Their Online Dating Site was Struggling
Throughout Sam Yagan's career, free had been the operative word. As a math major at Harvard in the late '90s, Yagan forever altered the market for student cheat sheets, then dominated by the iconic black-and-yellow CliffsNotes booklets, with his SparkNotes, a free Web-based copycat. Next, Yagan went after the music business, creating the file-sharing tool eDonkey. Before the company was litigated out of existence by a record-industry lawsuit, it boasted the world's most popular file-sharing software, bigger even than Napster.
Now Yagan had set out to bring free to online dating, a growing market dominated by a number of, as Yagan saw them, expensive and unsatisfactory competitors like IAC's (NYSE:IACI) Match.com. Yagan figured he could inflict serious damage on Match, the industry giant with 2007 revenue of $349 million, and other big subscription sites such as eHarmony and JDate by using the same strategy he employed with SparkNotes. "Take an existing business," he explains, "reduce the revenue that industry produces by offering a free product, and then claim the remaining revenue for yourself."
He had spent three years building his dating site, OkCupid, with partner Chris Coyne and had raised nearly $7 million. But something wasn't working. The company needed a massive audience to make money. Instead, after two years of rapid growth, its Web traffic was flat-lining while competitors were growing rapidly. By early 2007, Yagan realized his window of opportunity was closing. He needed to jump-start his company or face a slow death.
To deliver to advertisers and turn a profit, Yagan figured he needed eight million users and two million regular daters, roughly eight times his current traffic. If those numbers weren't daunting enough, new free dating sites were popping up and beating Yagan at his game. PlentyofFish.com, a fast-growing Canadian site founded in 2003, surpassed OkCupid, attracting nearly 1.5 million unique viewers a month in the U.S. by early 2008. PlentyofFish.com, run by a solo entrepreneur with one full-time employee, was also wildly profitable, earning some $10 million a year. Another looming threat: People were turning to social networking sites Facebook and MySpace as de facto dating services. By 2007, Facebook was attracting more than 30 million visitors a month and generating $150 million a year in advertising revenue.
Coyne and Yagan could try fighting back with an ambitious advertising campaign, but Yagan wasn't sure what it should look like. "Any place you might advertise to attract daters, someone's already there," he says. "You might think Times Square. But JDate's there. You might think Google (NASDAQ:GOOG), but Match is willing to spend well over $50 per subscription." A quirky dating site seemed like a perfect fit for a guerrilla marketing campaign, but a test run, in which Coyne and Yagan spent $10,000 to distribute 10,000 red roses in Boston, yielded few users. "It was a flop," Yagan says.
A second possibility was to embrace Facebook rather than compete against it. In May, Facebook founder Mark Zuckerberg announced that outside software developers could build programs, called widgets, that would operate within his company's wildly popular social network. The problem, as Yagan saw it, was that operating inside Facebook would seriously constrain OkCupid's ability to sell advertising. Furthermore, he worried that OkCupid risked being seen as just another widget maker in a crowded marketplace.
As various promotional options were exhausted, Yagan found his thoughts turning back to a wacky idea he and Coyne had once tossed around: a dating site with "a blind-date button." What had been little more than a running joke suddenly seemed like a way to stand out from the crowd. At best, the novelty of instantaneous, face-to-face blind dates might catch on among users inundated with e-mails, phone calls, and IMs; at worst, it might at least generate buzz for OkCupid.
The Decision Yagan and Coyne decided that the potential rewards of press coverage and increased Web traffic from a blind-dating site outweighed the benefits of buying advertisements or developing more features for OkCupid. They began work on CrazyBlindDate.com in July 2007 and assigned three of the company's nine engineers to build the website.
The site made it easy for users to go on blind dates within hours of signing up. It severely limited the amount of information users could see about prospective dates. A blurred photo and a sentence-long description about one's expectations for the evening were required, with the option to answer three additional questions, including, "How will I recognize you?" Yagan knew that the site's appeal -- the novelty of instantaneous hookups -- might be off-putting to some users, so he instructed his software developers to add an option of arranging double dates, which would offer safety in numbers. "Men will look at this and say, 'Sweet; I can get a woman delivered to me,' " says Yagan. "But for some women it'll seem creepy. This way they'll only need to bring half a canister of mace." To further mollify wary users, he also set up a text messaging system that routed messages through his company's servers. That way daters could contact one another without exchanging phone numbers.
Yagan decided to kick off CrazyBlindDate.com in Austin because he thought people in a socially liberal university town would be more likely to seek blind dates. On the evening of the launch, in October, Yagan, Coyne, and their engineers gathered in the company's Manhattan office. They munched pizza and drank cheap champagne out of red plastic cups, waiting to watch CrazyBlindDate.com in action and standing by to fix software bugs. There were more bugs than dates. Each night for the next few weeks, only a handful of love connections were made online.
The problem: The media had more or less ignored the launch. With the exception of some blog mentions and a product placement deal with an Austin radio station, KROX, no media outlets covered CrazyBlindDate.com during the first month. Even the radio ad was a disappointment. Yagan says he paid the station $6,600 with the understanding that Deb O'Keefe, a morning deejay, would go on a blind date and endorse the website. But the station balked, citing an editorial policy that prevented O'Keefe from doing the segment.
What dates there were didn't always go well. Callie Snyder tried out the service, then blogged a review of one date gone comically bad with a young guy who professed a love for poker and pornography. "It's one of those bargain basement things where you just don't know what you're going to get," says Snyder, who tried to use the service two more times before giving up.
Despite the lukewarm trial run, Yagan and Coyne persevered. "There's this idea that you leak something to The New York Times, and it magically appears on the front page," Yagan says, "but that doesn't really happen." He spent $43,000 on radio placements to launch in New York, Boston, and San Francisco in November. This time, the radio stations went along with the plan. In New York, "Goumba Johnny" Sialiano and "Hollywood" Sean Hamilton, hosts of the afternoon rush-hour show on dance station WKTU, repeatedly praised the site, claiming that even their "loser" producer had wrangled a week's worth of blind dates. The lovesick responded, logging on in greater numbers, and the site was organizing 50 dates per night by January.
Finally, the media took notice. From November to March, the site garnered dozens of mentions -- including in the New York Daily News and Boston magazine and on CBS's The Early Show and Fox's The Morning Show. Though OkCupid was not mentioned in the TV segments, many of the newspaper articles and blog entries noted the existence of CrazyBlindDate.com's less crazy parent company. "It's been a real media phenomenon," says Yagan.
That may be a stretch. But OkCupid now attracts two million users a month and 550,000 active daters -- roughly double the numbers of a year ago. Revenue surpassed $1 million in 2007, and Yagan expects it to double in 2008. Thanks to links from blogs, including the popular TechCrunch, OkCupid's rank on Google's results page for the search online dating has jumped from fourth place to first place. Yagan says the attention should make it easier to raise money and hire more engineers. "This project reaffirmed us as the leading innovator in the space," he says.
The buzz hasn't come cheaply. The tab for CrazyBlindDate.com has been about $60,000, not including salaries for three engineers or the more than $100,000 paid to OkCupid's PR firm. Still, Yagan figures the PR payoff has been worth the cost. "At this point, any future growth is going to be driven by where we can get PR," he says. "Ultimately, whatever we pay out has to come back to OkCupid, or we'll shut it down, but it's hard to quantify. The jury's still out."
The Experts Weigh In
Try a live event
I like the way they put a new, slightly off-the-wall spin on blind dating. But I think CrazyBlindDate is more interesting as a product than as a media strategy. When we do guerrilla-marketing campaigns, we absolutely want PR, but the campaign has to live on its own. I would have focused on doing something in front of a lot of people, either by organizing a public event where two people went on a blind date or using social media to document the dates. That way the company wouldn't be dependent on a journalist's writing about it.
New York City
Focus on women
A dating site can succeed only if it attracts a lot of women, and that's the problem with CrazyBlindDate. For any dating site, women, not men, are the customers. Women don't want a crazy blind date; they want safety and security, and they don't want to feel embarrassed. I would take the money they're spending on PR and put it toward affiliate marketing to women. Yagan and Coyne are clearly smart guys: They should start thinking about how to lower the cost of customer acquisition and build a differentiated audience.
Founder, former CEO
Get beyond free
They have come up with a novel angle in a truly crowded space. From an investment perspective, spending $100,000 to $200,000 to double your traffic sounds pretty cost effective. But they need to be more creative about monetizing CrazyBlindDate. Free, ad-supported online dating is hard. Instead of thinking of this as a PR stunt, they should look at it as a possible new business model. For instance, they could let people go on online "blind dates" for free and then make them pay five bucks to meet up in person.
Theresia Gouw Ranzetta
Palo Alto, California