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Spark Networks Inc (LOV): A Strong Investment in Online Dating

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Seen any online dating commercials lately? Chances are they were for market leaders Match.com and eHarmony.com. While these two online dating sites offer a stream of revenue for their parent companies, they also get lost in portfolios of online properties. Spark Networks Inc (NYSEAMEX:LOV) is a pure play on the online dating business and offers investors several ways to play niches in that subscription market.

About Spark Networks Inc (NYSEAMEX:LOV)

Started in 1997, Spark Networks Inc (NYSEAMEX:LOV) began with the property Jdate.com. That property,  the leading online dating community for Jewish singles, and Christianmingle.com make up the majority of the company’s portfolio and revenue. Here is a look at the other properties owned by the company: Believe.com, dailybibleverse.com, christiandating.com, faith.com, christiancards.net, ldssingles.com, blacksingles.com, silversingles.com, catholicmingle.com, bbwpersonalsplus.com, hurrydate.com, spark.com, jewishmingle.com, adventistsingles.com, interracialsingles.com, deafsingles.com, militarysingles.com

Jdate

Jdate is the leading Jewish dating site in the world, with sites in the United State, France, United Kingdom, and Israel. The site has over 750,000 members who create profiles and connect with other members. Amazingly enough, the site is responsible for 52% of all Jewish marriages that start online. This translates to number-one market share and a higher percentage of resulting marriages than all other Jewish dating sites combined.

ChristianMingle

 Spark Networks Inc

ChristianMingle was founded in 2001 and is now the leading faith-based online dating site in the world. The site has over nine million members, including over three million added in the last year. In the most recent first quarter, Spark Networks Inc (NYSEAMEX:LOV) reported a 51% increase in paid subscriptions for its ChristianMingle property. The site remains the most important piece to Spark Network’s (NYSEMKT:LOV) portfolio and has put up huge growth numbers. In the first quarter of 2012, ChristianMingle passed Jdate as the biggest revenue contributor for the company.

Financials

In April, Spark Networks Inc (NYSEAMEX:LOV) reported strong first quarter financials. Revenue increase 19% to $17.3 million from the prior year. Revenue also increased 6% from the prior quarter. This marked the ninth and tenth quarters, respectively, for year-over-year and sequential growth. Average paid subscriptions increased 23% to a record 300,000. The majority of revenue came from ChristianMingle ($9.9 million) and Jdate ($6.5 million). The biggest positive for the company going forward could be its move into mobile. In the first quarter, mobile log-ins rose 63% on ChristianMingle and 66% on Jdate. Spark Networks also launched a mobile application for its ChristianMingle property during the month of April.

Competition

Match.com is the largest online dating site in the United States. The site, which is owned by IAC/InterActiveCorp (NASDAQ:IACI), is part of a portfolio that also includes chemistry.com, ourtime.com (50+), blackpeoplemeet.com, singleparentmeet.com, loveandseek.com, and personals.com. Loveandseek.com poses the biggest threat to Spark Networks’ ChristianMingle.com, as it caters to Christian singles.

The problem with IAC/InterActiveCorp (NASDAQ:IACI) is that it is not a pure play on online dating. The company also owns search, travel, and other internet-related assets. In fiscal 2012, online dating contributed $713 million of the reported $2.8 billion in total revenue. This represents 25% of the company’s yearly revenue, giving investors a way to play the online dating market.

While Match.com boasts important numbers of 1.8 million paid subscribers, eight languages, and 25 countries, the site does not cater to one particular niche and isn’t available as a direct investment. Match.com’s main rival eHarmony is privately held, so there would always be the possibility of InterActiveCorp trying to buy out Spark Networks to strengthen its position in the online dating market and diversify into new niches. After all, InterActiveCorp has bought out smaller dating sites OKCupid and Meetic in the last two years.

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