When Liu Hongxing, a 29-year-old translator in Beijing, began looking for a husband two years ago, she didn’t turn to a professional matchmaker, or even to a trusted friend or relative. Instead, she subscribed to two of China’s most popular internet dating sites – Baihe.com and Jiayuan.com.
"My friends recommended them to me and said they were ‘serious’ internet dating websites. I was single and Christmas was coming. So I had a try," she said.
The experience was a success: After a two-year courtship, last October she married a man she met through Jiayuan.
Liu is part of a growing population of upwardly mobile Chinese urbanites turning to the internet for companionship. The fledgling online dating industry has benefited in recent years from a growing number of internet users increasingly comfortable with making friends online.
But profits remain elusive and companies continue to search for a revenue model both they and their customers can fall in love with.
"It’s not easy for internet companies to monetize their user base in China. That’s the same pretty much everywhere in the world. It will take some time and only … true leaders in the sector will be able to monetize," said JP Gan, managing director of Qiming Venture Partners, which was an investor in Jiayuan.
Budding romance
China’s internet dating market was estimated to be worth US$43.9 million in 2008, and is expected to nearly double to US$83.4 million by 2010, according to data from technology research house iResearch. This is still small potatoes compared to the US internet dating market, which Forrester Research valued at US$957 million in 2008 and expects to grow to US$1.6 billion by 2013.
China’s internet dating market has several long-term factors working in its favor, though. Xu Bin, an analyst with iResearch, says China’s demographics have been crucial to the sector’s growth. There are 10 million more males than females in China, and that number is estimated to grow to 30-40 million by 2010.
More importantly, China’s breakneck economic growth has created a generation of twenty- and thirty-something white-collar workers who have left their hometowns to seek success in the city. This nationwide influx into China’s urban centers – which no one expects to end anytime soon – has disrupted traditional means of finding a mate, says Gong Haiyan, founder and CEO of Jiayuan.com.
"Traditional matchmaking by one’s relatives and friends has become more unrealistic. You could be a migrant and your relatives and friends may be far away," she said. "It’s a new personal relationship now, and we have to find our husband or wife by ourselves."
Gong would know something about tradition. The "Little Dragon Lady," as she is known within the industry, comes from a family with a long history of matchmaking in Hunan province. A former factory worker, she began Jiayuan in 2003 as a project for her master’s degree at Fudan University. She received an angel investment of US$292.4 million after graduating two years later.
According to Gong, Jiayuan now posts yearly revenues of US$1.5 million. She expects the number of registered users to grow to 25 million this year from the current 16 million.
Jiayuan is one of seven internet dating firms that received venture capital investment in 2007, says Xu of iResearch. That enthusiasm has since waned.
"The economic situation is gloomy … and venture capitalists will be careful in making investments in this sector. They will not look at a firm’s long-term development, but whether the company can make profits in the short term," Xu said, adding that he expects the size of individual investments in the sector to shrink.
Those who follow the industry believe short-term profits will be difficult for even the most successful internet dating firms to achieve. Most internet dating sites have to lure customers with free memberships, in the hopes that they will pay for VIP services. Thus far, the strategy has met with only limited success.
Fickle users
The challenge of separating Chinese consumers from their money is common among internet firms. But sites that market themselves as "serious dating" sites face an additional obstacle unique to their business, according to Yan Mu, vice president of marketing and a co-founder of internet dating firm Baihe.com.
"The life cycle of the members is quite short. Usually it’s just less than one year. If they find their match, they leave, but also if they don’t find their match, they leave," he said. This fickle user behavior means that internet dating firms must devote significant resources to marketing efforts to bring in fresh crops of new daters.
Baihe is looking to the offline world as a source of future revenues, and, it hopes, profits. Currently, offline VIP services – such as personalized assistance from a professional matchmaker – account for more than 50% of Baihe’s revenues. The company offers the service in Beijing and Shanghai, but is looking to expand to cities such as Guangzhou and Chengdu. Baihe has hired the former head of customer service for white goods manufacturer Haier to lead the division.
The company also worked with the Ministry of Labor to create the government-recognized profession of "marriage counselor." Baihe can now train people seeking a license, and hire the best.
"People in China have been matchmaking for over 2,000 years just based on the matchmakers’ personal abilities and intuition," Yan said. "We found we could build up a system so that normal people, with proper training, can do matchmaking better than most matchmakers."
With these combined revenue streams, Yan says he expects Baihe to turn a profit in the first or second quarter of 2009.
Value added
Although Gong maintains that Jiayuan’s focus this year is building a user base rather than turning a profit, the company is experimenting with new revenue streams. It added online advertising in May 2008 and now offers what Qiming’s Gan calls "virtual steps" – a modified subscription for special services like sending and reading messages and love letters.
But the best hope for Jiayuan and China’s internet dating industry may be satisfied customers like Liu Hongxing.
"My friends recommended to try internet dating. Now after my experience, I recommend it to my friends," she said.
