldn’t be further from the truth.”
“I’ve been married for more than 10 years. Happily,” he adds. “So I’ve got no credentials or experience in being single or the problems that have to get solved. And, it’s a very dangerous thing to assume that you are the customer and you understand the customer.”
Because he made no such assumptions, Safka found something unexpected when he first began breaking down Match’s data. Though there is a large disparity between total users—15 million—and paying subscribers—1.3 million today—that disparity is not as great among users who are over 50.
“When we looked under the covers of our traffic to try and understand it, we found out that young people ages 18 to 25, we were seeing less of them. They were going to places like MySpace. But people over 50, that was growing rapidly.”
So, what does, say, a 55-year-old user value more than, say, a 25-year-old user? “They like bigger fonts,” Safka deadpans. He’s only half-joking. Match did, in fact, revamp their site in 2005, switching to a cleaner, simpler design with lots of one-click buttons to make navigation faster and less intimidating to Internet newbies. It worked. One-quarter of Match’s paying membership is now over 50. That’s double what it was when Safka arrived in Dallas.
That change has been a key driver in Match’s turnaround. By tapping into the Boomer market early, Match got out in front of a trend. One estimate suggests the number of over-50 online daters has ballooned by more than 350 percent in this decade. And, unlike, say, that stereotypical 25-year-old who wants everything on the Internet to be free, including Justin Timberlake MP3s, Baby Boomers comprise “a segment that has money and is willing to spend it,” Safka says.
3. Adding Value. (And Charging More For It)
Online dating used to have an image problem. It was akin to meeting someone through one of those personal ads in the back of your local alternative weekly. But that was a long time ago. These days plenty of people are finding Mr. and Mrs. Right online. “Everybody’s got a story for me,” Safka says. “Everybody was at a wedding recently of a couple who met on Match.com. Everybody.”
Sounds like a good thing. But if everyone is doing the online dating thing already, then where does a company like Match find growth? Again, no worries, Safka says. “There are only 3 million subscribers out of 90 million single people in America alone. If you look at the worldwide opportunity, that number is at least double. We have 1.3 million of those 90 million. So there’s plenty of room to grow.”
He has a point. The U.S. Census Bureau reports that there are 95.7 million single adults in the U.S. But the Pew Internet & American Life Project last year said that just 7.4 million single adults sought relationships online in 2006. “We’re the category leader,” Safka says, “and if this business is going to grow, we have to grow the category.”
Actually, there is one other way. Match can increase revenues by adding premium products, and that process is well under way. One new product, launched last year, is a partnership with Phil McGraw, TV’s mustachioed “Dr. Phil.” For an extra $9 a month, Match subscribers can access the details of a three-step plan that will help them select better dating partners and clean up their own dating act while they’re at it. Guess who the service is really popular with? Right. Boomers.
This year, Match is partnering with another doctor—a “biological anthropologist” named Helen Fisher—on a new service called Chemistry.com. Think of it as a more clandestine and scientific Match, or, as Safka puts it, Match with a “more formal communication choreography.” Through a system called 1-2-3 Meet, users share information before they meet, but they only meet if the system determines they’re likely to have, you know, chemistry. “If you can know something about the basics of human personality,” Fisher says, “then you can match that with some elements of brain chemistry and create the magic of romantic love.”
It sounds weird, sure. But it’s selling. Match has signed up 200,000 users who pay as much as $49.95 a month to use Chemistry. And Safka is convinced that there are more add-ons to come. “You look at what people’s alternatives are for meeting somebody—potentially the most important thing they’re going to do in their lives,” Safka says. “The social system for enabling people’s paths to cross is so wildly inefficient that I was convinced, and I still am, that adding a little structure to that process, giving folks a chance to meet people who they otherwise would never meet, that’s an extraordinary service.”
Notice that Safka puts the emphasis on meeting and not making “love connections.” Match trumpets its successful pairings in marketing materials and at the corporate headquarters where a regular stream of baby pictures from Match couples arrives by mail. But, Safka is careful not to take too much credit, or accept blame, for failed couplings. “You control the variables you can, not the ones you can’t,” he says. “We’re all about introducing people. What happens from there, we can’t control it. So we don’t try to.”
But, for an even heftier fee than Chemistry, Match will take control of the entire pre-meeting process for new daters. Its latest product, launching nationally later this year, is Match.com Platinum, which has been testing in Dallas. Platinum lets users pay a higher rate to hire a personal concierge of sorts, someone who will cull Match’s membership for potential dating partners, make recommendations, and even arrange meetings for Platinum members.
Guess where the idea for Platinum came from? “Our customers were asking for something like this,” Safka says. “To grow, we’ve got to continue to figure out how we can continue to add more value in what Match does, and we have to continually understand customers. And they seem to have the answers for us.”
4. Learning to Say, “I Love You” in Chinese.
“In a place like France, you don’t use the word ‘marriage’ at all,” Safka says. “They’re not interested in marriage. They’re interested in meeting someone who maybe they can share a piece of the road with or maybe it’s the whole road—it doesn’t really matter to them.”
But it matters to Match. Earlier this year, the company added to an already large European presence by acquiring Netclub, an online dating site in France with 4 million members. With the purchase, Match becomes the No. 2 purveyor of Internet dates in France. It’s also No. 2 in Germany, and Safka says Match is the market leader in the U.K., Spain, and the Scandinavian countries, where the company has had a presence for several years. Match is now growing in Asia, too, having also picked up eDodo, a social networking site in China, earlier this year. Some 40 percent of Match’s business is now conducted overseas, and Safka thinks that will swell to half within two years, even with steady U.S. growth. Europeans are having trouble meeting people too, it seems. And companies like Match and Yahoo have easily translatable technology to help. “Culturally, each country is very different,” Safka says. “The process of courtship is different. But the desire for a relationship and the lack of efficiency in the social system for getting people together is pretty universal.”
That’s not to say all the overseas growth is going to be easy. Take China, for instance. The online dating market is potentially huge, but presently small. eDodo has just 180,000 members. Signing up new ones means partnering with China’s mobile phone companies because the Chinese don’t have the same access to credit cards that we do. So they often bill online access, and other purchases, directly to their phones. “The Chinese market is going to take a lot of time to develop,” Safka says. “But we like the market a lot. We’ve gotten to the market early. And we’ve got a lot of patience.”
Watch out, Dr. Phil. That sounds like good dating advice.
Love for Sale
The Dallas-Fort Worth area is the sixth-highest market in terms of dollars spent on dating. For now. Of the top 10 markets, Dallas-Fort Worth showed the second-highest growth from 2005 to 2006.
Jan.-Nov. 2005 (mil)
Jan.-Nov. 2006 (mil)
|San Francisco -Oakland-San Jose||$4.9||$6.7||36%|
Source: Nielsen Monitor-Plus
CEO SNAPSHOT JIM SAFKA, CEO of Match.com
BORN: 1968, Chicago, Ill. Raised in Medina, Wash.
AN INAUSPICIOUS START: His first job was working weekends and afternoons during high school at a downtown Seattle jewelry shop. It was his older brother’s job, actually, but Safka got to do it when he agreed to split his salary with his sibling. Not smart.
EDUCATION: Undergraduate degree in accounting, USC; M.B.A. from the Kellogg school at Northwestern. Smart.
PERSONAL: Married to wife, Mandy. Two children, Tallulah and Quinn.
WHY YOU SHOULD BE NICE TO THE NEW GUY: Safka’s first jobs out of USC were in marketing for both Paramount and Warner Bros. “When I was at Warner Bros., Terry Semel was running the studio,” he says. “Now he runs Yahoo,” whose Yahoo Personals are a major Match.com competitor.
MMM, HOT OIL AND BUTTER SPRINKLES: Out of Kellogg, Safka went to work for Alberto-Culver, a diversified consumer products company. He served as a brand manager for Molly McButter butter flavor sprinkles and later in the same role for Alberto Vo5 Hot Oil Treatment. “I had to get out of there,” Safka says, laughing. “I started to lose my hair. I think it was something to do with being too close to the factory.”
CONNECTING THE DOT-COMS: Safka and his remaining hairline headed next for Intuit, where he worked as a brand manager on Quicken Financial Planner, a product that had online applications. From there, he moved to E*Trade. It was the mid-’90s and dot-coms began to boom. “I saw the whole Internet thing through at E*Trade, from its heyday to when the bubble burst,” Safka says. Post-bubble, he moved on to AT&T Wireless, where he ran Ma Bell’s e-commerce division from 2002 until Match.com called in 2004.
MMM, MORE BUTTER SPRINKLES: “It’s not the product, it’s the challenge and the people that matter,” Safka says. “Because, with the right challenge, you can get excited about any product. When I was working at Alberto-Culver on Molly McButter butter sprinkles, I was passionate about those butter sprinkles. We’d go to parties and my wife would get so upset with me because it’s all I would talk about. You couldn’t get me to shut up about them.”
ACTUALLY, SELLING BUTTER SPRINKLES MIGHT MAKE MORE SENSE: Safka says he hasn’t modeled Match after any particular company, because, he figures, there’s no model for it. “One of the big conundrums of our business is when we do our job extremely well and two people meet, they’re no longer our customer. Can you find another business where, when you provide great service, your customer leaves you?”