Investors Have Faith in Religious Dating Websites

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Spark Networks Inc. is converting.

For years, the Beverly Hills online dating company’s crown jewel was Jewish dating site JDate.com. But with that service now in decline, Spark is getting huge revenue growth from its newer sites aimed at Christian daters, especially ChristianMingle.com.

Spark’s shares were up 14 percent last week to close at $7.40, making it the top gainer on the LABJ Stock Index for the week ended Dec. 19. (See page 26.) The company’s shares have doubled since Jan. 1.

“They’ve completely reinvented themselves,” said Chris Armbruster, an analyst at B. Riley & Co. in West Los Angeles. “The growth driver is ChristianMingle.”

Before this year, Spark’s business was mostly reliant on collecting subscription fees from JDate and affiliated international sites. The site launched in 1997 and won widespread acceptance in the Jewish community.

Its popularity made the company profitable, but the lack of subscriber growth over the years led to criticism the company was over the hill – and prompted a takeover attempt in 2010 by Boston private-equity firm Great Hill Partners, the company’s largest shareholder. JDate and its related international sites lost paying subscribers this year – there were about 85,000 as of the third quarter.

Now, Spark is trying to re-create the popularity of JDate with its Christian sites, which include ChristianDating.com and faith-based content sites such as DailyBibleVerse.com.

The company is courting new dating subscribers with a heavy marketing budget – Spark spent about $11 million to market its Christian sites last quarter, for example, by buying ads on TV. By comparison, it spent only about $800,000 to market its Jewish dating sites.

The strategy has led to substantial growth. The Christian dating sites had about 155,000 paying subscribers in the third quarter – up 89 percent from about 82,000 last year.

But the substantial expense of marketing the sites has curbed Spark’s former profitability. The company lost $1.7 million in the quarter ended Sept. 30, compared with a loss of $200,000 in the same quarter last year. Revenue was $15.9 million, up 25 percent.

Nonetheless, by investing in newer lines of business, the company’s stock is appealing to a new class of growth-oriented investors who are optimistic the company will repeat its JDate success with the Christian sites, Armbruster said.

“They’ve kept their foot on the gas,” he said. “The topline growth has attracted a lot of people to the stock.”

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