This is the news for the week of October 23rd through October 29th, 2009. We hope you enjoy the new weekly news format. Here is the news we covered for this week:
MERGER MARKET – Oct 26 – FriendFinder Networks, formerly known as Penthouse Media, filed for an IPO in December, anticipating $460m in proceeds to help pay off its debt. FriendFinder could look to sell off non-core pieces of its business that may be distracting to potential investors including GradFinder and Christian dating site BigChurch, online dating industry consultant Mark Brooks said. The company would likely keep its highly lucrative adult sites. Its adult social networking and live interactive video sites comprised 95% of the company’s revenue, as of six months ended 30 June 2008. FriendFinder’s international properties could also be spun out to a media company with more expertise in certain geographic markets, said Noel Biderman, CEO of Toronto-based Avid Life Media, the holding company of dating sites like HotOrNot and Ashley Madison. He pointed to IAC-owned Match which took a 27% stake in European dating operator Meetic in February, in exchange for Match’s European operations, as an industry example of this. In the case of FriendFinder, its Latino dating site Amigos has a strong membership base, and could be sold to an acquirer that can better grow and monetize the brand, Brooks noted. FriendFinder’s sites may fetch 7x to 8x EBITDA, Biderman said, using Match’s USD 80m acquisition of People Media in July as a comparable transaction. FULL ARTICLE @ OPW
Mark Brooks: FriendFinder's successful IPO and continued strong performance is critical for the reputation of the internet dating industry. FriendFinder could indeed look to sell its non-core businesses. Here's what I told the reporter…"GradFinder is a significant property that could be developed out to compete with Classmates.com. …BigChurch is a misfit community for them. They have been chastised by the Christian community for running the site. It should really be sold. Amigos has lots of traffic, is a great name, but South America still doesn't monetize anywhere near as well as the rest of the world. So its a longer term play for a potential acquirer, but the future is pretty clear, it will eventually make good money. FriendFinder needs to have money in the bank, and make good money quickly, so I think these communities would be most suitable for selling."
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This is the news for the week of October 11th through October 16th, 2009. We hope you enjoy the new weekly news format. Please follow this link to enjoy the high-resolution version. Here is the news we covered for this week:
XBIZ – Oct 13 – FriendFinder Networks intends to complete its IPO process by the end of the year. “The primary purpose of this offering is to repay some of our outstanding debt, including certain debt held by our affiliates, which we expect will decrease our interest expense and increase our flexibility with respect to our operations and growth strategy,” the company said in the filing. As of June 30, the company had ~$81M in debt at the parent level. It also had ~$442.1M in debt in connection with its acquisition of Various, which was the preceding parent operator of its FriendFinder websites.
The full article was originally published at XBIZ Newswire, but is no longer available.
GLAMOUR MAGAZINE — Aug 26 — A startling number of young women are living out a fantasy with guys they meet online – and don’t know at all. Liberating or just plain dangerous? Hookup or “casual dating” websites like Fling.com, SexSearch, OnlineBootyCall, and others often outperform mainstream dating sites. Match.com had 5M unique visitors in May. AdultFriendFinder had nearly 24M and Fling 18M. Statistics show that ~50% of these users are women. “Most women say they get a rush from sleeping with a stranger. The rush may be largely fear. If you mix the chemicals involved with fear (adrenaline and norepinephrine) and those involved with sexual arousal (serotonin and dopamine), you create the most potent cocktail the brain can handle”, said Kelly McDaniel, author of Ready to Heal: Women Facing Love, Sex and Relationship Addiction. SUMMARY FROM SEPTEMBER 2009 GLAMOUR MAGAZINE
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E-COMMERCE — July 8 – Last year adult dating sites' growth rate was about 70%. AdultFriendFinder.com is the most popular adult-oriented dating site drawing millions of unique visitors per month. Besides AFF, there are many other sex-oriented dating sites including Fling.com, SexSearch and IWantU.com. Similar to the traditional dating sites, users lie about their personal information – age, marital status and appearance, so what you see may not be what you get. Sometimes men pretend to be women and women pretend to be men. Specialists suggest that up to 30% of all dating profiles are misleading.
The full article was originally published at E-Commerce, but is no longer available.
Mark Brooks: People tell white lies. iDaters should ask 'is your photo up to date' and 'is your profile and marriage status info accurate.' Sometimes profiles can be online a looong time. Users will join and cycle in and out of relationships (and their idating memberships) and neglect to update their profiles. ProfileHelper.com, LookBetterOnline.com and e-cyrano.com help users put their best profile forward. IWantU is dead and dying at this stage. (Full Disclosure: Fling is a client. The Founder of ProfileHelper.com is on the Courtland Brooks team.)
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MIAMI HERALD — May 2 — In March, Ashley Madison claimed annual revenue in the tens of millions of dollars and 3.3m users worldwide. South Florida was its sixth-largest market (177k users), behind New York and Los Angeles. The Gender breakdown is 70-30 men-women; 60-40 in South Florida. Americans spent $957m on dating sites in 2008; in 2013, Forrester projects $1.5 billion. February data from Compete show that Adultfriendfinder and Fling logged 37.9m unique visitors, more than the next 12 dating sites combined. Sites like these and Ashley Madison have one big advantage over the competition: ''Their target audience is going to be on the site forever,'' says Mark Brooks, an Internet dating industry consultant. "The typical dating services are victims of their own success. After three months, people bail — they sign off because they've met someone, or they skip over to another dating site. The people at Ashley Madison have already demonstrated they're not going to be committing any time soon, and they keep on cycling back around. It's a wonderful cash machine.'' ''Sneaky or deceptive is not my cup of tea,'' said Paul Falzone, founder of TheRightOne, and a professional matchmaker for 30 years. "These guys are totally the opposite of what we're about . . . Do you want to spend your life with someone you're compatible with, that you enjoy, or do you want to live a lie?''
The full article was originally published at Miami Herald, but is no longer available.
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VALLEYWAG — Feb 26 — A porn star draping boobs over an employee's head. Lapdances on the company dime. $50m in back taxes. These are just some of the charges Penthouse publisher FriendFinder Networks is facing from an ex-employee Natalie Cedeno. FriendFinder filed to go public last year. It desperately needs the $460m it hopes to raise in an IPO in order to pay down $420m in debt. If the company has legal problems and labor issues beyond what it disclosed in its SEC filings, its executives could face heavy penalties, and the IPO would likely be scotched. According to Cedeno, Various operated Adult FriendFinder for seven years without drawing a single sexual-harassment lawsuit from employees.
The full article was originally published at Valleywag, but is no longer available.
NY TIMES — Jan 7 — Friendfinder Networks (formerly Penthouse Media Group) is trying to go public in this market and plans to list on NYSE if it does find buyers. Penthouse went bankrupt in 2003. It was taken over by Pet Capital Partners, which gained control by buying up Penthouse bonds that received stock in the reorganization. If investors will not put up enough money, Bankruptcy No. 2 looms again. The big investment banks seem to be shying away from the deal, even though at $460m it would generate badly needed fees. The only underwriter is a Cyprus-based subsidiary of a Russian bank. FULL ARTICLE @ NY TIMES
CNET NEWS — Dec 24 — Friend Finder Networks, the company formerly known as Penthouse Media Group, is filing an IPO (underwritten by Renaissance Capital, based in Moscow) to pay off almost a half a billion in debt, to stay alive. The $460m IPO will go to paying off FriendFinder's ~$450m debt. For the nine months ending September 30, FriendFinder had revenue of $243m, operating income of $17.6m and a net loss of $32.3m. In its prospectus:
Our ability to continue as a going concern is dependent on our ability to raise additional capital, including from this offering. As of September 30, 2008, our balance sheet had…$420m in short-term debt… $411m of which had been reclassified from long-term debt, due to our failure to comply with certain covenants and restrictions in the agreements governing our 2005 Notes and 2006 Notes… We do not currently have sufficient cash to repay this indebtedness if our debt is accelerated and if the noteholders instituted foreclosure proceedings against our assets.
FriendFinder averaged 1 million paying subscribers a month for the first nine months of September 30 good for 77% of Internet revenue. Net revenue per subscriber was $19.06 a month. The monthly churn rate is 18% for the nine months ending September 30, down from 19.6% at the end of 2007.
Various neglected to collect taxes in the EU. The company says:
After our acquisition of Various, we became aware that Various and its subsidiaries had not collected VAT from subscribers in the European Union nor had Various remitted VAT to the tax jurisdictions requiring it. We have since registered with the tax authorities of the applicable jurisdictions and have begun collecting VAT from our subscribers in the European Union and remitting it as required.
The full article was originally published at CNet News, but is no longer available.
Mark Brooks: The IPO is underwritten by Renaissance Capital a Moscow based investment bank. Huh? On the other hand, adult site membership is up, user churn is down, and ARPU is $19.31 a month. Your comments please.