For Love and Money
In its infancy, the online dating space was one of the more scrutinized – even chastised – verticals of ecommerce. If the naysayers knew then what we all know now, that it would become one of the richest opportunities in all of retail, they probably wouldn’t have been so quick to judge.
From its humble beginnings, online dating has expanded into a $3 billion business worldwide. The most well known sites such as Match.com, eHarmony, Tinder, and Plenty of Fish claimed $1.28 billion of the total pie in 2017, leaving more than enough room in the pool for countless niche-focused sites and enterprising entrepreneurs willing to dive in.
Perhaps yours will be the next online dating site to make a big splash. But before you leap, here are some considerations to ponder.
In Online Dating, Cold Feet Abound
Online dating is a complex beast. Some subscribe to dating sites because they are in a slump, and some may join simply out of loneliness. The reasons get sticker when we look at sites like Ashley Madison, which was hacked back in 2015. The heart wants what the heart wants, until it doesn’t anymore. This is especially true for online dating sites, all prone to a higher rate of chargebacks than other businesses for just this reason.
Buyer’s remorse is not unique to online dating sites, however, it is more prevalent. Known as “friendly fraud” in the greater ecommerce landscape, this type of chargeback is the bane of online dating sites. People impulsively purchase subscriptions, only to regret it and end up defrauding the merchant by contacting their issuing bank to dispute the charge. The good news is that many of these not-so-friendly chargebacks can be avoided by requiring users to agree to the terms of the site via an electronic signature.
Love is a Battlefield, So Are Online Payments
The most successful online dating sites typically adhere to one of two business models: subscription-based or advertising-based. Subscription-based sites such as Match.com earn their revenues through paid subscriptions, while ad-based models such as Plenty of Fish offer free registration to customers – upwards of 30 million of them in POF’s case – and make their money from advertisers.
From a financial perspective, a recurring business model can be lucrative. Building a solid client base can yield large profits; however, the recurring billing model also presents challenges that can impair payment processing abilities. Recurring billing is also a cause of increased chargebacks. In some instances, a subscriber has simply forgotten that they signed up, sees a charge they don’t recognize on their monthly statement, and disputes the charge. Recurring billing also presents the risk of card declines and churn. Customers may lose payment cards or become victims of identity theft or data breaches, leading banks to reissue cards. Unfortunately, when payment card information is not updated with recurring merchants, it contributes to declines.
Whether increased chargebacks or a high number of declines, too many of these hiccups can result in termination of a merchant account or being blacklisted by processors. In addition to the heartache this outcome may cause, it can put an online dating merchant out of business.
Love Your Customers
Top-notch customer service is vital to the success of any ecommerce venture, but particularly important in the online dating space where customers value their privacy and hold trust in the highest regard. Implement systems with which your subscribers can voice their concerns if they have any and really be listened to, and take their feedback seriously rather than with a grain of salt. This not only keeps customers happy, but can decrease chargebacks. Also consider implementing an auto-updater tool from the major card brands, which can keep payment card information up-to-date and decrease unnecessary declines. One thing to remember about the space is that your customer base will be fluid rather than static, so your site’s reputation is paramount to bringing in new business.
There’s one last thing to consider. Online dating sites historically receive their highest traffic numbers in the first few months after Valentine’s Day, so now is the optimal time to take aim with Cupid’s arrow. Good luck!
About the author
Jared Ronski is co-founder of MerchACT and works with merchants globally to ensure they are paired with the right merchant account for their specific business needs. He has worked closely with higher risk business models and has provided companies of all sizes with payment processing solutions.