Eharmony Case

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Why profiled on Startup Review eHarmony established a new category within an online market that many considered to be dominated by two well-established Internet brands in and Yahoo. eHarmony was launched in August 2000 with $3M in funding and grew into a rumored $100M+ revenue, highly profitable company in less than 5 years (note: revenue currently estimated at $165M per year). By the time Sequoia Capital and TCV invested $110M into the company in November 2004, it was rumored that almost $80M of the round was used to buy out founders shares. Not bad results for a company in a market that not many VCs would have invested in during 2000/2001.

Interviews conducted: Greg Waldorf, eHarmony‟s current CEO and the company‟s founding investor. Several conversations with product management people at competing online dating services. I also spoke with online dating industry analyst Mark Brooks, who publishes a great blog called OnlinePersonalsWatch, and who I look to for all news/analysis in the online dating world.

-------------------------------------------------------------------------------Key success factors Designed and marketed product for large, underserved market segment (serious relationship and marriage seekers, particularly women)

eHarmony made its mark in the online dating landscape by establishing its brand as the site for the serious relationship seeker, particularly women. In some ways this is classic market segmentation – targeting your product, brand, and marketing to a particular market segment. However, to say that eHarmony had this explicit strategy as the result of an MBA-type marketing analysis is incorrect. Dr. Neil Clark Warren, eHarmony‟s founder and a 35-year clinical psychologist, believed that his years of research could be applied online to better matching people for successful marriages. His research pointed to the fact that some people just aren‟t compatible for each other, and this is something that could be screened for with psychological testing. The result was a dating site that at the time went against all the standard practices and conventional wisdom in the industry. eHarmony didn‟t allow users to search and browse the database for potential mates. Instead, eHarmony had users complete an exhaustive questionnaire and based on the results fed users an allotted amount of potential mates. This process made for a much better user experience for eHarmony‟s target demographic in several ways. One, women didn‟t feel like they were being judged mainly on their photograph and that potential suitors were being matched to them on criteria other than looks.

Second, the entire eHarmony process is very time consuming. It takes 40+ minutes to fill-out the initial questionnaire, users must court potential mates through a series of essay questions, and users must review every potential mate. By making the process so time consuming, eHarmony has the natural effect of weeding out non-serious users. This makes the product much better for the serious female

relationship seeker who doesn‟t have to spend as much time determining whether a male suitor is just seeking a casual relationship.

Third, eHarmony did a good job of leveling the playing field for its users. On traditional dating sites, over 80% of e-mails go unanswered. This is due to what is called the “lightning rod” effect – a few attractive users getting the majority of inquiries. This leads to frustration for both parties. Those sending the e-mails (mainly guys) never hear back after investing time to write, and those receiving either get too many inquiries or not enough inquiries. eHarmony forced users to consider and respond to a set of potential matches before providing that user with the next set of potential matches. eHarmony was the first site to moderate the flow of introductions between users, thereby leveling the playing field for all users.

The result of creating a product suited to women seeking marriage or serious...
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