Spark Networks Plans Germany Exit & Layoffs

In its report on Q1 2023 results, Spark Networks has announced that it will close its Berlin operations by January next year. This move includes layoffs of around 200 full time employees, as the company transitions into a lower-cost decentralised organisation.

Spark Networks shared that it will be redomiciling from Germany to become a Delaware corporation. Despite this move, it states it will be “retaining best-in-class service providers that will be held highly accountable for results and some of whom the Company expects to compensate on a shared-success basis.”

Other operational plans include outsourcing IT services to a third-party vendor, which it states will bring about an improved user experience and further cost savings. To boost revenue, it plans to appoint a Chief Revenue Officer, who will focus on capital growth.

To improve marketing efforts, Spark Networks will also onboard a performance marketing agency. It states this will help marketing strategy move away from affiliate relationships, “an outmoded practice that continues to return less and less for companies across all industries”.

Instead, Spark Networks will look to emulate the success of publicly traded competitors, who are able to generate $4 in revenue from every $1 spent on direct marketing in the channels of SEM, SEO and TV.

The company shares that its current reliance on affiliate marketing only generates $2 for every $1 spent, and with this change it looks to boost that to a 4:1 yield instead. 

These changes come as the company records lower revenues than the same period last year. Its 2023 Q1 revenue was $41.3 million, as compared to $49.9 in Q1 2022.

“Our two highest priorities remain returning to revenue growth and improving profitability. We strongly believe this can be achieved through the implementation of our strategic plan, which is focused on a future state of the Company that has a substantially lower cost base, more efficient marketing spend, and an improved user experience”, said Chelsea Grayson, CEO of Spark Networks.

“Spark’s diversified portfolio of leading brands (including Zoosk, EliteSingles, SilverSingles, eDarling, Christian Mingle, and Jdate) hold significant value in the online dating market and are in demand by our global subscriber base”, she continued.

“We continue to target at least a 50% increase in Adjusted EBITDA to $28 million in 2023, and our long-term goal is to achieve and sustain 25-30% plus Adjusted EBITDA margins consistent with industry averages, which should allow us to fulfill our intent to accelerate the paydown of our debt.”

“To start 2023, in the first quarter, our seasonally weakest quarter, our Adjusted EBITDA margin grew from 2% to 6% year-over-year, which signals what we intend to be the start of a year of efficiency for Spark”, Grayson shared.

“We believe the best way to increase the value of the Company is to significantly transform our operations and right-size our cost structure while reallocating capital to customer acquisition channels with the highest returns and investing in our brands with the highest ROI. We believe these efforts will ultimately yield a simpler, more profitable business. And given the importance of our offering for so many of our users, we fully understand the trust they’re placing in us and we’re continually open to engaging with them in new ways and through new partnerships with influencers and other trusted sources”, she concluded.

Click here to find the Spark Networks’ latest report in full.