By Anne VanderMey, reporter
FORTUNE -- Let's say you're looking for love. Let's also say you love the satirical newspaper The Onion. You might decide to make a profile on TheOnion.com dating site. Naturally, you assume that you'll be connected to other lovers of the publication known for headlines such as "Kitten Thinks of Nothing But Murder All Day" and "Study Reveals Babies Are Stupid." Instead, your profile is entered into a much larger database -- consisting of some 1,422,000 users -- and you're paired up with another single who signed for the same service, but through another site, Salon.com.
Welcome to the weird, interconnected world of online dating. There are thousands of sites out there, many with an incredible degree of specificity in their target audience. There are sites for satire enthusiasts, of course, but also for zombie-lovers, objectivists, and people living the mullet life-style. An observer could be forgiven for thinking that the fast-growing industry is becoming increasingly fragmented. But the reality is exactly the opposite. A smaller and smaller number of companies are controlling a greater and greater share of the market.
For instance, the personals sites for The Onion and Salon are both powered by a service called FastCupid. That company is a property of FriendFinder Network. FriendFinder Network, formerly called Penthouse Media Group, operates more than 40,000 sites. (Yes, it's that Penthouse.) Suddenly, the niche community you thought you were tapping into by signing up with The Onion Dating, turns out to be much larger. Which isn't to say your interests will not overlap.
To be sure, FriendFinder likely does not mix together all the profiles of all its branded sites. (The company did not return calls for comment.) That's probably for the best, because people from one property, BigChurch.com for Christian singles for example, may not get along with those from another, say, Bondage.com, "the world's largest BDSM community." Many established online dating operators eschew the practice altogether, but it's fairly common, particularly in the U.K. where it's standard practice. And it's just one result of the fast consolidation in the industry.
Today, four companies control 77% of the $1.22 billion online dating market, according to research from IBISWorld. That's up substantially from five years ago and is likely to climb higher. With the market for online dating stagnating in the U.S. -- revenue grew just 3.5% last year -- startups are finding it increasingly difficult to break into the space, and second-tier players are struggling to stay profitable.
Right now, Barry Diller's IAC (IACI) controls 41% of the market, thanks in large part to its properties Match.com and OkCupid.com. eHarmony is next, with 23.5% of the market. In third place is Zoosk at 7.7%, followed by Spark Networks (owner of JDate, Christian Mingle, LDS Mingle, and more) at 4.9%.
Much of the same algorithmic magic is at work across each company's sites. IAC says its back-end engineering is not identical for all its properties, but that it does revise and tweak them with each new acquisition. It's a similar story with, Spark Networks' many properties. The profiles might be different on JDate and ChristianMingle, but the actual product and process are similar.
While Spark Networks has a policy of not mixing profiles between sites, CEO Greg Liberman says he sees smaller, copycat sites try that often. "They pop up all the time," he says. "You go through a Christian front door, and then you can do a search for 50 different religions." Like Spark Networks, IAC also does not mix the profiles between its sites, a process known as "white labeling." It does find other uses for its massive user base, though. When it created the new site for singles ages 50 and up, OurTime.com, it populated it with existing members from its sites SeniorPeopleMeet.com and SeniorsMeet.com.
Even the super-specialized mullet dating website is part of a much larger group, the Passions Network. Member sites also include FestivusPassions.com for Seinfeld fans and StachePassions.com for the mustachioed. The majority of the company's users who join declare several passions.
Despite the competitive advantage conferred by niche markets, big data-driven dating clearinghouses may be the way of the future for much of the online dating industry. "Strategically, bigger is best," says Brooks, industry analyst and editor of Online Personals Watch. "If you consider what would be the perfect model for an Internet dating site, in theory it would have all the people in the world who are single on it, and you could find your perfect match within a day's work." A single major U.S. service that controls more than 50% of market share is "inevitable," Brooks says. In theory at least, a bigger pool means more happy matches, even if they're from unlikely sources. Data confirms: "It's kind of a waste of time anyway asking people what they want anyway," Brooks says. "Because they don't really know."
What happens when online matchmaking hooks up with predictive software? More online connections.
For years the "E" in eHarmony was a bit of a misnomer. Despite the company's success online -- the matchmaker says it is responsible for an average of 271 marriages a day -- it only recently started to seriously embrace the Internet. For much of eHarmony's 10-year history, the web was merely a platform for distributing its compatibility MOREJessica Shambora, Writer-Reporter - Sep 23, 2010 3:00 AM ET
Earlier today, IBM (IBM) announced it would purchase Netezza (NZ), a publicly-held Massachusetts-based data analytics company, for $1.7 billion.
For IBM, Netezza is the most recent of 23 acquisitions by the company over the last four years, amounting to $12 billion. (Last week, the company bought OpenPages, another company in Massachusetts that creates risk and compliance software for businesses.) Analytics technology enables companies to observe and analyze past business performance so they MOREJP Mangalindan, Writer - Sep 20, 2010 11:38 AM ET
|GM's recalled Cobalt was a failure from the start|
|Lara Spencer promoted to 'Good Morning America' co-host|
|Americans have fallen in love with real estate once again|
|Why you should pay off your car loan ASAP|
|Michaels hack hit 3 million|