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SNAP Interactive, Inc. (STVI) is rapidly making a name for itself in the online dating industry with a unique approach. The Company's focus is building applications on social networks. The Company launched its first application on Facebook(R) in June 2007. The application is basically the equivalent of a website, but it exists within Facebook for those members to access. SNAP Interactive currently has eight dating applications on the four major social networks that include MySpace.com, hi5.com and bebo.com, in addition to Facebook. SNAP's biggest application, "Are You Interested," is the leading pure dating application on the web and a Top 10 application overall on Facebook with over 11 million users and traffic that compares favorably with some of the leading online dating sites in the world.
The Company has already become profitable despite an early focus on user growth ahead of monetization. Its revenues have increased for each of the past five quarters while its operating costs remain low. SNAP reported $533,257 in revenue for the quarter ended June 30, 2008. The Company has issued revenue guidance for Q3 of $870,00, a 63% quarterly increase over Q2.
Until Q2, all of the Company's revenues were generated through advertising. In Q3, it began to build some premium features into its applications, such as the ability to search "hottest members" or the ability to get priority placement. This allows a user profile to appear more often than others. These features require additional payment and has resulted in the Company's increasing revenues. The Company plans to continue to build out these premium features.
Clifford Lerner, Chairman and CEO of SNAP Interactive, explained to Knobias, "We have a total of 17 million installations and about 1.4 million visits a day to its applications. About 14-15 million of the 17 million users are currently on Facebook, so a major opportunity for growth exists on the other social networks."
He continued, "The beautiful thing about our business model is that all our growth is viral. Our application incorporates people's friends, so we do not have to spend any money on marketing and are able to keep costs very low. We have spent virtually nothing to get 17 million users. The normal way the online dating model works is it costs $4-$5 per user to fill out a profile on a regular dating site."
"There has been a major shift in the online dating industry over the last year with the growth of the social networks and the ability to date on Facebook using an application like ours. We have seen a significant decline in traffic at the larger dating sites. Match.com traffic is down 35% in the U.S. over the last year. American Singles, which is owned by Spark Networks PLC (AMEX: LOV), is down 72% in the U.S. However, Facebook traffic in the U.S. is up 70%. Users are now utilizing social networks to date, so if we can offer similar product such as Match.com or eHarmony within Facebook, along with unique features, there is not much reason to stay on the stand-alone sites. Our 17 million users have come at the expense of these stand-alone sites. We have such a presence on Facebook which continues to grow at an extraordinary rate. We are piggy-backing on their growth."
"When these online date site companies saw our growth and success, and how little we were spending to do it, Match.com, eHarmony and others decided to create their own applications on a social network. These applications have not gained any traction. Almost all of them have less than a couple of hundred daily active users. We have 600,000-700,000 daily active users and nearly 4 million unique visitors per month. Our competitors have attempted to duplicate our success. They thought that if you build an application, it will automatically grow. There is a lot of work that we have done behind the scenes to perfect our formula. We have a formula that works very well on social networks and grows very well without having to spend money to do it."
Mr. Lerner added, "You can have the most amazing ideas, concepts and features, but if you don't have a database of a few million users, it doesn't matter at the end of the day. This critical mass gives us a significant advantage over our competition."
SNAP is also exploring other opportunities that exist in mobile industry with the emergence of the iPhone, Blackberry and Android. There are very few companies that have the ability to build a critical mass of users on a mobile dating application. The Company is in a good position with its 17 million users that have all come from social networks and are a younger demographic that would use these applications.
Mr. Lerner concluded, "We understand what it takes to succeed with a dating application on a social networking site, and we have proven that several times. There have been a number of 'copycats,' but nobody has been able to approach the level of success that we have had in the dating space."
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