Will Investors Find Love with Online Dating Stocks?

Long before Facebook FB, Twitter or MySpace, online dating was a prominent Internet social experience. Since it began in the early 1990s, this big money business has transformed romance.

Online daters are no longer a desperate minority, trolling the web for love. In fact, as the social media blog reports, online dating is worth more than a billion dollars per year.

Profiting from romance (especially on Valentine’s Day) means providing a worthwhile service for lonely hearts in search of that certain someone to fill their life with love and purpose.

Publicly traded companies that compete for online daters are accomplishing that. Playing matchmaker is obviously a moneymaker, but not all stocks, just like not all dates, are equal.

According to CNNMoney, the dominant stock, IAC/InterActiveCorp IACI has 41 percent market share, and includes popular sites like Match.com, and OKCupid.com.

IACI posted a profit of $40.7 million, down from $48.8 million, a year earlier. Total revenue grew 28 percent to $765.3 million, beating analysts’ expectations.

Spark Networks LOV controls 4.9 percent of market and operates ChristianMingle.com, SingleParentsMingle.com and JDate.com. Spark’s net income decreased 630 percent when compared to the same quarter one year ago and the market is expecting a loss of 264 percent in earnings.

One of the more interesting companies is Friendfinder Network FFN. With dating sites like SeniorFriendFinder and BigChurch.com, it might not be obvious that FFN’s entertainment division includes the Penthouse (yes that Penthouse) brand.

From an investment perspective, FriendFinder’s business model isn’t exactly “hot.” The stock was recently trading at $0.65 on 3-month volume of just over 77,000 shares.

The company received a “failure to comply” letter from NASDAQ February 7, which FFN says it plans to appeal.

In the CNNMoney report, Mark Brooks, industry analyst and editor of Online Personals Watch, says that despite the competitive advantage of niche markets, big data-driven dating clearinghouses may be the way of the future. "Strategically, bigger is best," Brooks said. "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 percent of market share is "inevitable," Brooks says. The question for investors, of course, is who will it be?