A Look at Facebook Dating through the Lens of FriendsPlus

In 2013, I led a team to create FriendsPlus, a mobile app that was acquired (and killed) right at launch.

It turns out Facebook’s new dating app, announced last week, is very similar. Let’s see how Facebook talks about it:

Facebook Dating product manager Charmaine Hung tells me that “I have 2,000 Facebook friends. I’m not best friends with all 2,000 people, and there’s a good chance that one of that could be a really good match with me. I trust them, I appreciate them and I know we’re compatible. The only thing missing is knowing if we’re both interested in being more than just friends without the fear of rejection if you were to do this in real life.”

Let me first share how I talk about FriendsPlus on my LinkedIn Profile, with my intro deck and a screenshot below.

Dating service acquired in 2013 by Vietnam’s largest dating community, Noi.vn.

► Recruited and managed 5 person cross-functional team to produce FriendsPlus, a social / local / mobile dating (SoLoMo) app for iOS and Android.

► Created service targeted towards professional-age females, emphasizing real relationships to make romantic connections in contrast to typical male-oriented “browsing”​ dating services. Product Manager.

► Led startup to acquisition of application and technology platform.

An overview of Friends+ as pitched to investors and later, acquisition partners. The application and technology platform were acquired pre-launch in Q4 2013 by Vietnam’s largest dating service, Noi.vn

I first started work on FriendsPlus in 2013 while I was COO at Cyworld, a social networking service. When I first arrived in Vietnam in 2006, it was still common for women to get married as early as age 18 and slightly older for those who went to university. My theory is that limited life options in education or careers streamline roads to marriage and children.

As women started to build great careers in the blooming (tiger) Vietnamese economy, there was less time to focus on relationships; some of Cyworld’s female employees became increasingly frustrated at growing older but not finding marriage partners.

Going deeper into the problem, traditional methods such as matchmaking could be a bit archaic or difficult if a woman was working away from her hometown. Dating apps like Tinder were primarily focused on (ahem) male psychology; women needed a digital tool to help them meet people in a way that still felt conservative and true to the values (less about hookups) with which they grew up.

After hearing about these problems for some time, I decided to take action. I formed a new company to help my female employees find love: FriendsPlus.

From my user research, I learned that Vietnamese women did not want to meet random people. At the same time, it was not yet culturally acceptable to make the first move (unless you were my future wife).

My problem was how can you bring two people together in a natural, almost magical way?

The solution we proposed was: serendipity.

At the time, Facebook was already the most popular (sigh…Cyworld) social networking service in Vietnam, and you could still pull in friends lists from the service. We let users connect their Facebook accounts to FriendsPlus and select up to the second degree of friends (friends of friends) of people they were interested in as “romantic crushes”; the idea was to include your friends and people that you might have known or seen occasionally but were still a bit shy around.

From here, the app was “set it and forget it.” As other people started to use the app and set their own crush preferences, our system would monitor when two crushes were in close proximity (ex. 1KM away on a weekend afternoon). If you were both around each other, the app would ping you and try to convert you two into meeting – this would also be the first time you knew about each other’s mutual interest. This was a magic moment that might not happen again for a very long time.

FriendsPlus was about removing frictions to create a real meet up and opportunity at love. One point that spurred furious internal argument was leading users to meet offline in the real world instead of to chat. My argument was that if you start chatting, it’s easy to postpone a meet, and basically never meet. Chatting was also what every other dating service did; I felt that the case for chat was the common mistake of seeing what everyone else was doing and assuming you needed to do the same. FriendsPlus needed to be clearly different in how it operated and generated successful outcomes for users.

If you have noticed, however, FriendsPlus had a problem, at least in comparison to social apps of the day: engagement. In 2013, success was about creating addiction, a problem we understand more clearly in light of Facebook, YouTube, and fakes news /  junk content / data privacy. FriendsPlus was a utility that only appeared in your life when something special was about to happen.

Thus, there wasn’t a clear business model (though we could have highlighted places to meet as ads, that ad volume would have been low) or virality. Before launching, we also added ways for people to meet people at random, my homage to ChatRoulette. You can see a preview of that below.

Friends+ Screenshot – Finding People Nearby

FriendsPlus Screenshot.jpg

Feature: Allowed you to propose a meetup right now based on the type of activity and person you would like to do and meet.

To be honest, the app was not going to be easy to launch and have traction grow on its own; this is why I ended up selling it to Noi.vn, Vietnam’s most popular dating service. Noi never launched the app either. I suspect it was hard to get internal support for something that did not work on traditional engagement metrics.

Going back to Facebook, its Dating team is going to face the same issues in defining success. After you set up crushes, what do you do?  FriendsPlus would wait for that magic moment, but if the user does not take action right away with Facebook Dating, she will not go back into the app. It’s also not like you add new friends (I guess this rate declines with age) constantly and consistently over time and can be reminded to set new crushes.

I imagine the real-world usage as follows: I set some crushes. Some time later, as not all users will use the app at the same time, a crush of mine may also use Dating and set me as a crush. Facebook whisks us into an awkward chat:

Facebook: “You guys seem to be crushes. Go chat!” (at a random time of day in which the pair may or may not be busy)

Me: “Hi”

You: “Hi” (anywhere from immediately to days later, have you seen how the modern generation replies to messages?)

Me and You: [Uhhh, what now?] (Hopefully, not a dick pic)

Potential awkward fail, at least based on how the app is described in the TechCrunch article.

The Facebooks and Googles of the world get easy media attention any time they release a new app. My impression is that most of these apps are tests from product teams that need to build out their resumes. These apps are not real businesses; they get 15 minutes (seriously, go search Techcrunch) of media attention and die out months later.

While this sounds like a humble brag, I claim this more about my failure in social products: I feel I hit my peak as a social innovator in 2012/2013, seeing pain points and constructing social utilities to solve them on a monthly basis. Because I was in Vietnam, these ideas died; I could not get investor support for anything without clear virality (“build it and they will come” and gamification are not strategies) and revenue models. (Cyworld and Mimo failed in significant part because unlike MySpace, Facebook, and Snapchat in the West, we had to grow users rapidly and make money.) Months or years later, I would see these same ideas I had get millions in funding in Silicon Valley, like Facebook Dating. They unsurprisingly all failed, though perhaps some like FriendsPlus in Vietnam eventually got acquired.

That is what I expect to happen here.

Me Talking about Vietnam and the Social Media Scene on the Xpansion Podcast

Recently, I had the honor of talking to the Xpansion Podcast with Fiona Huang and Justin Taillole about my experiences leading social networking startups in Vietnam – I spent over 7 years there, learning, grinding, and enjoying my time in a rapidly growing 3rd world country.

Listen above and I would love to hear your comments!

Here’s the official Xpansion description for the episode:

Vietnam, the 3rd most populated country (93.95 million) in Southeast Asia. With a population average age of 28.5 years old, young Vietnamese are crazy about social media. Without a doubt, people there are heavy Facebook users. Before Facebook went viral in Asia though, Cyworld had been the social media that gained most tractions in Asia. Originating from Korea, Cyworld was founded in 1997. After acquired by SKTA, a Korean telecom company, Cyworld aggressively expanded to Vietnam, Taiwan, Japan amongst others.

If you are curious about how social media was ran in Vietnam, do not miss out on this episode of Xpansion. We’ve invited Michael Nguyen, the COO of then Cyworld Vietnam. Michael is born and raised in the U.S. by Vietnamese immigrant parents, went back to Vietnam in his mid-twenties and set up Cyworld’s operations. He successfully grew the user base to 4 million. During his stay in Vietnam, he founded Mimo and FriendsPlus. Mimo is a microblogging social network similar to Twitter and later a popular dating app, which Michael successfully exited.

In this episode, Michael shares his story of running social media companies in Vietnam. From his experiences, you will learn:

  1. The cultural differences between the young professionals of Vietnam and the U.S.
  2. How social media in Vietnam used to be monetized differently.
  3. How national-owned telecom companies in Vietnam affects startup survival.
  4. Why managing government relationships is a big deal in Vietnam.
  5. What are some challenges Vietnamese startups are facing.

Vietnamese (Olympics) Gold is Better Than Any Other Gold

“So proud! But the greatest happiness was that we won over China,” Nguyen Cao Ky Duyen, a Vietnamese music show host based in the U.S. but popular in her homeland, wrote on Facebook. 

From VNExpress

Admittedly, shooting is not the sexiest sport. Shooting from 10M (32 feet) sounds even worse. However, once I watched the video coverage, I was pretty excited and proud to see the first Vietnamese Olympic gold medal from Hoang Xuan Vinh.

But the thoughts above pretty much reflect any Vietnamese citizen right now, with bold emphasis mine.

Plus, check out the “Man, I got this!” grin Vinh breaks into as he prepares for his final shot (starting at 1:45 in the YouTube video below):

I do kind of wish he had been wearing a Vietnamese flag-themed jersey though. And done a little dance. Plus, isn’t it a bit weird we don’t see anything come out from the gun? I kind of feel like he’s playing Duck Hunt for Nintendo / NES.

My Memories of Coach Jason Rabedeaux [Vietnam, Saigon Heat]

espn_rabadeux01_1600x1000
Last week, I was surprised to see this long form article on ESPN: Former UTEP coach Jason Rabedeaux’s death remains a mystery.

I knew Coach Jason. He lived in my building in Vietnam, and we would either run into each other in the elevator, at the minimart on the ground floor, or during morning swimming sessions on the 25th floor at 7AM – a chat for a minute or two every few weeks. My wife Ha worked with him during the Saigon Heat’s first season, and both of our impressions of him were the same: he was a really friendly guy.

We heard about his death last fall, but I had no idea about the many internal demons haunting him.

Best wishes to Coach in the heavens.

Analyzing the Shark Tank – Coffee Meets Bagel Episode [Startups]

I do not really watch Shark Tank, but two recent episodes struck my interest. The first was the episode with Singtrix, which has a connection to my time with RedOctane and Guitar Hero. The other was about Coffee Meets Bagel, the January 9th episode (thanks to Kevin Tung Nguyen for sharing the episode) that you can watch below:

Coffee Meets Bagel (CMB) relates because of my work at FriendsPlus, which we sold pre-launch to Noi.vn, Vietnam’s largest dating service in 2013. Like CMB, FriendsPlus focused on creating a non-meat market dating environment focused on the needs of female users, encouraging offline meets between users who explicitly opted in to each other. Some commentary on the episode and CMB:

  • The team should have been prepared for questions about user numbers. By deflecting the question multiple times, one wonders if they have given different numbers to different people and thus could not say publicly on television what the current numbers were (they would not want to be shown lying), or if CMB is simply at the bottom of the range given (100-500K users). As Cuban implies, there is a big difference between 100K and 500K users, especially considering that CMB has been around for close to 3 years (more on that below) – it suggests limited market or non-compelling and non-naturally sustainable growth.
  • The team mentions that CMB was invested in by a Match co-founder. That person is Peng Ong, who I actually know. Tinder is invested in by Match, the firm. CMB launched in April 2012, 5 months before Tinder, but Tinder is estimated to have 50 million users today. The team cites Match’s 800M in revenue as a sign of their own potential. That’s the same logic that says you should automatically advertise on Facebook because it has 1 Billion users. Yes, there is some superficial logic there, but you need to delve a bit deeper.
  • The Sharks are right in that CMB can easily be copied – look at the popular Noonswoon from Thailand.
  • CMB’s revenue and users are a bit alarming. I discuss it over the next points.
  • Last year, CMB generated $87K in revenue. If that is $0.50 per user on average, this would imply 170K users. This is reasonable for this type of product and follows what the team said. I don’t know how long the average user stays with the product. If they actually have more than 170K users, revenue is actually less than $0.50 per user. Remember this $0.50 figure for later.
  • This year, CMB expects to make $1M USD, but expects to lose $1M, which means costs were $2M USD. Current user acquisition is $0.30 per user.
  • CMB expects to break even at $10M in revenue next year, from 4M users. They expect to spend 3-4M (let’s assume it’s 4M) in to bring on those new 4M users. That is $1 per user. They expect $2.50 per user in revenue, but did not include CMB’s existing users in that revenue figure. This leads me to believe that CMB user lifetime with the service is not particularly long (1 year or less) or that the number of current users and the revenue generated from them is not significant enough to include. This implies the lower user figure in the given 100-500K user range. Increased user acquisition costs suggests this product does not spread virally, something about it does not compel others to talk about it, or you are trying too hard to bring someone who may not be the right fit for your product. If this is the case, the projected gain in average revenue per user (ARPU) for these kinds of users is also a concern.
  • How did CMB estimate $2.50 per user per year moving forward? CMB is going to jump from $0.50 to $2.50 (500%) in 1 year?  How does adding users generate more money per user? Since the revenue is from digital currency / microtransactions, does having more users make the product more sticky? If so, this implies the business is not sustainable now. If that is true, and focusing on this niche is not sustainable, what does this imply about the value the product is creating for its current users? Does having more users actually mean more date / chat frequency which means I need to buy more microtransactions? Again, this is not a meat market like Tinder in which you go on to browse (consume) through people – for Tinder, you need a ton of users. For CMB, you are getting one match per day carefully selected for you. Are there more types of transactions that CMB will be processing in the future that will generate new forms of revenue?
  • Let’s compare CMB to a Facebook type of product. Facebook generates more revenue by adding more business models. Example, Facebook could sell different types of ad products, and can charge more money with an increased user base (market power) increasing the efficiency of those ads. It can also take a share of revenue that is generated within the platform (apps, games), or sell emoticons. Thus, more users could lead to more revenue, but you also need to add more models for those users, it’s not automatic. This concerns me about CMB – it currently just sells digital currency.
  • Why is there such a high burn rate (company spending)? With $2M in expenses, this is over $150K in burn per month. You might want to look at CMB’s jobs page to find out where the money is going: https://coffeemeetsbagel.com/jobs/. From my experience: company trips costs a sh*tload of money. Based on LinkedIn, I found about 15 full-time employees at the company. Let’s say on average, each employee costs the company $100,000 each per year (this is low when you include office space, benefits, etc.). The founders mentioned they each make 100K, which for the Bay Area, is low. Based on CMB’s $1M revenue, and $1M in losses figure, however, the team is suggesting they spend 133K per employee per year, which is possible. (This doesn’t include marketing, which at .30 per user at 170K users, would only be about 50K and can be ignored for now). I know that the Bay Area is a different beast with employee expectations, but in my opinion, startups in need of cash need to learn how to conserve cash better.
  • CMB will break even at $10M in revenue and 4M+ users. With $4M going in advertising, where does the other $6M go? If you stick to the $133K per employee figure, the company would need to grow to 45 people. Perhaps some people are getting raises. Infrastructure should not be a particularly significant cost yet. I don’t think you can have 45 people in a co-working space either. If the cost goes to $150K per employee, that is still 40 employees. If the team can cut the fancy office, parties, trips and focus on profitability, I expect there is a good amount of fat that can be cut. (One of RedOctane’s first offices was a big warehouse with no air conditioning in Sunnyvale – no frills worked out for them)
  • I wonder if CMB’s quoted revenues include the 30% share that is given to Google Play and iTunes for microtransactions. Otherwise, there is no cost of goods (COGS).
  • Why does CMB need to grow to be profitable? This, along with CMB’s slow user growth after nearly 3 years troubles me. I could understand the growth in the sense it’s not a meat market app. It’s for people who want quality, real relevance over gross quantity. But why can’t it be profitable now? This makes me question the revenue model. Is CMB going against its core by going to mass-market advertising? If the app is not for everyone, it should be positioned accordingly. I don’t see how growth rescues them long term.
  • So what should CMB do? I would consider changing to a premium / subscription model to get revenue from more (higher % of users pay, but less overall users) users at higher rates and focus on that smaller niche audience to reach profitability. Do people pay for love? Yes, as long as it is provides real value. CMB seems to be providing that.
  • The Mark Cuban $30M offer: I don’t think he is actually making the offer, he is saying “what if”, to which the proper response to a hypothetical is of course no. If you say yes, you have publicly given a limit to what your company is worth (the team has suggested a $10M valuation with $500K for 5%) for no reason. You would never want to create the sense you do not believe in your product to preposterous levels. If it were a legit offer, I believe they should have taken it. 3X valuation is nothing to joke at, as much as the team may claim to look at Match’s $800M in revenue or Tinder’s billions in valuation. The team suggested CMB is a cash hungry business intent on growth. CMB received $2.8M in venture capital last May, which would not cover its marketing budget for this next year. Yet, its is only asking for 500K from Shark Tank. This leads me to believe CMB is mainly on Shark Tank for the PR and don’t want to give up very much equity, has another round coming, or does not intend to go with its stated marketing plan at all – it would not have the money for it. If it needs to grow massively to become profitable, CMB has no other option than to take the buyout offer.