Usually, when two heavyweights come together one or both of them gets bloodied and battered, if not knocked out all together—Ali/Foreman, Lewis/Tyson, Conru/Lars …
Actually, the coming together of FriendFinder founder Andrew Conru and Streamray founder Legendary Lars in March of this year has been anything but a knockdown, drag-out brawl. Since Streamray was merged with FriendFinder the Conru/Lars combination has been more of a mutually beneficial love fest than anything else.
Of course, you’re talking about a business relationship that’s based on 10 years of friendship and a great deal of respect, along with a little friendly competition, rather than two guys trying to beat the hell out of each other.
“It’s interesting because dealing with Andrew is a lot like dealing with my brothers. It’s a constant battle to show each other who’s right. So we spend a lot of time saying neener-neener-neener to each other,” Lars says. “Sometimes that can be a bad thing, but in this instance it’s great because it motivates us to push forward and outdo each other, which only helps the company excel.”
“It’s been that way for the last 10 years and now that we’re kind of attached at the hip, Lars will say ‘I just increased the conversions on my site by X percent,’ and I’ll have to go work with the team and do the same on our site,” Conru says. “Every month we rib each other about ways we’re improving each one of our sites—he’s still more attached to the cam sites and I’m still running the personals sites, but we definitely keep the fire under each other’s tail.”
The FriendFinder and AdultFriendFinder story is one of a company that has excelled every step of the way and has often set the bar by which others are measured. As with any great venture, AdultFriendFinder was created mostly by accident.
While working on his Ph.D. at Stanford, Conru, a small-town farm boy from Indiana, created FriendFinder in 1994.
“All I knew is that I wanted to create a site that was better than what I saw out there at the time. I never really thought about where we were going to be or the growth of the company. All I did was focus on the members and the product and kind of rode it from there,” he says.
The ride has been pretty wild up to this point. In 1996, Conru branched AdultFriendFinder off of his initial creation as a reaction to some FriendFinder members’ increasingly risqué photos and profiles. That spin-off is now the largest sex and swingers’ personals site in the world with nearly 20 million members.
Changing the game plan
So you’re sitting on what is undoubtedly the king of adult dating sites and a mainstream counterpart that is a power in its own right. What do you do?
If you’re FriendFinder parent company Various, you expand in the next logical way—via acquisition.
“Our goal is growth in both directions—horizontally and vertically,” Conru says. “Our core competency is creating communities for adults to have fun and we don’t want to get too far away from that. We also know we are in the community business and the aggregation business. Obviously, there are other companies that are of interest to us.”
When FriendFinder acquired Streamray in March they not only picked up an additional and substantial affiliate base, they also picked up the technology to improve user experience. That came in the form of Streamray’s cam technology, which has made a name for itself on Cams.com and has since been integrated into the FriendFinder sites. Upwards of 800 members are already broadcasting video.
“A lot of people are doing it and as the video gets better, it could be a lot bigger,” Lars says. “I expect video to be a big part of what FriendFinder is doing. That was one of the reasons for the deal, because our competency is in video and it made sense for [what] FriendFinder was moving towards.”
In July, Various moved in another direction, acquiring Spring Street Networks—a mainstream online dating network that runs dating portals for sites such as TheOnion.com, Salon.com, and the San Francisco Chronicle’s website SFGate.com. The move wasn’t about acquiring additional members to add to the FriendFinder database though, since Spring Street has remained independent of the FriendFinder sites themselves. FriendFinder left the personals model created by Spring Street intact, instead choosing to concentrate on beefing up the network’s functionality, technology, and conversions by introducing new revenue models.
Both acquisitions have also helped FriendFinder work out some kinks and move toward more streamlined future growth.
“The key part with the last two acquisitions is they both force us in a direction that will improve our offerings,” Conru says. “Spring Street forced us to create a flexible system to quickly cobrand any one of our sites because the Spring Street network has more than 200 large traffic partners.”
That means that FriendFinder can now change the look, feel, and feature set for any of the sites in their network through a Web interface, a move Conru says affords the company more flexibility in partnering with other companies through their site network.
On the other hand, the Streamray acquisition will enable AdultFriendFinder to have an affiliate program that transcends what one company can accomplish.
Although the possibilities are astounding, the Streamray merger hasn’t been all smooth sailing. Both Conru and Lars admit that it has been much more work than anyone expected. What was anticipated to be a 30-to-60-day integration process was, as of press time, moving into its six month, mostly due to technical and database issues (Streamray is a Windows-based company and FriendFinder is MySQL/Unix-based).
Still, the benefits of the merger are already evident. Even without full integration, Lars says Streamray’s sales have doubled since becoming a part of FriendFinder. He expects them to double again before 2006.
Building the ultimate community
Once Streamray is completely integrated with FriendFinder, along with what Conru expects to be the company’s biggest jump in affiliate revenue in the past year, the stage will be set for something even bigger. Conru is looking to make more acquisitions, both in adult and mainstream, and turn FriendFinder into something much more than a personals community.
He compares the strategy to that of Commission Junction, a mainstream affiliate marketing, program management, and ad network that incorporates online businesses in several industries under one marketing program.
But it goes beyond just acquiring new sites. AdultFriendFinder is currently beta testing an Adult Directory Guide, which is a directory of adult-oriented, real-world places people can go to have fun. The focus of the project is to the bridge the gap between the online and offline worlds.
“Our take is our members already know how to have fun online, so we want to take that experience and bring it into the real world. We think there’s going to be a great opportunity for growth in that space,” Conru says.
“The next step, obviously, is to partner or acquire organizations that cater more closely to offline places.”
With that in mind, FriendFinder is currently evaluating a number of offline companies for possible partnerships or acquisition. Conru expects the full plan to take shape in the next four or five months.
From card tables to corporation
When you think of FriendFinder you think of its mass. Forget about the nearly 20 million members and consider that the company now has more than 200 employees in two states.
Of course, it wasn’t always that way. In fact, the corporate sheen is something that’s just starting to come into the picture. As recently as two years ago, there were still card tables being used as desks in FriendFinder’s Palo Alto, Calif., offices.
“We really only worried about the affiliates and not really the corporate feel,” Conru says. “We’re not really a glossy company yet.”
They are, however, moving in that direction, perhaps hesitantly.
“FriendFinder has a more corporate structure, and I have to fit into that structure,” Lars says. “Recently, I had to write some employee reviews and I was like, ‘What?’ … I’ve got other stuff to do besides write reviews, but OK, I guess I can do that.”
Lars went on to call the environment at FriendFinder “more corporate-y” than that at Streamray, but that’s coming from a guy with an affinity for big, floppy hats and the early a.m. surf.
It’s also coming from a serious businessman, though. Although he could retire, and admits that he’s thought about it several times, Lars has one ultimate goal in mind for FriendFinder before he hangs up his hat—an IPO.
“One of things I plan on doing is the IPO, so I’d like to see that happen and even if I started everything today and saw it set up, that’s probably a two-year process. So I’m here for a good three or four more years at least,” Lars says. “Honestly, I’ve entertained the idea of retiring many times and when I finally sit down and am true with myself I realize what the hell else would I do? I need something that occupies my brain and my energy and is a challenge.”
