Deal Radar 2009: Zoosk

Today’s Deal Radar moves the spotlight from enterprise software and open source to a topic that has not made an appearance recently: online dating. Zoosk, a dating network, was founded by Alex Mehr and Shayan Zadeh. They had met as students at Sharif University of Technology, Iran, and reunited in January 2007 to start a company called Pollection. The idea behind Pollection was to leverage social media to enable quick and cost-effective market research for small and medium businesses by distributing polling widgets on blogs and social networks. Just as they were about to release the first version of their product, Facebook opened its platform to third-party developers.

Merh and Zadeh saw this as a great opportunity to distribute their polling widget and created a series of smaller applications on Facebook that were built on top of the polling technology as promotional vehicles for their multimedia polling widget. One of their fastest-growing applications was Sex Appeal, which allowed Facebook users to rank their friends based on how sexy they were and get attractiveness scores and titles in the process. Slowly, Sex Appeal turned into a dating platform as Alex and Shayan recognized the demand for such a service inside social networks. They decided to focus the company in that direction and launched Zoosk in December 2007 on Facebook as a dating property built for social network users.

The online dating market worldwide is a $4 billion industry that was fairly stagnant when Zoosk was launched. The established players, such as Match.com and eHarmony in the US, hadn’t been challenged to a large extent, since it was very hard to attack a big market without investing huge dollars in customer acquisition to reach critical mass. However, with the opening of Facebook and then OpenSocial, it became possible to reach large numbers of consumers cost effectively. Zoosk took advantage of these market-changing forces to gain market share among audiences, especially those that traditional online dating couldn’t reach out to: 25- to 40-year-old singles.

While other players built a layer on top of Facebook for discovery purposes, Zoosk wanted to build a fully independent community inside it. So while others relied on Facebook profiles, Zoosk allowed singles to build full dating-oriented profiles, separate from their Facebook identities, on Zoosk. 

Zoosk’s aim was to turn the traditional online dating experience on its head by integrating it with the social networking experience via the Zoosk application, which Facebook, MySpace, Hi5, Bebo and Friendster users can add to their profiles. Users (known as Zooskers) just need to log into their Facebook or MySpace, for example, to check their Zoosk inbox for winks and flirts, or browse their daily matches to connect with someone they find appealing.

Riding the wave of the social network phenomenon, Zoosk has managed to get serious traction in many markets without establishing a local presence in them. In a little over a year, Zoosk has been able to gain over 20 million users for the service in 40 countries around the world and has made more than 228 million connections among users. It also launched its site, zoosk.com, late last year. According to Quantcast, the site attracts 2.1 million people globally, 240,000 of whom are from the US. According to Compete, the site attracts 506,084 unique visitors monthly and about 1.3 million visits monthly. In December 2008, Zoosk won the People’s Choice Award in the Dating and Romance category of Open Web Award.

Zoosk works on a ‘freemium model’. Users can sign up and create profiles free. They can also search and initiate conversations with others free. Members can upgrade to a premium membership for additional privileges, such as unlimited communication and premium placement. Those who opt for the premium membership can pick different billing options ranging from monthly to a one-year membership. The cost of these packages depending on their length varies from $12.49 to $24.99 (or their equivalent in other currencies).

Zoosk also monetizes through sales of virtual gifts using the ‘Zoosk Coin economy’. Zoosk coins can be purchased in different packages, with each coin costing between $0.03 to $0.10. Zooskers then use these coins to purchase gifts, which usually cost between 10 and 50 coins, that be attached to their messages and get higher visibility with their potential matches. While the company did not give any figures, it did say that it is experiencing strong growth across all revenue streams.

Zoosk raised $4.1 million in Series A round led by Canaan Partners in 2008 after a seed round in 2007. Though the company, with its current cash reserve and continued strong revenue growth, can reach profitability without another round of funding, it does not rule out this possibility to further accelerate.

Suggested Reading:
*Online Dating & Web 3.0
*Deal Radar 2008: eHarmony Replacing Yenta

This segment is a part in the series : Deal Radar 2009