This document is authorized for use only by KYLE MATTICE in MGT 509 Spring 2015-1 taught by Keith Yurgosky, University of Scranton from March 2015 to August 2015.

This document is authorized for use only by KYLE MATTICE in MGT 509 Spring 2015-1 taught by Keith Yurgosky, University of Scranton from March 2015 to August 2015. For the exclusive use of K. MATTICE, 2015. eHarmony 709-424 Chemistry tried a “rejected by eHarmony” advertising campaign, with the tagline, “Who knows why eHarmony has rejected over a million people looking for love? But at Chemistry.com, you can come as you are.”47 eHarmony did not react to the advertisements. Yahoo! Personals eHarmony also competed with Yahoo! Personals which attracted seven million unique visitors and 5% of all visits to dating sites. Personals was a business line of the Search division of Yahoo!, which also included Yellow Pages, Maps, and Shopping. In addition to Search, Yahoo! had the following divisions: Front Page, Mail and Messenger, Media, and CoBranded Internet. In 2007, Yahoo! attracted a total of 107 million unique visitors, and earned $695 million on $6.9 billion of revenues, $12 billion of assets, and $9 billion of equity. Yahoo!’s overall profitability was at least 5 percentage points lower than it was in 2006, as operating expenses increased faster than revenues. Sales and marketing accounted for one-half of Yahoo’s! overall operating expenses, while product development contributed one-quarter. Yahoo! developed the Personals line internally in 1997 and relatively quickly rolled out the service to 15 different countries. The service was not differentiated from a typical paid dating website—users could browse a few personals for free, but to continue browsing or to communicate with others they had to buy a subscription. The service did not change much over the first 10 years of operation, except for the introduction of Yahoo! Personals Premier in November 2004. Launched in response to eHarmony’s success, the new service used results from relationship and personality tests to search and match individuals. It cost $34.95 a month, $15 more than Yahoo!’s regular service. The service was not very successful, largely because Yahoo! did not put significant resources behind the business. The company did not advertise on television, but spent a total of $17 million in 2007 on Internet advertising through diverse Yahoo! properties and other search engines. Despite the lack of advertising support, Personals contributed approximately 2.5% to Yahoo!’s revenue, with estimated average revenue per customer of $16 per month.48 Options With the competitors in full attack mode, Waldorf knew that eHarmony needed to respond very soon. Together with Steiner, the COO, they continued to debate four different options. The first option was targeted at defending eHarmony’s position as the leading matchmaking company in the long term relationship segment of the market. Central to this option was a rapid increase in the number of paying members to deny Chemistry a chance to grow. Reflecting on this option, Waldorf commented “Two years ago, I believed that we had diminishing returns to subscribers in the network. I no longer believe this at all. There is still a massive user satisfaction effect to having more users.” Few at the company believed that increased advertising alone would be sufficient to drive customer growth; some favored reduction of barriers to joining the site and encouraging the use of Fast Track communication. Selling memberships to anyone who wanted to purchase a subscription could also be considered, but then the company could not be as confident in recommending matches that resulted in high levels of marital satisfaction. The second option entailed broadening the customer base to include more casual daters. Waldorf believed that the company could only expand as far as medium-term relationships without seriously undermining its credibility with marriage-minded individuals. Although this option would expose eHarmony to more intense competition with Yahoo! Personals and Match, the introduction of the matching algorithm to this segment could provide a strong point of differentiation. Given that no more than 5% of the 94 million U.S. singles were paying members of an online personals site, Waldorf reasoned there were many people interested in medium-term relationships who could benefit from eHarmony’s matching algorithm.