Their Online Dating Site was Struggling

Was a blind-date stunt really the answer?

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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.

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