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How to make this "love stock" pay for your Valentine's Day gift

Thursday, February 14, 2008 | Jason Jovine

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Today is Valentine’s Day!!! So for all of you who still have not bought your significant other  a present, I am sure that there are still some 24 hour stores open where you could rush to get your mate a dozen roses for $9.99.

$9.99 for a dozen roses!  I am kidding, of course. You should all know that because of supply and demand issues (not to mention a little fraud and price gouging), stores charge more for things like roses around Valentine’s Day. They know that you need those roses, or, in economic terms, they know that the demand curve on or near Valentine’s Day is very inelastic. For some of us guys, the demand curve is as inelastic as buying medicine for your ailments.

Back to business…

This isn’t dear Abby, and I am not Dr. Ruth, so I know that they don’t pay me the big bucks to talk about love.  Instead, let me talk about a topic that is even more important to all of you capitalistic pigs out there:  MONEY!!!

I recommended a stock a while back called Spark Network Inc (symbol: LOV) at about $6.70. The stock went higher after I recommended it, then it went lower and has stayed low for a while now. Let’s take a look at the two year chart.


                                                    Courtesy BigCharts.com

This company operates niche online dating sites such as JDate (a dating site tailored specifically to the Jewish community), Black Singles Connection (a dating website for African Americans), and they just launched a brand new website for the Christian community called Relationships.com.


Spark earned over $68 million in revenue in 2006. They earned $.07 per share for the quarter ending on September 30, 2007, and will report their results for the fourth quarter of 2007, as well as the entire year, today at 1:30 p.m. Pacific Time.

If you would like to hear Spark discuss their numbers, you can click on this link: http://www.spark.net/press/sn_press_020708.htm.

The couple of analysts that cover the stock expect them to earn $.10 a share for the fourth quarter of 2007. Do you?

What we have here is an online dating site this has a niche focus. Some of their competitors include www.eharmony.com and www.match.com.

The pricing power that Spark has is based on the fact that they provide great customer service to niche communities for a reasonable price.

For example, www.jdate.com is focused on catering to the Jewish community. Spark charges just under $40 a month to make love connections. They have done such a good job, and provide such a user friendly website, that there are many members who subscribe who aren’t even Jewish!

There will always be a market for love. Once upon a time, you would get involved with people in your own community and stay with that person for the rest of your life, whether you were miserable in the relationship or not.

Nowadays, you can meet any person, from anywhere in the world, based on your common interests. I think that kind of business is sustainable.

The key question…

Online dating is here to stay. The key question is which company is the best love broker out there? Which company is the best at execution?

There are, of course, free websites out there such as www.facebook.com and www.myspace.com where people can go to find a match.


These types of competitors will put a ceiling on the amount of money that companies like Spark can charge.

In other words, would a person pay $40 a month for a service to help them find a date when they could simply go onto a free site to find a date?

Your knee jerk answer may be no, but it all depends on if what they are getting for that $40 is better than what they could get on the free sites.

I believe that the niche way to dating is the right way, and the Match.com’s of the world, by focusing on the masses, is doing it the wrong way. They are doing it the wrong way because you could just go to one of the free aforementioned websites to hook up with one of the masses.

It is easier to maintain your pricing power when you have a niche service, as long as they don’t start giving away a niche dating website as well. That could spell the end of these abnormal profits that companies like Spark have been enjoying for a while now.

The online dating wars are heating up folks. Let the games begin.

Do you think that Spark will meet, beat, or exceed the $.10 a share that Wall Street expects them to earn? Share your thoughts with us! Also, listen to the conference call to get a feel for this company and industry - it could put money in your pocket.

Until the next time folks…



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Jason Jovine
Contributing Editor
The Tycoon Report


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4 Comments

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  1. jester112358 (1 year ago) Is this Spam?

    I think you covered the nearly the full gamut of the problems China faces which are risk factors except for the problems stemming from the lack a of stable law system and respect for personal property rights. A bit of a joke in a communist society, but critical to capitalism.



    One error I believe you made was the claim that exports to the US are 50% of the total Chinese export. Its actually about 26%. This doesn't alter your well reasoned arguments concerning the fundamental instability of their corrupt political system.



    As one Chinese insider put it, there are hundred of Enrons listed on the Chinese exchanges. We just know who they are right now and won't find out from a closed society like China.

  2. chaos_nantuko (1 year ago) Is this Spam?

    Spark is actually taking advantage of myspace and facebook. Its already got an application on facebook with 267,169 daily active users. From what I've heard, myspace will be releasing a developer API in the near future (within 6 months). Myspace has more people then facebook, so spark can realistically expect another 50,000-100,000 unique users from myspace. Remember that these 350,000 are only the people who use the application frequently (13% of the total), so I'd say 5% of them will probably go for the final product. Another 17 500 customers is another 700,000 in monthly revenue, which in this case, is essentially free, or 8.4 million annually. This could be a significant boost that really brings up the stock price.

  3. John M (1 year ago) Is this Spam?

    Good Morning Jason,

    I think the new service will beat $.40 a share.

    The reason is most people don't have any intestinal fortitude in this generation unless it involves bodily mutilation; tattoos,piercings, scarification.I saw a youngster at a fast food deli yesterday with tattoos on the conjunctiva of his eyeballs; Tweetie and Sylvester. OK, that may be attractive to the opposite gender in this culture of hip hop and rap. I just wonder where it will end in twenty years as sobriety and the daily grind dull the edge of being socially daring.

    On the down side of computer profile dating; what do matched individuals do on their first meeting when they discover computer obesity and e-mail are all they share in common? I think computers are wonderful but must take a lot of adventure from modern life. I am still betting on technology as the way our culture will choose its matrimonial

    mates in the present and near future. One thing about being a lemming; following is the easiest path to the sea.



    John Mahler

  4. Scott (1 year ago) Is this Spam?

    Jason,

    Great article, you know, those advertisements on t.v. for love seem to have gotten more and more lately. As one that seems to be agreeing with you on the stick to your type of person or niche, i think that this company seems to have it down, now i have yet to make a penny in the markets, well let me say yet to ever invest.(i want to know it all before i do, well, i know that will never happen, so i never put a book, website, or article down on the subject in two years( i am 25 ), and when i do feel comfortable, i will jump) anyway, without even taking a look at any info on the company or the stock, i think that if the estimate is .10, i think that it should beat it because i think the idea is solid. now i have not yet seen SPARK advertised, so that could hold it down, and i am not looking for love, cause me and the ex cant let go, lol, (that is a good thing i think); so for someone with alot of common sense, open to anything attitude, and the need to have more than enough info before i jump, i think that this way of doing things sounds great. i have no idea about any of these online daters, so as for a completely unbiased opinion, i would go for this love site if i needed it, although, i am not african american, jewish, or whatever else they have offered(might be a caucasion one, but that would be the masses pretty much, kind of).



    SO MY ANSWER IS THAT I THINK THEY SHOULD BLOW THE MARKET AWAY, IF THEIR PRICES COMPETE, BECAUSE THAT IS WHERE I WOULD GO TO LOOK FOR A MATE.



    MY OPINION.



    scott,
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