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Valentine's Boost For Online Dating Sites

Internet dating companies are expecting a boost in business in the run-up to Valentine's day as increasing numbers of people log online for love.

"It is very seasonal – we start to see an increase in activity from the end of December and that builds up to Valentine's day," said Karl Gregory, managing director of Match.com in the UK and Ireland, the UK's largest dating website by revenue.

"It's a time for reflection and people want to find a partner more."

Online dating accounts for one in five of all new relationships, according to YouGov, the polling organisation. Last year the Office for National Statistics introduced dating subscriptions in its basket of goods and services measuring the cost of living.

"It's a trend we see continuing," said Ivor Jones, an analyst at Numis Securities. "The old taboo of internet dating was a function of embarrassment – now you've got places where the user knows everyone is up for meeting other people and the hurdle to begin interacting is very low."

Websites range from the overtly faithful, such as Eharmony, to the brazenly risqué forgetdinner.co.uk.

The UK market, with an estimated £120m a year in revenue, has more than 800 dating websites. Most fall into one of two camps – free-to-use sites that generate revenue through advertising and those that offer services by subscription such as Match, owned by the Nasdaq-listed IAC.

Edinburgh-based Cupid, which trades under names including benaughty.com and girlsdateforfree.com, is the sector's only London-quoted company. Formerly known as Easydate, it has seen its share price rise more than threefold since it floated on Aim in June 2010 at 60p a share. The company projects achieving £100m in revenue by 2014, a fourfold increase on 2010. It has spent more than £10m on acquisitions to raise client volumes, expanding operations to 16 countries using 10 different websites.

"There is a recognised industry trend that January is strong because of singles' new year's resolutions, and February because of Valentine's," said Mr Bill Dobbie, the company's co-founder.

Like most subscription dating websites, Cupid lures punters through an introductory "freemium" service, where users can post their profile without paying. If it attracts interest they must pay a subscription to respond and chat.

Unlike Match.com, which builds up strong single brands, Cupid focuses on a lot of niche markets such as expat Indian dating and single parents. While a typical dater stays on a site from between four and six months, Cupid tries to capture the traffic when it moves on to another website it owns.

"We have a network of sites catering to people from 18-65 years old," said Mr Dobbie. "You may meet a lady in a certain bar and it doesn't work out so you don't want to go back – we offer many bars where people can move on to."

Although the UK market is growing, Paul Morland, an analyst at Peel Hunt, believes it is "pretty mature".

Last year Match acquired an 81 per cent stake in Paris-listed Meetic in order to create a pan-European dating group, a deal which valued the company at €345m. Recently Cupid has made acquisitions in Germany, Brazil and India.

But growth is not one-way. Meetic's shares fell more than a quarter in 2011. More worrying is potential competition from Google and Facebook offering non-fee paying dating services.

But with the consumer downturn Mr Morland said the online dating sector could be a novel defensive stock. "People don't cut back on hooking up," he said. "But meeting people online is cheaper – you get to sift through potential suitors."

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