I've always admired Markus. In part, because of his ability to run a very successful business by himself, but also because I tend to enjoy rooting for the home team; I live in Vancouver.
That being said, I'm not sure where he's going with this. In many ways this seems like the beginning of the end for him. Granted, he knows his industry better than I do, but here's my take:
1. He runs a free service, at huge profit margins. His competitors all run paid services.
2. The likelihood that people would view paid dating as a luxury they can no longer afford is higher than ever.
3. He's worried about "hundreds of millions of dollars" that he's missing out on - that's usually a recipe for disaster.
If anything, I think he should stay as static as possible. The odds that much of the paid traffic from his competitors comes his way in the next little bit is extremely high. Moving to a paid site destroys the only competitive advantage he has. It's suicide.
I've seen this move before with other entrepreneurs, and I've never really seen success from it. What it usually symbolizes is that the particular niche has reached its potential, and no real innovation is required at this point. The founder is basically getting bored, and looking for new challenges. What needs to happen though is that the entrepreneur him/herself needs to leave/end the business. You can't evolve into new markets and bring your business with you without destroying the comfortable fit that your brand already has in the marketplace.
From my 2 cents, he should be looking for buyers, not trying to become one.
I think he's going to keep his current site and create another one separate from his current. Am I wrong?
Really he just wants to keep users that come to his site and aren't happy with the free type dating site. Instead of them going to match.com or w/e they'll go to his pay site.
Wouldn't it be a lot easier to call up match/cupid/eharmony and discuss referral fees for driving traffic to these sites? I think he'd be better off looking for a partner. Perhaps an exclusive deal?
What value is adding a pay site to an over saturated market bringing here? Why would you play against companies that are more resourceful and experienced using their rules? Seems to me that - long term - this is a lose/lose all around for him.
In order for this to be even remotely successful, he needs to beat the pay sites at their own game. Otherwise, his "pay site" will still be disregarded, and he'll still "lose revenue" to the big guys. The odds are stacked against him. The big guys can bear a price war much better than he can, and that's what he's jumping into, essentially.
Maybe he's tried referrals and sites like Match.com, which launched a free version, turned him down or paid too little because they want to take over the vertical too.
I'm not seeing how a referral deal would be a "one time fee" at all. In my mind, it would be recurring based on the number of click throughs or sign-ups or whatever.
He doesn't want to be an affiliate, he wants control of it all.
And my point is that this is where greed can sometimes bite you in the ass.
It would be recurring assuming he gets a certain amount of signups each month. But in month 2, he no longer gets that money from the customers - that goes straight to the other company.
He may get a one-off payout of $100 or so per signup, but if he had his own service he would continue to make money from the original signups while gaining new ones each month.
a good traffic deal pays based on the turnover generated at the destination site, I'd definitely pass on a 'one time fee' per signup, unless it is very substantial.
I think when he says "by sending people to competitors sites." he's suggesting that he already gets referral fees (why else would he send them?). I think watching the referral fees roll in makes him think - "these people are willing to pay x to get my customers, therefore they must be making y >> x." He may be wrong.
Ask HN: I have site: somoscompatibles.com it is the same concept as eharmony.com and chemistry.com. It is geared towards Mexico and Spanish but it can be converted easily to English. I haven't been able to devote a lot of time to market it but the site has been working fairly well for over a year and I feel users are very loyal to it. It requires very little maintenance on my side. I feel very confident on the code it represents about a year's work. I will like to approach Marcus, I am not too interested on just selling the site since I do not really need the money but it does seem like a good match.
So my question is how should I approach Marcus and what type of agreement do you think would be beneficial for both of us.
I will like to approach Marcus, I am not too interested on just selling the site since I do not really need the money but it does seem like a good match.
My first suggestion would be - assuming what you say here is true - to be concrete at what you would want out of this, if not money. Fame? A nice CV tagline? What?
Once you have that down, you would tailor the approach strategy to enable that outcome.
Yes you are right, that's probably the first question I should ask myself. I guess I would like to look at two possibilities: one just selling the software and the second one to be an active contributor to the project.
edit: grammar.
If you believe his observations about the differences between free and paid sites, it would seem very difficult to reconcile them into one freemium site. You'd essentially have two tiers of users, with separate pools of personals and at least some variation in design.
Another challenge for PoF is reconciling their business models. AFAIK, right now PoF makes its money from selling leads to premium dating sites. If they're going to run their own premium site, doesn't that risk cannibalizing that business?
I don't always believe everything he says but he does sometimes make some good points. He says he makes his money entirely off google ads but then again he said everything runs off varying numbers of servers (it varies according to which article you're reading, sometimes it's "it's only 2!", sometimes more and on articles like this one: http://highscalability.com/plentyoffish-architecture mail servers and such aren't even mentioned) so I find that very fishy.
These assumptions he makes about free vs paid are reasonable but it's probably just a gut feeling guess.
If you actually look at pof it looks like garbage. No one would want to pay to have their photo resized so terribly and have basically no features. When you're paying for a service you have an entirely different set of expectations. pof works because it has a very large user base. That's all you need for a free site to work. For a paid site you need quality and he's famously very lazy so that's why he's looking to buy one instead of actually getting to work to build one on his own.
It's possible for a dating site to work on the freemium model. It's isn't for pof though, not without a lot of work he isn't willing to put into it.
I think he's going to find that the only ones he'd want to buy are the ones that aren't selling.
Match.com started a free site to get plentyoffish's traffic, so plentyoffish starts a paid site to go after some match.com traffic, it's a pretty smart move in my opinion.
From what I can tell, while free and paid dating sites are largely the same, their market is different; most people if they can afford it and want to pay will choose Match.com due to its popularity; some may also setup a profile on plentyoffish and the other free sites, but since they paid for Match, they'll likely use it more.
Markus knows exactly what traffic goes out via his ads to third party paid dating sites, and how many of those never return, so if he can make that traffic and sales his, it can only be a smart move!
My feeling is we'll see another hotornot kind of development here. Markus will try to go with a paid model, fail - because his thinking wouldn't work in the new context, and either sell the site or leave things as they are now.
A cynical take: saying you are in the market for a pay dating site is a way to get inside information about running a pay dating site. He is going to have all kinds of small sites sending him their numbers on signups/conversions, etc. It would be nice to see all that and know which models are working best. Heck, he even says "I’m going to have a lot of work to do to figure out how to run a paid site properly."
I don't think an ad model is that effective in a bad economy. So he is probably losing lots in revenue and trying to find ways to generate new revenue. Just like Google are way more aggressive with a freemium model for Google Apps...
it sounds like he is listening to other people and the media too much and maybe questioning his rightful place in the land of internet fame.
undoubtably any paid site that is hooked into plentyoffish.com will get a flood of referral traffic, and that is a major competitive advantage. regardless it will be a major time consuming undertaking and he might hate all the work involved.
I feel like he needs a number 2, biz dev guy/gal to put together a big time referral deal with one of the major paid sites. then look at the ad space and hook in some premium ads that pay more then Adsense. google is reaping huge rewards here and a big time advertisers would add huge money to the bottom line, without so much work involved. i would love that gig.
I'd take that gig even with the work. Alas, it isn't my industry, and if Markus actually wanted that person he'd probably be able to find much better resumes than mine in that respect.
me too, and yep likely people out there with loads more experience then me, but it would be an awesome gig and seemingly a quicker path to those "million of dollars" he is missing out on.
That being said, I'm not sure where he's going with this. In many ways this seems like the beginning of the end for him. Granted, he knows his industry better than I do, but here's my take:
1. He runs a free service, at huge profit margins. His competitors all run paid services.
2. The likelihood that people would view paid dating as a luxury they can no longer afford is higher than ever.
3. He's worried about "hundreds of millions of dollars" that he's missing out on - that's usually a recipe for disaster.
If anything, I think he should stay as static as possible. The odds that much of the paid traffic from his competitors comes his way in the next little bit is extremely high. Moving to a paid site destroys the only competitive advantage he has. It's suicide.
I've seen this move before with other entrepreneurs, and I've never really seen success from it. What it usually symbolizes is that the particular niche has reached its potential, and no real innovation is required at this point. The founder is basically getting bored, and looking for new challenges. What needs to happen though is that the entrepreneur him/herself needs to leave/end the business. You can't evolve into new markets and bring your business with you without destroying the comfortable fit that your brand already has in the marketplace.
From my 2 cents, he should be looking for buyers, not trying to become one.