INDEPENDENT TECHNOLOGY RESEARCH SECTOR INITIATION  NOVEMBER 2012  ONLINE DATING

A LABOUR OF LOVE – ONLINE DATING IN THE AGE OF MOBILE AND SOCIAL MEDIA

Industry Being Re-Energised by New Entrants

As one of the long-standing Internet verticals, online dating is currently being re-energised by a flurry of new entrants looking to capitalise on (i) the acceptance of online dating, (ii) social media’s ability to expand the market beyond traditional dating services, and (iii) mobile’s ascendance to becoming a key pathway to consumer services. Through the proliferation of social media and the ubiquity of mobile Internet the online dating industry is adapting to cater to changing consumer needs. Some well-established players are pursuing innovation and growth through acquisitions and a fresh wave of start-ups are looking to capitalise on a rapidly evolving and potentially much larger market.

Three is no Longer Company…

With the advent of social media, a new online dating category called “social discovery” is starting to emerge looking to leverage social graphs, integrate friend’s recommendations and setting up casual events with people that share similar interests. With the boundaries between online dating in the traditional sense and social networks quickly becoming blurred, we think the online dating sector is set for strong growth, driven by the increasingly social dimension of online dating and the ease and convenience of mobile dating.

Is Mobile The Killer App? Mobile is shaping the way singles interact with online dating services as the mobile phone is ideally suited to leverage the pervasive nature of an individual’s digital life. Mobile adoption has been rapid in online dating, with 30% of all eHarmony traffic now being originated from the mobile, 40% of Match.com log-ins stemming from the mobile, and 68% of all Badoo log-ins coming via the mobile. CLAUDIO ALVAREZ [email protected] In the US, the nascent mobile dating market is estimated to be $200m+ in London: +44 207 101 7571 2012 (30% YoY growth) and in Germany it is forecast to reach $40m+ by 2012, with mobile dating penetration across Western Europe estimated to be MANISH MADHVANI around 10%. [email protected] London: +44 207 101 7560

ALESSANDRO CASARTELLI [email protected] London: +44 207 101 7594

Important disclosures appear at the back of this report GP Bullhound LLP is authorised and regulated by the Financial Services Authority in the United Kingdom

GP BULLHOUND – ONLINE DATING – A LABOUR OF LOVE

TABLE OF CONTENTS

The Evolution of Online Dating ...... 2

Introduction ...... 2

Dating Before the Internet ...... 2

The Birth of Online Dating – A Serious Affair ...... 3

Niche Verticals – An Attractive Market ...... 4

Europe Joins the Party ...... 5

Monetising Online Dating ...... 6

White Labelling ...... 7

Market Size and Growth ...... 8

The Rise of Social Discovery...... 9

Social Dating: A Natural Evolution from Social Networks and Online Dating . 10

Social Dating 2.0: A New Crop of Players ...... 13

Challenges Ahead for Social Romance ...... 14

Dating has Become a Key Category in Mobile ...... 16

Mobile Dating Usage Rising Sharply ...... 16

Incumbents and New Players are Pursuing the Mobile Dating Opportunity ... 18

Mobile Dating: The Challenges ...... 20

Selected Company Profiles ...... 21

Selected M&A Transactions ...... 26

Selected Private Placements and IPOs ...... 27

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The Evolution of Online Dating

Introduction

Services aimed at connecting individuals and enabling them to find partners and start relationships have existed for as long as living memory. The oldest form – introduction by relatives – has been the preferred method for centuries and continues to be available today. Yet in more recent years a series of dramatic changes have fundamentally altered how singles enter the dating scene and find partners. In the 1900s rising economic prosperity, urbanisation and increased life expectancy, coupled with the widespread availability of contraception and the social and sexual liberation of the 60s, brought about a seismic shift in attitudes towards love, sex and marriage, and consequently dating. In the last few decades however it is technology – in particular the Internet – which has been the agent of change.

Dating Before the Internet

Before the Internet, dating services were obtained in person through dedicated intermediaries – matchmakers and introduction agencies. These intermediaries controlled and charged for access to pools of prospective partners, the size of which were limited by the depth of the intermediaries’ respective networks. The matchmaking process was fairly cumbersome and time consuming, as new clients and prospective partners all had to be assessed in detail to provide the highest chance of success. It was also expensive.

The other route to romance for lonely hearts was to list adverts in the personals sections, on radio shows, or on TV through dedicated dating channels. Despite being cheaper and quicker than the matchmaking route, this method was also less than satisfactory – success was dependent on Mr. or Mrs. Right happening to read the relevant paper or tune in on the day of the advert, and few people were prepared to pay for repeat listings.

Moreover, both of these methods suffered from a general lack of social acceptance – for most people, paying to find love was seen as a last resort, not a first port of call. As a result, these conventional dating channels remained a niche and fractured market, with a blend of small local agencies and media groups functioning at different levels of the market and operating under different revenue models. Yet with the arrival of the Internet and the digital age, all this would change.

E X H I B I T 1: G L O B A L G R O W T H I N S I N G L E S P OPULATION AND O N L I N E S INGLES

Global Singles (m) Global Online Singles (m) % of Americans who met their partners online

331 23.2% 99 19.3%

69 10.9% 277 3.8% 2.1% 0.02% 0.06%

2011A 2020E 2011A 2020E prior to 79-88 89-93 94-98 99-03 04-06 07-09 '78

Source: Forrester Research, Euromonitor International, Stanford University and City College of New York, GP Bullhound

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Some of the key drivers that have led to the uptake of online dating are: a rapid rise in the global online population, a rapid rise in number of single-person households, improved user functionality and the fading away of the stigma attached to online dating.

The Birth of Online Dating – A Serious Affair

The online dating industry was established in 1995 when Match.com and AmericanSingles.com were launched in the US. Match.com took a more traditional approach to dating online through matchmaking (i.e. pairing people up dependent upon their personal profile and goals) and AmericanSingles.com took a much more casual approach by allowing members to search its database by gender, age and location.

In 1994, when only about 5% of the US population had Internet access and the Internet was still in its early stages, an entrepreneur named Gary Kremen purchased – from the US government – the Match.com domain name for $2,500. In 1995, he founded Match.com as a way to inject efficiency into the traditional matchmaking model. Before Match.com Gary started a personals classified business that primarily used premium phone numbers to engage clients. However, he found the phone service inefficient, and thought if he could create an online database of personal advertisements it would allow people to find potential partners themselves more quickly, effectively and, most importantly, anonymously. Given the early stigma around online dating, and the type of users that Match.com was trying to attract, it was paramount that the service was able to guarantee anonymity but still allow users the ability to have meaningful interactions. Match.com quickly grew to be one of the leading players in the online dating space and was sold to IAC in 1999 for $50m. Today, Match.com generates revenues of over $500m, has over 2.7m subscribers and over 6m unique monthly visitors.

E X H I B I T 2: O N L I N E D A T I N G U N I V E R S E (REPRESENTATIVE )

High Matchmaking

Traditional Online Dating

Casual Pricing

Niche Dating Low

Broad Target Group Focus Narrow Source: GP Bullhound

The other well-known entrant in the online dating market was eHarmony, which was founded in 2000 by Neil Clark Warren, a psychologist and author of relationship advice books. Neil

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developed a proprietary model of compatibility which is at the core of the company’s matching system, and which differentiates its matching service by what eHarmony describes as “a scientific approach to a deeply personal and emotional process.” eHarmony uses a proprietary algorithm to analyse answers and users’ behaviour on the site in order to increase the chances of a successful match – hopefully leading to marriage. Because of eHarmony’s lengthy sign-up assessment process and tailored introductions model (e.g. it normally takes an individual 40 minutes to complete the introductory questionnaire), it was able to mitigate the problem many online daters had of being unable to find serious relationships due to lack of compatibility and information.

Because of eHarmony’s positioning as a site for “the serious relationship seeker”, it was able to garner a higher proportion of female users and monetise them at a premium compared to Match.com. Like Match.com, it grew rapidly to become a multi-million dollar company, and today boasts over 3m unique monthly visitors.

Niche Verticals – An Attractive Market

Serving a wide audience was how the online dating market initially expanded – so as to benefit from consumer adoption – but as the market expanded, players focusing on niche verticals started to appear. A number of companies began to make headway by targeting niche markets, such as same-sex relationships, casual encounters, and specific demographics filtered by education, wealth, race, occupation and even body weight. In 1997 for instance, Spark Networks was created, launching JDate.com, an online dating service aimed at Jewish singles, and expanding to over 30 diversified sites. FriendFinder Networks also successfully combined specialisms with scale, launching over 25 targeted portals to date which together attract over 2m unique monthly visitors.

Niche verticals became attractive to new market entrants as they could tailor their consumer proposition to a very specific target group and hence be very effective at acquiring customers through more direct marketing channels. According to online dating consultant Mark Brooks, in the US 44% of the market was comprised of niche sites in 2009, up from 35% in 2006. Jdate.com has demonstrated the willingness of consumers to pay a premium for targeted dating sites. It has been able to generate ARPU of $25 with a contribution margin circa 90% throughout the last nine years as it has grown revenues from $8.4m (2002) to $27m (2011).

E X H I B I T 3 : A VID L I F E M EDIA’ S R APID R EVENUE AND P ROFITABILITY G ROWTH

42% CAGR 59% CAGR

$57m

$28m $19m

$8m

Revenues EBITDA 2009 2011 Source: Company information

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The other interesting niche market that has started developing is the casual encounters (i.e. cheating) market. The biggest player in this market is Avid Life Media – the owner of Ashley Madison. Ashley Madison specifically targets individuals in relationships looking to have affairs, and since its launch in 2002 has attracted more than 15m members in 25 countries. According to the company a new person is said to join every six seconds. Ashley Madison is also highly profitable as it manages to charge a monthly subscription fee of $49.00 in addition to value-added-services to help users promote themselves and communicate with other members. In 2009, it estimated that the business generated EBITDA of $8m (26% margin). It has grown EBITDA to $19m by 2011, corresponding to a CAGR of 59% and an EBITDA margin of 33%.

Europe Joins the Party

Until 2001 the burgeoning online dating market was largely confined to the US – then it began to expand globally. Before 2001, there was only one online dating player – United People – established in 1996 in Germany. United People was acquired by Scout24 group in 2000 and changed its name to FriendScout24. In 2001, two other players entered the European online dating market – Meetic and Parship. Meetic was founded by Marc Simoncini (a well-known French entrepreneur responsible for iFrance – sold to Vivendi for €182m) and started in its home market of France and then quickly expanded to other territories in Europe through organic growth and acquisitions. Meetic made five European acquisitions between 2005 and 2009 – eFriendsNet, Lexa.nl, DirectDating.com, Neu.de and Match.com International. The last transaction – done in 2009 – saw Match.com become a minority shareholder in Meetic and this would ultimately lay the foundations for Match.com acquiring Meetic in 2011.

E X H I B I T 4: E UROPEAN - BASED O N L I N E D A T I N G P LAYERS

2000 2001 2003/04 2006/08 Source: GP Bullhound Founded in 2000 and backed by Holtzbrinck Digital GmbH, Parship looked to replicate eHarmony’s algorithmic matchmaking model for the German-speaking (DACH) market. Parship established itself as the matchmaking leader in Europe and grew revenues north of €50m and 10m+ registered users, with key properties in Germany, Switzerland, Austria and the Netherlands.

As the European market developed, other players started entering the market with Match.com establishing European operations based out of London in 2003. Elite Partners (originally backed by Burda Media Ventures and then acquired by Tomorrow Focus in 2009)

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was founded in 2004 and by the time of the Tomorrow Focus acquisition, it had revenues of €20m+ and was EBITDA profitable.

In 2004, Be2 launched in Switzerland and then raised €20m from Index Ventures and Banexi Ventures in 2008 to expand outside of its home market. It is reported that Be2 European revenues in 2010 were circa €21m. In 2008, eDarling launched in Germany received backing from Rocket Internet in 2009 and reached European revenues of €21m by 2010.

Monetising Online Dating

Traditionally, the main way to monetise online daters has been through charging monthly subscriptions. However, with the advent of Web 2.0, online dating providers have added new functionalities and launched mobile offerings in order to attract more users and boost monetisation.

Online dating players have added features which are inherently social but revenue generating – either ones which help warrant the cost of monthly subscriptions (such as instant messaging, mini-games and personal ratings) or which are of direct benefit and paid for when used (such as virtual goods and micro-payments to browse other users’ profiles anonymously or to enhance a users’ visibility in search listings). Developing value added services has been a move that traditional online dating players have had to embrace as daters’ attitudes between paying and free sites have become less stark with regards to the quality of matches they may find.

E X H I B I T 5: C ONSUMER S ’ V I E W S O N P AID VERSUS F R E E D A T I N G S ITES

Paying to belong to a dating site doesn't necessarily 52% 38% 8% mean you'll find a better match 2%

I believe paying money to contact someone on a dating 38% 41% 17% site is unnecessary 4%

You are just as likely to meet professionaly oriented 36% 43% 16% 5% people on free sites as you are on paids sites

Paid dating sites have no advantages over the ones that 31% 39% 24% are available for free 6%

Strongly agree Somewhat Agree Somewhat Disagree Strongly Disagree

Source: comScore

Given consumers’ attitudes to subscription websites and the flood of new social entrants, online dating companies focused on subscription-based memberships have experienced pressure on subscription prices and levels, with users migrating to free dating sites monetized through advertising revenue. Another factor contributing to this shift in attitudes towards subscription versus free, is that with the entry of free players into the space, few users feel that access to a large pool of prospects is worth paying for: dating sites then must offer more to command a premium.

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Although consumers’ perceptions to paid versus free are blurring, the number of consumers willing to pay for online dating has been steadily increasing as both the single online population and social acceptance of the service has continued to grow. According to TNS data collected from Western European singles, the percentage of European singles willing to pay for online dating services has grown from 24.3% (9.6m) in 2008 to 28.3% (15m) in 2012, and is expected to grow to 31.9% (19.8m) by 2015.

E X H I B I T 6: E U R O P E A N S I N G L E S P R E P A R E D T O P A Y F O R O N L I N E D A T I N G S ERVICE S

% of total 24% 25% 26% 27% 28% 30% 31% 32% singles online 19.8m 18.3m 16.4m 15.0m 13.3m 11.9m 9.6m 10.6m

2008 2009 2010 2011 2012 2013 2014 2015

Source: Eurostat, TNS Brand Awareness Throughout our discussions with several players in the online dating space, one of the reasons given for the steady growth in online singles willing to pay for online dating services is that a large portion of these individuals are users of online match-making services, such as eHarmony, Match.com and Parship to name a few. Match-making users are more willing to pay for online dating services as they are typically an older demographic with higher levels of disposable income when compared to those users only willing to use free sites.

White Labelling

The other model which some players have used to enter the online dating market has been through white labeling – providing publishers affiliates, marketeers, etc. with an online dating platform for them to monetise their user base and/or traffic.

Two of the most successful European players in this space are Cupid plc and Global Personals. Cupid was founded in 2005 and hosts over 100 websites through its own network, white label and technology licensing partnerships. Global Personals was founded in 2003 and has a portfolio of over 7.5k websites in its portfolio.

By operating a portfolio of websites, Cupid and Global Personals are able to address multiple sectors and dating options without compromising the identity of its key brands. Their combined databases of over 72m registered users allows for considerable potential for cross- marketing, with the average customer registering at two or more Cupid/Global Personal sites.

This model has proven to be quite successful with Cupid having revenues of £53m+ and EBITDA of £10.6m (19% margin) in FY11, and Global Personals reporting annualized revenues of $62m+ with EBITDA margins of circa 13%.

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Market Size and Growth

Despite being well established, the global online dating market can be difficult to quantify - most statistics relate to the US market. There are a number of reasons for this. Firstly, there is no official industry body or trade association regulating the dating industry which provides official figures. Secondly, the US is essentially the birthplace of online dating and its largest market. The US makes up close to 50% of global online dating industry, in revenue terms.

With some notable exceptions, such as Russian (Mail.ru) and Chinese (Jiayuan.com) sites, many non-US sites are in fact owned by or are localised versions of large US players who have expanded out of their home market, with ownership of the remaining sites being relatively fragmented across geographies.

The 12 US-based dating companies together account for almost 60% of the traffic of the top 30 global dating companies by unique monthly visitors (UMVs), with Match.com taking the lion share of global eyeballs.

E X H I B I T 7 : T R A F F I C T O T O P 30 G L O B A L D A T I N G S I T E S D OMINATED BY US P LAYERS

7.4% 5.5% 12.8% US 4.9% China 3.4% Russia 3.3% Australia 2.9% UK 2.6% France Germany Other India

57.2% Source: comScore In spending terms, the US online dating market generated approximately $1.1bn in 2009, and is expected to rise to almost $2.4bn in 2013, representing a CAGR of 21.5%, with the global market estimated to be worth $4bn in 2012. According to market research publisher Tampa, key growth drivers are expected to be geographic expansion and mobile app roll- outs.

E X H I B I T 8 : S I Z E O F O N L I N E D A T I N G M ARKET

2009A 2013F $4.5bn

$2.4bn $2.1bn

$1.1bn

US Global Source: Forrester, Jupiter, Mintel, Marketdata Enterprises, GP Bullhound

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The Rise of Social Discovery

Since the breakthrough of Facebook and social networks, social features (such as Facebook integration, Like buttons, shareable content, ratings and reviews, commenting functions, polls, etc.) have been increasingly present in consumers’ everyday online experience. Social features have been more and more integrated with all sorts of online offering: consumers have access to such features while reading news, watching video or accessing a wide array of other content online whether for work (e.g. LinkedIn) or leisure (e.g. travel or games).

Dating is one of the quintessential social activities, and Facebook and the other social networks have helped people looking to make new friendships and relationships online. Many people realized that Facebook and other social networks could be very powerful (and free) instruments to meet new people. As a consequence, in comparison to the early days of social networks when people would go to social networks to make new friends or interact with existing ones and to dating websites to find a match, now the boundaries have blurred considerably. Social networks now clearly focus on promoting “sharing” with a user’s existing network therefore enabling companies to provide a better user experience and monetise their user base more effectively. As a consequence, social networks have shied away from incentivizing users to overly expand their networks but rather are interested in their users giving access to deeper content and information. This in turn allows Facebook and other social networks to better monetise their user base through the sale of targeted advertising.

E X H I B I T 9 : E VOLUTION OF S O C I A L N ETWORKS AND O N L I N E D A T I N G M ARKETS

Existing Friends Meet New People

2004 Social Networks Online Dating

Social 2014 Casual Dating Online Dating Matchmaking Discovery

Source: GP Bullhound From the online dating point of view, the dating sector in the traditional sense is now more fragmented than ever, with over 1,500 dating sites in the US alone. Matchmaking and “traditional” dating are more likely to attract a more mature and wealthy demographic (mainly through subscription business models), and niche and casual dating sites looking to monetise younger and more casual users (mainly through freemium business models). In between social networks and online dating, a new proposition named “social discovery” or “meet new friends” has been evolving in parallel. Social discovery focuses on bringing together the casual elements of meeting new people, with a variety of aims which include, but are not limited to, dating (see Exhibit 9).

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The concept of enabling users to meet new friends is of course not new: in the first generation of social networks (e.g. MySpace, Bebo, Hi5) there was often an element which allowed users’ to meet new people online. This is in contrast to the now well known “someone you might know” functionality of today’s Facebook, LinkedIn, etc., which focuses on building an online relationship through your existing real life contacts.

New social discovery sites have recently appeared, catering to the specific need of meeting new people for whatever purpose. Social discovery websites typically gather profile and contact information from one or more social networks with which the user has an account, and then use it (as well as users inputs made into their own platforms) to tailor the offering to that user accordingly, and monetise him or her through the sale of value added services, membership subscriptions or advertising.

Social discovery is a concept which can be applied to a variety of activities as long as they are suited for doing something with other people. Dining is an example: Grubwithus is a Chicago-based start-up which offers a “Social Dining” service, where friends and potential new friends create and join meals for 6-10 people. Most meals are themed or hosted by a Grubwithus Group to help bring together interested and similar people as well as to guide initial conversation topics at the meal. Each individual pays in advance through Grubwithus for a set menu, and the company takes a fee. In the UK, Dinmill offers a very similar service, calling itself a “Social Dining Network”.

E X H I B I T 1 0 : S O C I A L D I S C O V E R Y S E R V I C E S ( REPRESENTATIVE , E XCLUDI NG D ATING )

Dinner Travel Other

Source: GP Bullhound Social discovery can also target travelers: services such as Mysocialpassport (founded 2011) and Travbuddy.com (founded 2005) allow users to search for new people to meet while on the road, people to organise a trip together, or to share reviews and other travel-related content. These companies typically monetise their user base through advertising and lead generation. Tripl (founded 2010) allows users to find out who their friends would recommend as a “must meet” local when traveling the world. Tripl collects data from the incumbent travel companies and in return provides them with opportunities to re-target potential travelers with customized and relevant offers. A B2B proposition such as Tripl may prove winning versus the C2C ones, where competition for advertising and value-added service revenues is more intense.

Social Dating: A Natural Evolution from Social Networks and Online Dating

A common way in which social discovery enables people to build connections beyond their local networks – and find dates – is to link them based on shared interests. In the last 3-5 years, a large number of companies have emerged, specifically focusing their attention on this aspect of social dating. Why?

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First, there is a monetization / user behavior consideration. Whereas marriage, matchmaking and “traditional” dating websites have the aim of pairing users which eventually get off the websites when they have found a match, social discovery tends to lend itself better to meeting new people for casual dating, as opposed to matchmaking. The matchmaking model (monetized mostly through subscriptions) lends itself well for demographics with higher purchasing power looking for a long-term partner, which have a larger disposable income. On the contrary, freemium monetization models with frequent transactions of a smaller ticket size can be more attractive to younger demographics who may seek to step in and out of the casual dating arena for a few years.

Secondly, the sheer size of the potential market has to be considered. The dating and matchmaking funnel gets narrow towards the bottom: the vast majority of potential customers for dating websites are singles, using the internet, who are willing to pay for such services. If we take the US, for example, there are 90m singles (not married), of which 54m not currently in a relationship, of which only 2.6m pay for online dating services. Match.com has 1.8m paying members, or 69% of the addressable market1. There are exceptions: some non- singles might still use services like Ashleymadison.com (a website specifically targeted at affairs); also, a portion of the 54m singles not in a relationship would be willing to pay for other dating services in freemium or casual dating websites, for instance.

It is our belief that the funnel for the dating sector as a whole (including casual and niches) is larger than the estimate above. However, the potential market for social dating and social discovery is even larger. In the broadest sense, the market could be defined as every online adult in the US, and a good proxy could be represented by the over 100m Facebook users in the US. For social dating, the addressable market could be represented by a high portion of the 54m singles in the US, and is much larger than the market willing to pay for matchmaking services (see exhibit 11).

E X H I B I T 1 1 : M ATCHMAKING VS . S O C I A L D I S C O V E R Y F UNNEL

US MATCHMAKING FUNNEL US SOCIAL DISCOVERY FUNNEL

Source: GP Bullhound, Match.com, Broker research, Internet World Stats

1 Source: Match.com, Deutsche Bank

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Not surprisingly a large number of companies have sought to commercialise this massive opportunity. Badoo, the most well-established player, was founded in 2006, and is very open in its casual dating intentions. The primary connecting factor is the shared location, rather than interests. The formula has worked so far: Badoo is now one of the largest (and reportedly most profitable) companies in the space; in May 2012 TechCrunch reported that Badoo had over 150m users and is one of the largest social networks globally, according to ComScore. Badoo operates in 35 languages and has been reported to have an annual revenue run-rate of $150m.

Another very popular service is Zoosk, a social dating community working as a Facebook app. Founded in 2007, Zoosk is available in more than 25 languages and has subscribers in more than 60 countries. The other large player in the space is Tagged: originally founded in 2004 as a teen-only social network, it pivoted to its current social discovery focus in late 2007 and has been profitable since 2008. The company’s service is designed to enable anyone to meet and socialise with new people through social games, customized profiles, virtual gifts, advanced browsing features and other value added services. Tagged has over 330 million members in 220 countries. In 2011, the company had revenues of $43m (+35% vs. 2010) and doubled its staff.

The key to the profitability of Zoosk, Badoo, Tagged and other established social dating websites is their monetization through freemium models, heavily reliant on Value Added Services. Registrations to such sites are typically free but users can pay for services such as the ability to boost themselves up on the display rankings in the form of bidding war, the ability to see who viewed their profile and rated them highly, or virtual gifts (see exhibit 12 for more examples). Social games and advertising can be also featured on the platform and provide additional monetization streams. There might be an option for a monthly subscription to get all the benefits that can be bought individually thus giving users “premium” status on the site.

E XHIBIT 1 2 : V A L U E A D D E D S E R V I C E S T Y P I C A L L Y U S E D I N S O C I A L D ATING

Value Added Service Description

On certain sites users have to purchase credits to communicate, special “urgent” Credits for messages messages, increase inbox size

Allows users to come on top of search results and landing pages with certain Highlight / Boost criteria

No advertising Removes ads from the site

Special filtering Allows users to perform more tailored search, e.g. by attractiveness (measured as options other users’ ratings, which are typically not public)

Browse Anonymously Allows users to browse other users’ profiles anonymously

See who likes you Allows users to see who rated them highly or “liked” them

Virtual gifts Users can typically send gifts (e.g. virtual flowers) for a fee

Source: GP Bullhound Another key for these social dating services’ success has been related to user acquisition. Historically, such sites had an inherent advantage in terms of user acquisition versus the incumbent dating and matchmaking players. The most successful relied more heavily on

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social networks themselves to increase traffic via viral mechanics, in contrast to the notoriously expensive acquisition methods of traditional players. This had an enormous impact in terms of profitability: Badoo’s EBITDA margins were rumored to be over 50% in 2011, vs. margins of the most successful matchmaking services at c.25%-30%.

Social Dating 2.0: A New Crop of Players

Most of the companies mentioned above, in our view, represent a “first generation” response to the social dating question. Their business model is heavily reliant on casual dating dynamics and is still dependent on a constant stream of new users in order to maintain liquidity on the platform and ensure a good product experience. In some instances consumers have expressed concerns over some of these websites in terms of their actual quality and reputation: anecdotes of fake profiles run by algorithms (“bots”), difficult membership cancellations and other aggressive marketing techniques have been reported in the wider dating industry, in particular, on services with a stronger orientation towards casual encounters. The reputation of certain websites might end up being counterproductive: less women liking them starts a vicious cycle which limits the appeal of the service. Nevertheless, a number of new generation players are emerging with a fundamental difference to compete with the established social dating incumbents which are in fact social networks pivoted on casual dating and transactional in nature.

This new breed of social dating players claims to provide a better user experience by integrating directly with a user’s existing social graph on Facebook, and use and cross- reference this deeper level of user data. One of these services, Thecomplete.me, is a tool which integrates with Facebook with a focus on meeting new people who share your interests and friends. It offers search and filtering functions and control over who sees what and when. The implicit aim of the website is to provide users with the best possible first date. If you are not single, as a user you can nudge your single friends to go out on dates by leveraging your and your friend’s network. Founded in 2011 by Brian Bowman, former head of product of Match.com, the company has among its early investors; Markus Frind, CEO and founder of PlentyOfFish, the online dating freemium website.

E X H I B I T 13: S O C I A L D A T I N G S ERVICES (REPRESENTATIVE )

Source: GP Bullhound Another start-up in the space is Likebright, founded by Nick Soman in Seattle in late 2011, about the same time as Thecomplete.me. The mechanics for Likebright are fairly similar: seamless and fast integration with Facebook, and focus on meeting new people with shared interests. The slightly different tilt is that there is a stronger emphasis of getting introduced by friends, under the assumption that, like in real life, friends’ recommendations and

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introductions can improve the probability of a successful date or match. The interface is also different from Thecomplete.me, with a simple Pinterest-like way of displaying profiles. Another difference is the absence of detailed search and filtering functions: the service for the most part automatically suggests who users could be interested in. Likebright is particularly aimed at women, who too often don’t have satisfactory experiences on dating websites: the introduction and friend of a friend mechanics are specifically targeted to improve women’s trust in the platform.

In November 2012, IAC-owned OKCupid announced the launch of a new “people discovery” service, Tallygram. The service (now only an Alpha version) uses the Facebook social graph and the OKCupid’s experience with questionnaires to explore and discover new relationships. A similar service is offered by Pinstant Karma, which helps connect users with similar interests: users can create Pinterest-style boards filled with images of their favorite places, special memories, foods and anything else that helps tell their story (and helps the site to match them with others).

An alternative approach is taken by Huntcha: a social dating service with the aim of helping users discover who their secret love is without the risk of rejection. Huntcha pairs someone with people also registered on the service through Facebook. Only when they have both expressed interest in one another, Huntcha privately reveals a “crush” connection.

All these second generation social dating companies mentioned above are a response to the fact that a universal front door for people interested in dating does not exist. At least it does not exist in the same way as Facebook is the front door to connect with your existing friends online. Instead, users now look for a date on a myriad of alternatives in the form of dating websites and social networks. The underlying belief motivating many social dating entrepreneurs is that, whoever is successful in creating a new generation social dating service which is not just a good dating website disguised as “meet new people”, but benefits from the integration with the social graph and a person’s existing network of friends, has the possibility to become a mass market service.

Challenges Ahead for Social Romance

Typically, a dating company is successful by attaining critical mass through the acquisition of increasingly costly traffic. Gone are the days where virality on Facebook could propel a social service company into the stratosphere with a disproportionately low marketing spend. New rules on Facebook limit the sharing and re-posting of such applications due to concerns of social graph pollution. Furthermore, even if some industry participants say that the stigma of dating is largely gone in most developed markets, there still is a certain understandable reluctance attached to publishing your membership to a social dating or social discovery service on Facebook timeline.

In the past, certain dating and social discovery companies chose to rapidly scale their member base, exploiting the fact they were the first of their kind, and only then improve their product (e.g. POF, Zoosk, BranchOut). Now, the second generation players are focused on getting the product intrinsically right, mainly through social content and deep integration with Facebook, and only then attempting to exploit the underlying liquidity of the Facebook

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platform to grow. Companies need to demonstrate that they can provide valuable, transparent services and make money at the same time without using aggressive or questionable techniques that has led to some of the past PR scandals.

Social discovery businesses are mostly reliant on micro transactions, advertising and a subscription component to make money. Other social discovery players (e.g. e-commerce or travel players mentioned earlier in this report) would need to find alternative ways of monetizing their platforms with more emphasis on lead generation and advertising. The growth of social discovery is evident; the execution is difficult but the potential rewards are sizable. Some players are creating new offerings, and others are just rebranding themselves from online dating to social discovery in order to exploit the buzzword. Those who get the model right, however, will be able to command a slice of a much larger pie than the existing dating or business networking markets. It is our belief that in the future traditional dating models will still exist, however a growing portion of the online population, boosted by younger demographics, will use social discovery as their “front door” to online dating.

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Dating has Become a Key Category in Mobile

Arguably, the major trend currently sweeping the digital landscape is the inescapable rise of the mobile Internet. Increasing smartphone and tablet penetration, progress in mobile operating systems, mobile’s always-on nature, and other popular features such as geo- location, has led to the spectacular growth of mobile social media, applications (apps), games, and a vast array of solutions for consumers and businesses.

E X H I B I T 1 4 : US M O B I L E D A T I N G M A R K E T E VOLUTION

$415m $381m $340m $295m $251m $213m $165m

$109m

$43m

2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E

Sources: IBISWorld June 2012 The worldwide mobile app market was estimated at $7.3bn in 2011 by IDC, and is set to grow over 50% annually to $35bn in 2015. This switch to mobile is inevitably affecting the online dating world: the global mobile dating market was estimated to be $1bn in 2011 and is forecast to reach $2.3bn in 2016 (Juniper Research). In the US, the market has grown over 70% per year to $212m in 2012, accounting for c.4% of the US mobile app market. The industry is forecast to grow 14% per year to over $400m in 2017 (See exhibit 14). In Germany, Mobile Dating reached €25m in 2011, accounting for c.10% of the overall German online dating market, and is forecast to grow by 30% in 2012.

This rapid growth has been facilitated by a number of drivers:

 Firstly, getting a date is an inherently social activity which people have conducted on mobile phones as soon as the first mobile phones appeared, by calling and sending SMS.  Furthermore, the two top activities that users look for on dating websites, browsing and sending messages, lend themselves extremely well to mobile.  As smartphone penetration and mobile network speed have dramatically increased over the past few years, they have facilitated online dating apps.

Mobile Dating Usage Rising Sharply

The time users spend on mobile has greatly increased, and mobile dating apps have improved considerably to reflect the increasingly social nature of the dating proposition. Users – thanks to similar features in social networking applications – can transition seamlessly and become accustomed to browsing potential partners and uploading pictures

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and other personal information on their dating profiles via mobile. Another key consideration is that, with a proprietary mobile app handling communication between dating users at any time in any place, there are less concerns related to sharing private information such as phone numbers. Within the world of mobile apps, the largest category on US Smartphones, behind gaming, is Social Networking, in which dating apps appear (ComScore, July 2011).

E XHIBIT 1 5 : D A I L Y T IME S P E N T O N L I N E D ATING IN THE US – O NLINE VERSUS M OBILE

Online Dating (Websites) Mobile Dating (Apps)

8.9mins 8.4mins 8.4mins 8.3mins

4.8mins 3.7mins

Jun 2010 Dec 2010 Jun 2011

Sources: comScore, Alexa, Flurry Analytics. Enhanced functionality and a proliferation of dating apps have been driving up both the sheer number of users dating on mobile, and the average time spent on mobile dating applications. In the US for instance, in the space of one year the average daily time spent on mobile dating has risen from 3.7 minutes (less than half that spent on dating websites) in June 2010, to 8.4 minutes, exceeding time spent on online dating sites in June 2011 (see Exhibit 15).

The transition towards mobile dating is reflected not just in the length of time spent accessing mobile apps, but also in the frequency with which this is done. In 2011 the average US user opened a dating application twice a day, for a little under 2 minutes each time. Now he or she typically opens their app over 5 times a day, but for shorter periods of time. This is a reflection of the “always on” nature of mobile dating apps.

The overall trend in online dating is towards both greater internet and mobile app usage – they are not mutually exclusively and each is capable of driving the other. The main takeaway though, is that analyses performed by Flurry Analytics on ComScore and Alexa data show how mobile dating is already more popular than desktop dating: 17% of unique internet users use mobile dating apps, vs. c.13% in desktop dating in June 2011 (see Exhibit 16).

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E X H I B I T 1 6 : % OF A L L U N I Q U E I N T E R N E T U SERS D A T I N G O N L I N E B Y M E T H O D

17% 15% 13% 12%

Internet Mobile Apps

Jun 2010 Jun 2011

Source: Compete, comScore, Alexa, Flurry Analytics Incumbents and New Players are Pursuing the Mobile Dating Opportunity

Not long after smartphones were introduced, the large incumbent players in the dating space realized the potential of the mobile market, and began launching their own mobile version of their services shortly after, typically in the form of lighter, mobile-accessible websites, Facebook mobile apps and dedicated mobile applications. Match.com launched its iPhone app in March 2009, the first company to allow its mobile users to edit their profile, upload photos, and even locate singles in their area using an opt-in to a location-based feature. SNAP Enteractive’s AreYouInterested? launched a casual dating app with similar functionalities in the same month. Others followed suit with similar adaptations of their desktop services for iPhone, Android and other mobile operating systems (see Exhibit 17).

E X H I B I T 1 7 : O N L I N E D A T I N G I N C U M B E N T S M O B I L E A P P L A U N C H E S

Source: company press releases, press articles, GP Bullhound. The decision to bet early on the mobile market has proved to be a wise one; for many of these players, mobile apps represent the strongest growth driver in terms of users and revenues. In May 2012, Badoo announced its mobile usage has risen over 100% in the last six months, and that 68% of new users came on the service via mobile. The Social Discovery service MeetMe (formerly MyYearbook), in August 2012 reported $1.3m in mobile revenues, up 73% Q-o-Q and 152% Y-o-Y, and accounting for c.10% of the company’s revenues for

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the quarter. As incumbents such as Match.com have been quick to capitalise on their established user bases by migrating users to mobile, and focused on gaining a share of the quickly growing mobile dating market, a large number of new entrants have launched mobile- only propositions. Many of these new entrants offer fairly standard dating applications such as the one offered by the incumbents, which might be focused on a niche or place more reliance on geographical location.

As happened in eCommerce, a lot of emphasis and hope has been put on geo-location for mobile dating. Most online mobile apps have geo-location functions; however, so far geo- location dating has remained a niche segment, mainly due to concerns about privacy and safety. Many users are hesitant to give away their location to strangers, especially after a number of crime cases related to geo-location apps have been brought to the public spotlight. Geo-location has enjoyed more success in the gay community, with apps such as Gaydar and Grindr, where same-sex members appear to be less reluctant about using such services. Since launching in early 2009, Grindr, a male-only application, has grown to reach more than 4m users worldwide in June 2012 (with 500,000 new users in Q2 2012 alone) and more than 1m active unique daily visitors. A large number of straight mobile geo-location apps exist and are all fairly similar, often lacking the necessary liquidity: users have to install multiple apps to figure out which one works best in a given place in a given time. SingleSquare, for instance, is a freemium app that uses FourSquare technology to find potential matches nearby.

Another much talked about space in the mobile dating sector is Video-dating. With increasingly fast mobile connectivity and good quality cameras on smartphones and tablets; it is now possible to have an efficient video-conversation. A plethora of start-ups have naturally translated the concept to dating, in a video speed dating model. Companies such as Flikdate, Mobilevideodate, SpeedDate, WhosHere, offer such services. Users typically sign up (usually with their Facebook login), filter which kind of potential dates they are interested in – male or female, height, weight, body types, etc., add a short profile and add a photo. Once matched users can send messages and have a short introductory video date. Typically, every conversation is limited to a set time and costs users a fixed amount; after that, users can pay with credits for longer video dates.

E X H I B I T 1 8 : M O B I L E D A T I N G A PP L ANDSCAPE (REPRESENTATIVE )

Source: GP Bullhound Speed dating and video dating concepts have proved to be an attractive product for a niche audience, however the market has so far demonstrated to not be ready yet for such a

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proposition on a larger scale. Live video communication with strangers and video dating have been tried in the past on the desktop format with mixed fortunes: Chatroulette, although not specifically aimed at dating, has enjoyed enormous popularity and media attention, but was highly penalized by the lack of moderation. Airtime, founded by former Facebook and Skype executives, has resorted to Facebook identification to try and limit such risks, and pulls data from Facebook to increase match probability by pairing shared interests. WooMe.com launched with a similar speed date proposition in 2007 and raised over $10m from Index Ventures, Mangrove Capital Partners and Atomico Ventures; the company was reportedly acquired by Zoosk in November 2011 in a rumoured fire sale.

Mobile Dating: The Challenges

Many challenges exist in order to build successful mobile dating companies: user monetization is, as for the rest of mobile, complicated. The best models have proven to be freemium apps monetised by advertising and by charging for value added services. Gamification and social aspects are top of mind for mobile dating app providers. Handmade Mobile, the company managing the Flirtomatic mobile site and app, has reported 6m registered users and most of their revenues and profits come from mobile value added services. The main challenge is that mobile dating is not immune from the inherent churn dynamics of the wider dating market, and the user acquisition cost for a mobile user is higher than for a desktop user. Companies are under more pressure to get their user acquisition and monetization strategies right from the start, or else they will face serious difficulties in reaching or maintaining profitability, once the initial viral growth stops. Other challenges have not been solved yet: geo-location dating carries serious privacy and safety risks and has to be improved in order to offer better user experiences. Mobile video dating is still a niche in its infancy.

Ultimately, we are convinced that mobile dating will be a vast industry, and has the potential to grow more rapidly than other mobile categories. Much trial and error is still needed, and a universal model on how to make mobile dating work on a large scale has not been found to date. But by making it easier for people to meet and date spontaneously, mobile dating is not so much a trend within the online dating industry, but a natural progression of the entire concept of online dating itself. Whoever is able to capitalise on this underlying trend will be in a position to reap significant rewards.

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Selected Company Profiles

Founded in 2002, Ashley Madison is a niche dating player which actively encourages and enables people to have affairs, with a strong emphasis on protecting member privacy. The site provides a freemium service which requires members to purchase credits to unlock custom- mail messaging and chat sessions, and to send virtual gifts. Ashley Madison is famous for its provocative ad campaigns and bold PR stunts: in April 2012 it offered $1m to any woman who could prove she slept with football player Tim Tebow, a self-professed virgin. The site attracts over 1.4m UMVs, has over 8.5m users and in 2011 reported revenues of close to $60m. Ashley Madison is owned by Avid Life Media, a niche dating site operator which also owns gay dating portal Man Crunch, and CougarLife, which connects older women with younger men.

Founded in 2006, Badoo is a social dating network accessible via both computer and a mobile app. It operates a freemium model which enables users to sign up and send messages for free, but charges them to promote themselves to the top of search listings and to activate “super powers” such as seeing who has been reading their messages, and viewing other profiles anonymously. Badoo reported to have over 150 million registered users in over 180 countries and a revenue run rate of $100m. In 2012, Badoo acquired Hot or Not, a site which allowed users to rate the attractiveness of photos submitted by others. The company is owned by investors including Finam Capital, which invested $30m in 2008.

Founded in 2005, Cupid is a listed UK and International dating player which operates a broad portfolio of 25 portals across traditional, casual and niche dating. It also operates a mobile app and a white label dating service, and has a broad affiliate network. Active in 15 countries, Cupid attracts over 3.6m UMVs and more than 480,000 paying subscribers, with 56m member profiles registered and over 16m active users. In 2011, the company doubled its revenues to £54m. In July 2012, Cupid acquired French Genie Logiciel for €3.7m, and in September niche dating site Uniformed Dating for £7m. The company has been publicly listed since 2010 and has a market capitalisation of c. £150m.

Founded in 2008, eDarling is a Germany-based freemium dating site which operates 14 local language portals across Europe. It also publishes dating-related content through its “Science of Love” blog. The site is 30% owned by eHarmony and its main competitor is Match.com- owned Meetic. eDarling attracts more than 1.4m UMVs and claims more than 12m members. The company is expecting 2012 revenues to be up 30% on 2011 to around €50m, making it one of the top European dating players by revenues. Other investors in eDarling include the venture arm of German publishing group Holtzbrinck, IBB Beteiligungsgesellschaft and Rocket Internet.

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Founded in 2000, eHarmony is a subscription-based matchmaking site with a strong focus on compatibility matching via its proprietary algorithm. It does not allow users to browse profiles freely, but sends them regular samples of compatible matches. eHarmony focuses on attracting quality, relationship-minded people and filtering out undesirables through its lengthy registration questionnaire. The site attracts over 2.4m UMVs. It is estimated to have achieved $300m of revenues and EBITDA margins of c.30% in 2011, and to have converted around 24% of its active members into paying subscribers, nearly three times the industry average. eHarmony is active in Australia, Canada, the UK and Brazil and has a European presence though a 30% stake in Germany-based eDarling. The company is privately owned by investors including Juvo Capital, Saints Capital, Sequoia Capital and Technology Crossover Ventures.

Founded in 1997, FriendScout24 is a freemium dating site which operates across seven European countries and has a leading position in Germany, Austria and Switzerland. It operates a freemium business model with a basic free service and a monthly fee-paying membership with enhanced features. FriendScout24 reported to have more than 10 million members, over 200,000 daily active users and more than 12,000 new users per day. In 2011 FriendScout24 launched Secret, a portal for people interested in flirting and casual encounters. The company is a subsidiary of Deutsche Telekom and part of the Scout24 group, a series of content portals which also cover cars, electronics, personal finance, real estate, jobs and travel

Founded in 1997, Global Personals is a diversified dating player which operates its own portals and provides white label dating services for thousands of others. Global Personals’ own sites cover generic, casual, and niche dating. Its white label offering provides dating software (including mobile, API and social network integration), membership databases, payment processing and customer support for over 7,500 sites. The white label dating client provides the site’s brand, design and marketing, and is monetised through a revenue sharing model. Global Personals reported over 200 million page views per month, over 8 million daily interactions, and annualised revenues in excess of $74m. The company is privately owned.

Founded in 2009, Grindr is a location-based mobile app which enables gay, bi-sexual or bi- curious men to meet other like-minded men in their vicinity. Grindr operates a hybrid business model, offering its app as both a free ad-driven version (Grindr) and a monthly fee-paying alternative (Grindr Xtra) with enhanced features such as push notifications, quick menus and ad-free browsing. The app is available across a wide range of devices including the iPhone, iPad, Android devices and selected Blackberry models. Grindr claims to have more than 4 million users in 192 countries, 1 million daily users and around 10,000 new users every day. The company is owned by its founder and CEO, Joel Simkhai, who has subsequently launched a social dating app for straight people, called Blendr.

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Founded in 2011, LikeBright is a young social dating company which helps people find potential partners through their friends’ networks on Facebook. It aims to address the key internet dating concern to female users of security, and is designed to break down common inhibitions to online dating by sending Facebook users push notifications of people who are interested in them (or who their friends recommend) even if the recipient is not themselves a member of LikeBright. The company is privately owned and backed by investors including Dr Galen Buckwalter, founding scientist of eHarmony.

Founded in 1995, Match.com is a leading subscription-based dating site which holds stakes in a number of other portals, operating in 25 countries and more than 8 languages. Together with the other sites it controls, Match.com attracts over 9.9m UMVs and in 2011 recorded revenues of $518m, up 29% on 2010. In May 2011 Match acquired a majority position in leading European dating site Meetic, which in 2010 had acquired Match’s own European operations in exchange for a 27% stake. In September 2011 Match.com also acquired Zhenai, a Chinese matchmaking site with over 3.6m UMVs. The company is owned by IAC/InterActiveCorp.

Founded in 2001, Meetic is one of the main players in the European online dating market. It is majority owned by Match.com. Meetic operates both dating and matchmaking portals, primarily through Meetic and MeeticAffinity, but also Match.com (in Europe) and some niche brands such as Meeticgay. Meetic has over 4.3m UMVs and 750,000 subscribers, and in 2011 booked revenues of €178m. The company has been publicly listed since 2005 and has a market cap of around €280m.

Founded in 2003, Mötesplatsen is a freemium dating site that operates in Sweden and Norway. New users begin registration with a personality questionnaire which matches them with like-minded people, but are free to browse and filter potential partners using their own criteria. Users can pay for “VIP” membership to gain access to video chat, and a number of social networking features (including posting their status and writing journal entries). Mötesplatsen regularly polls its users on a range of topics and posts the summarised results on its website. It reported more than 140,000 active members across its sites with around 90% of users over the age of 25. The company is owned by Schibsted AS.

Founded in 2001, Parship is a Germany-based freemium matchmaking site with local language portals across 13 European countries and a specific focus on higher-income professionals between the ages of 30 and 55. Free members may inspect other member profiles, but premium membership is required to see or exchange photos, or to reply to messages. Like eHarmony, Parship offers a matching algorithm and begins registration with a compatibility questionnaire, but at 80 questions this is 1/5 the length and consequently more

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accessible. Like Meetic, the company also operates a gay dating portal, Gayparship.com. Parship attracts around 300,000 UMVs and is owned by the Holtzbrinck publishing group.

Founded in 2003, POF (“Plenty of Fish”) is a leading freemium dating site which offers basic compatibility matching. The site is primarily free and most of its revenues come from advertising, or Google AdSense click-throughs. POF offers premium services as part of an upgraded membership package, such as the ability to see whether a user has viewed one’s profile and read emails sent to them, and to give virtual gifts. It is also strongly mobile-driven, with 40% of member log-ins coming via mobile phones. POF has a broad global presence with particularly strong popularity in Canada, the US, Australia, Brazil and the UK, and generates over 8.7m UMVs . The company is privately owned by its founder, CEO Markus Frind.

Founded in 2007, Skout is a location-based social discovery mobile app and website. Skout uses a mobile’s GPS to help users find like-minded people within a walkable radius of one another, although for safety reasons it does not identify a user’s precise location. Users create a basic profile with photographs and then use instant messaging to get in touch and arrange a meeting place. Originally a pure-play dating app, Skout’s focus has widened to include making friends and other social activities. Skout operates a freemium model with users paying to purchase points which can be used to send virtual gifts, see who has viewed one’s profile, or send “wink bombs”. The company is privately owned by investors including Andreessen Horowitz and Siemer Ventures from which it raised $22m in April this year.

Founded in 2007, Spark Networks is a multi-platform personals player with over 30 sites, most of which charge a subscription fee. Its flagship portals are niche players JDate and ChristianMingle.com. Spark’s sites together attract over 1.4m UMVs and have almost 200,000 paying subscribers. The company recorded revenues of $49m in 2011 with particularly strong growth in its Christian dating offering. The company has been publicly listed since 2005 and has a market cap of around $120m.

Founded in 2004, Tagged is a social discovery site which connects people by their mutual interests. The site was originally a teen-only social network targeting the 13-19 segment but opened up to all ages from October 2006. The company monetises users via a freemium model. The site is reported to have over 300m members and 20m UMVs, and in 2011 booked more than $50m in revenues. Over the last two years Tagged has been involved in a string of social and gaming-driven acquisitions to enhance its user base and content offering, including hi5, Digsby, TopicMarks and WeGame. Most recently in October 2012, the company purchased Urbantag. The company is privately owned by investors including Horizon Technology Finance Management, Mayfield Fund, and Transmedia Capital.

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Founded in 2011 and opened to public beta in May 2012, theComplete.me is a social dating service which enables singles to share their interests and friends from different social networks with one another – a self-professed “Pinterest” of dating. Like Likebright, theComplete.me requires new users to log in via Facebook. However, it enables them to feed in data from a much wider range of social networks and platforms, including conventional dating sites. theComplete.me is reported to have over 1.5m users and is led by Brian Bowman, former Vice-President of Product at Match.com. The company is backed by private investors including Intel Capital, Plenty of Fish, the CrunchFund and angel investors, from whom it raised over $1.2m in seed funding in April this year.

Founded in 2007, Zoosk is a freemium romantic social network operating in 25 languages in more than 70 countries, which focuses primarily on the 25-35 age segment. New users can sign up and browse for free, but can only send a limited number of messages unless they pay for more access, with the choice of a fixed membership fee or pay-as-you-go purchases of Zoosk “coins”. The site attracts over 6m UMVs and in 2011 announced a $90m revenue run rate. In November 2011 Zoosk acquired WOO Media, an online live video introductions platform enabling video based “speed dating” and chat sessions. The company is privately owned by investors including Amidzad Partners, ATA Ventures, Bessemer, Canaan Capital and Keating Capital.

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Selected M&A Transactions

Transaction Date Value LTM EV/ Announced Target Buyer (US$m) Revenue EBITDA Commentary Aug-12 DateHookup.com IAC/InterActiveCorp - - - Casual dating portal Aug-12 Pinstant Karma, LLC Actinic Ventures LLC - - - Pin-board style social dating platform Jun-12 Eight Days, Inc. Badoo Services Limited - - - Online dating services May-12 Smooch.com Global Personals Ltd. - - - Top ten largest dating site in UK Aug-11 AondeNamoro.com and SolteirosComFilhos.com Cupid plc 0.8 3.8x - Online dating sites in Brazil Jul-11 PerfectMatch.com FriendFinder Netw orks 2.6 - - Provides online dating and relationship services in the US Jun-11 OnlineLiebe GmbH and WomenWeb GmbH Cupid plc 3.9 - - Niche online dating w ebsites in Germany May-11 Meetic Match.com 253.4 1.7x 7.3x Friendly offer for the remaining stake in leading European dating site Meetic Feb-11 Humor Rainbow (okcupid.com) Match.com 90.0 - - Online dating site in the United States Dec-10 Belamo Corp., Flirt.com Cupid plc 1.3 - - Online dating platform Sep-10 Cupid.com, Inc. Cupid plc 6.9 3.4x 8.8x Online dating Website Sep-10 Not Just Another Dot Com Company Ltd. Cupid plc 0.3 - - Niche online dating sites Apr-10 Allegran Ltd. Cupid plc 5.0 - - Provides online dating services Feb-10 Singlesnet, Inc. Match.com, L.L.C. - - - Online dating services Nov-09 Badoo (10% stake) Finam Capital Partners 5.0 - - Social dating netw ork Sep-09 EliteMedianet (37% stake) Tomorrow Focus 18.4 - - Online dating agency in Germany Aug-09 Friends Reunited Limited Brightsolid Ltd 45.9 1.5x - Operates social netw orking sites and dating sites Jul-09 People Media LLC Match.com 57.0 - 4.9x Operates online dating communities Feb-09 Match.com (European operations) Meetic 111.2 1.5x 10.4x Match.com's European operations sold for c.27% stake in Meetic and €5m in cash Aug-08 Mamba.ru Mail.Ru 18.0 4.9x - Operates online dating sites in Russia and Eastern Europe Jul-08 OnlineLiebe GmbH Holtzbrinck Ventures Gmbh - - - Operates an online dating portal in Germany Feb-08 Eight Days, Inc. Avid Life Media, Inc. - - - Provides online dating services Jan-08 Servicepals.com Limited Global Personals Ltd. 0.6 - - Provides online dating and friendfinder services to military Dec-07 Liebe.de GmbH Acton Capital Partners GmbH - - - Operates an online dating portal in Germany Dec-07 Various, Inc. FriendFinder Netw orks 500.0 - - Operates online dating and social netw orking w ebsites internationally Nov-07 Neu.de GmbH Meetic 36.6 - - Online dating site on the German market Oct-07 JSC "Mamba" (30% stake) Mail.Ru 3.0 - - Operates online dating sites in Russia and Eastern Europe Jul-07 EliteMedianet (63% stake) Tomorrow Focus 20.9 5.2x - Online dating agency in Germany Jun-07 People Media LLC American Capital, Ltd. - - - Operates online dating communities through specialized niche communities Feb-07 NetClub SA Match.com 13.2 - - Provides dating services in France Feb-07 HurryDate, LLC Spark Netw orks 5.5 - - Provides offline and online dating services Jan-07 DatingDirect.com Limited Meetic 52.8 - - Ow ns and operates an online dating Website in United Kingdom Jun-06 Spark Netw orks, Inc. Great Hill Partners, LLC 17.0 2.4x 54.9x Provides online personals sites for a range of demographics May-06 ParPerfeito Comunicação SA Meetic 27.4 5.5x 9.5x Operates an online dating sites in Brazil and Latin America Feb-06 Lexa.nl Meetic 13.8 2.9x - Online dating services in the Netherlands Jan-06 eFriendsNet Entertainment Corp. Meetic 20.0 10.2x - Provides online dating platform in greater China Sep-05 JSC "Mamba" Finam Capital Partners 11.0 - - Operates online dating sites in Russia and Eastern Europe Feb-05 Personals Plus, Inc. Inuvo 4.8 2.3x 3.3x Ow ns various online dating and relationship Websites Jan-05 Allegran Ltd. - 0.8 0.4x - Provides online dating services Aug-04 WebCapades, Inc. Inuvo 9.1 2.0x 4.8x Provides online dating and personal relationships services w orldw ide Mar-04 Lavalife Inc. Vertrue Incorporated 135.7 1.6x 9.3x Provides online dating services in Canada, the United States, and Australia Dec-02 uDate.com IAC/InterActiveCorp 114.8 2.9x 9.1x Online dating services Jun-02 Ticketmaster (incl. Match.com) IAC/InterActiveCorp 792.2 2.7x 18.4x Online ticketing Mar-02 Soulmates Technology Match.com 23.0 15.3x - Provides online dating services in Australia

Average 69.2 3.9x 12.8x Median 17.0 2.8x 9.1x

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Selected Private Placements and IPOs

Transaction Date Value Announced Target Investor (US$m) Commentary Oct-12 Guanxi Inc. SingTel Ventures (Pte) Ltd. - Online social discovery and interaction platform in China Aug-12 Momo Technology Co. Ltd Undisclosed 40.0 Geographic location based social netw orking and dating mobile app Jul-12 Pinstant Karma, LLC Actinic Ventures LLC - Online social dating platform May-12 Pair Angel Investors; Lerer Ventures; CrunchFund; A-Grade Investments 4.8 Private shasring app for couples May-12 IvyDate, Inc. Angel investors including Barry Silbert. 3.9 Niche online dating site Apr-12 theComplete.me, Inc. Intel Capital; Plentyoffish Media Inc.; CrunchFund 1.2 Social dating netw ork Apr-12 Skout Andreessen Horow itz 22.0 Location-based mobile dating application Mar-12 Avocado Softw are Inc. Baseline Ventures; General Catalyst Partners; Lightspeed Venture Partners 1.3 Private shasring app for couples Mar-12 OOO Teamo.ru United Managers Japan Incorporated - Online matchmaking and dating services in Russia Jan-12 Zoosk, Inc. Keating Capital, Inc. 3.0 Operates an online social dating community Dec-11 Sw oonXO, LLC (Speeksy) Angel investors 0.1 Operates a social dating site Dec-11 A Place for Rover, Inc. Madrona Venture Group; CrunchFund 4.3 Niche online dating site Nov-11 Elit Teknoloji Hizmetleri Internet A.S. European Investment Fund; 3TS Capital Partners Ltd. 4.0 Online dating platform in Turkey Nov-11 MeetMe, Inc. Undisclosed 1.0 Operates social discovery platforms Nov-11 MeetMe, Inc. Brio Capital L.P.; Next View Partners, LLC 1.6 Operates social discovery platforms Nov-11 meetOne GmbH SevenVentures GmbH - Operates a social discovery netw ork/an online contact portal Nov-11 This Life, Inc. (How aboutw e.com) RRE Ventures LLC; Khosla Ventures; ff Venture Capital 15.0 Operates an online dating Website in the United States Oct-11 SpeedDate.com, Inc. Undisclosed 3.0 Operates a dating Website Sep-11 MeetMe, Inc. Harvest Capital Strategies LLC 5.0 Operates social discovery platforms Aug-11 Elit Teknoloji Hizmetleri Internet A.S. B-To-V Partners AG - Online dating platform in Turkey Jul-11 MeetMe, Inc. Mexicans & Americans Trading Together, Inc 5.0 Operates social discovery platforms Jul-11 Samadhi SAS H Invest 3.9 Operates an online community for single people Jun-11 Beijing Baihe Online Hi-tech Co., Ltd. Investor Grow th Capital - Online marriage matchmaking and friend-making Website in China Jun-11 Banjo, Inc. BlueRun Ventures; Lightspeed Venture Partners - Provides social discovery services for smartphones Apr-11 Jiayuan.com International Ltd. Public Offering 78.1 Online dating platform in China Apr-11 Cupid plc Public Offering 8.2 Operates a portfolio of online dating sites in UK and Europe Mar-11 nProgress, Inc. Baroda Ventures LLC; SV Angel 1.8 Mobile social discovery platform for smartphones Mar-11 MeetMe, Inc. Undisclosed 3.7 Operates social discovery platforms Feb-11 OnlineLiebe GmbH Media Ventures GmbH - Online dating portal Jan-11 SNAP Interactive, Inc. Various investors 8.5 Online dating provider, operates also AreYouInterested? Dec-10 MeetMe, Inc. Various investors 13.2 Operates social discovery platforms Nov-10 OOO Teamo.ru e.ventures; Direct Group; Fast Lane Ventures 2.4 Online matchmaking and dating services in Russia Nov-10 Smartdate SAS 360° Capital Partners 4.8 Operates an online dating site Sep-10 This Life, Inc. (How aboutw e.com) RRE Ventures LLC; Founder Collective 3.1 Operates an online dating Website in the United States Jul-10 Elit Teknoloji Hizmetleri Internet A.S. B-To-V Partners; Euro Serve Media; Corporate Finance Partners - Online dating platform in Turkey Jun-10 Cupid plc Public Offering 15.0 Operates a portfolio of online dating sites in UK and Europe Feb-10 Smartdate SAS 360° Capital Partners 2.7 Operates an online dating site Jan-10 Avid Life Media, Inc. Public Offering 56.6 Operates online dating sites including AshleyMadison.com Nov-09 Zoosk, Inc. Bessemer Venture Partners; Canaan Partners; ATA Ventures 30.0 Operates an online social dating community Jun-09 Zoosk, Inc. Canaan Partners 6.0 Operates an online social dating community Apr-09 eHarmony.com, Inc. Millennium Technology Value Partners - Leading matchmaking service Dec-08 FriendFinder Netw orks Inc. Public Offering 50.0 Operates a portfolio of online dating sites in US and Internationally Aug-08 SpeedDate.com, Inc. Menlo Ventures 6.0 Operates a dating Website Jun-08 Zoosk, Inc. Canaan Partners; Amidzad Partners; ATA Ventures 4.1 Operates an online social dating community Feb-08 Consim Info Pvt., Ltd. Canaan Partners; Mayfield Fund; Yahoo! Inc. 11.8 Indian matrimonial w ebsite BharatMatrimony.com Jan-08 Badoo Finam Capital Partners 30.0 Social dating netw ork Aug-07 SpeedDate.com, Inc. Menlo Ventures 2.8 Operates a dating Website Jul-07 Tagged Inc. Undisclosed (pre-money valuation of $102m) 15.0 Social netw ork for teens Jun-07 meetMoi, LLC Acadia Woods Partners, LLC 1.5 Location-based mobile dating solutions Jun-07 Jiayuan.com Ignition Partners; Qiming Weichuang Venture 9.8 Leading online dating player in China May-07 Jiayuan.com Qiming Weichuang Venture Capital 10.0 Leading online dating player in China Aug-06 Consim Info Pvt., Ltd. Canaan Partners; Yahoo! Inc. 8.7 Indian matrimonial w ebsite BharatMatrimony.com Jul-06 Kizmeet, Inc. Advanced Technology Ventures; Revolution Ventures; The Founders Fund 5.0 Online dating netw ork Mar-06 Beijing Baihe Online (Baihe.com) Mayfield; NEA; GSR Ventures ; Northern Light Venture Capital 9.0 Online dating w ebsite in China Feb-06 Spark Netw orks, Inc. Public Offering 258.8 Operates a portfolio of online dating sites in US and Internationally Jan-06 Tagged Inc. Mayfield, Peter Thiel and Reid Hoffman 7.0 Social netw ork for teens Oct-05 Beijing Baihe Online (Baihe.com) Mayfield; GSR Ventures 2.0 Online dating w ebsite in China Sep-05 Meetic S.A. Public Offering 107.0 Provides online dating and matchmaking services in France and internationally Nov-04 eHarmony.com, Inc. Sequoia Capital; Technology Crossover Ventures; Tuputele Ventures 110.0 Leading matchmaking service Nov-04 MeetMe, Inc. Riggs Capital Partners; Talkot Capital; Paulson Investment ; William D. Witter 3.2 Operates social discovery platforms Oct-04 Meetic S.A. IDInvest Partners 8.7 Leading online dating w ebsite in Europe Jun-02 Meetic S.A. AGF Private Equity, S.A. 1.9 Leading online dating w ebsite in Europe

Average 19.5 Median 5.0

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GP BULLHOUND – ONLINE DATING – A LABOUR OF LOVE

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28 GP Bullhound LLP

GP BULLHOUND – ONLINE DATING – A LABOUR OF LOVE

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29 GP Bullhound LLP