Plentyoffish case study draft 2 PDF

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Professor Wayman BUS 243 September 2017

PlentyofFish Case Study

The nature of the dating site and app industry is fiercely competitive. Platforms must compete on business models, revenue per user, and growth rates. Frind is facing competitors utilizing aggressive marketing techniques, advanced technologies, and up-to-date interfaces. All of these qualities translate into faster growth rates, and more dollars of revenue earned per user, which can then be reinvested to continually improve the platforms. It is doubtful that PlentyofFish will ever gain dominance or survive without significant effort, commitment, and investment. The technology sector moves at an extremely rapid pace, and PlentyofFish’s design and business model are both already outdated. The New York Times article represents a valuable opportunity for Frind to capitalize on the exposure and gain new users, but also may serve to alert his competitors about his platform’s strengths. The nature of the technology industry is that once a competitor’s strength is understood, it is relatively simple to adapt by either copying their strategy outright or defending against it. A good example of this is when Facebook incorporated key features of Snapchat into not one, but four of its platforms1. PlentyofFish does not have many defensible moats such as patents or proprietary technology, and thus Frind’s lack of active management and development infrastructure may very well affect the company’s future prospects negatively.

Initially, Frind’s business model was a strength that set his platform apart from competitors and is likely the main reason his site has attained the success it has had so far. Marcus’s unique approach of allowing free usage attracted users who didn’t want to pay for expensive existing services. However, the website is still not as well-known as some of its current competition. This could be attributed to some critical decisions Marcus has made, such as the fact that the full site is no longer completely free and they have made certain features only available to upgraded members. Perhaps this stunted their growth potential somewhat; after all, they achieved their initial remarkable growth by targeting a specific niche of people who wanted a free service. Adding a paid tier may have boosted PlentyofFish’s short-term revenue, but perhaps it also negated their key strength and made them too similar to their competitors. Frind should have considered sticking to an ad revenue based business model and focused on expanding the user base, rather than trying to maximize revenue per user. This would allow him to focus on his business model’s key strengths and keep his company sufficiently differentiated. This is not to say that paid tiers are not effective and should be ruled out completely; the two business models are not incompatible. However, the free tier must be something that customers still want to use. Many sites severely limit free tiers to coax customers into upgrading to premium accounts. 1 http://www.businessinsider.com/all-the-times-facebook-copied-snapchat-2017-5

PlentyofFish should consider developing new features and capabilities that some users may want enough to pay for, but rather than relying on this segment of users for revenue, continue to provide an excellent free service and extract advertising revenue from it. The percentage of users who want to pay for a dating site is relatively small, and many of them are already using PlentyofFish’s competitors or would be willing to switch in the future. As far as adding new features, a strategy that has worked very well for companies such as Facebook and Google is to open up their platform to third-party developers. This allows them to vastly increase their platform’s functionality and value while not paying a dime for development or marketing.

Selling a company is a relatively simple way to make money in the short term, but is generally a better idea when a founder has grown it as large as they are capable of doing and can no longer handle managing a company of that scale. PlentyofFish has significant room for growth, having reached an impressive scale without many resources, employees, or expensive infrastructure. The fact that his company is profitable means that he can continue to scale it strategically without relying on venture capital money that would dilute his ownership. The best move would be to focus on growing his company efficiently and healthily by hiring new employees, marketing aggressively, and reinvesting the revenue generated by an expanding user base. Frind should also strongly consider global expansion, as it can be immensely profitable while requiring (relatively) minimal resources. By opening the network up to more markets, he can expand the user database significantly, which would in turn generate more profits. Because web design abroad is still predominantly done with the English language, the backbone of the site would not need to be redone - all that would be required is to change the text to different languages. While he may have to hire more staff to translate the information from his original English site, he would likely still come out with a hefty profit. Although life may have been simpler for Marcus managing a one-person employee, the fact of the matter is that more users translate into better profits for online businesses. Metcalfe’s Law describes what is colloquially known as the “network effect” – the idea that in networks, the value of each marginal additional user increases exponentially. At the end of the day, the purpose of a dating site (as with any social network) is to connect people. The more people on the site, the more possible connections between users there are, driving increased engagement which in turn attracts more users. Frind should absolutely prioritize expanding globally, rather than only concentrating on the competitive and saturated US market.

As of the time of the case study, PlentyofFish had been running for five years. It was garnering significant press and doing fairly well. It had certainly not run its course, as it is still in operation. However, as a service that at one point was growing with incredible momentum and elicited considerable consumer satisfaction, in 2017 it is currently nowhere near the popularity of the current competitors. It likely could have been far more successful had Frind made more prudent management decisions. He sold it to a competitor, Match.com, for $575 million, but it very possibly would have reached a higher valuation if he hired more

employees and put effort and resources into running the business. Tinder, founded in 2012, is currently valued at upwards of $3 billion 2. Although Frind made a lot of money from the acquisition, Tinder’s valuation, as well as several other competitors currently doing remarkably well, indicate that Frind missed a valuable opportunity. Perhaps if he had hired more employees, expanded his capacity, and marketed the platform more effectively, PlentyofFish could have been the current market leader.

2 https://www.forbes.com/sites/stevenbertoni/2017/08/31/tinder-hits-3-billion-valuation-aftermatch-group-converts-options/ - 3cd5e92c34f9...