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The Big Business of Online Dating

Online dating isn't just about making love connections, it's about making lots and lots of money.

And as the stigma of meeting a match online falls by the wayside, the industry's growth is accelerating. Online dating revenues are growing 10 percent to 15 percent per year, on track to hit one point nine billion dollars within three years, according to Piper Jaffray. The pullback in consumer spending hasn't slowed down the industry at all: if anything it seems to have made Americans more eager to settle down.

The two major players are Match.com, which is owned by Barry Diller's IAC/Interactive Corp and eHarmony, which is privately held. IAC's Match sites, which includes Match.com and Chemistry.com generated $343 million in revenue this year, reporting 1.4 million active subscribers, about 15 percent of the market. eHarmony doesn't disclose its user numbers, but Piper Jaffray's Gene Munster estimates that its revenues were about $250 million with about 13 percent market share.

eHarmony costs about twice as much as Match.com per month, but eHarmony's CEO Greg Waldorf explained to me why he believes it's worth it. eHarmony is responsible for 2 percent of all U.S. marriages. That's right, 236 eHarmony members get married every day. Waldorf says that the lengthy questionnaire and the price tag weeds out people who aren't serious, and the algorithm they use to crunch the answers matches customers with compatible life partners.

Match and eHarmony aren't the only players.

There are the niche sites like JDate.com and Christianmingle.com, which are both owned by Spark Networks .

In addition to Match.com and Chemistry.com IAC owns niche sites Blackpeoplemeet.com, singleparentmeet.com and seniorpeoplemeet.com.

All these premium services face competition from free sites like Plentyoffish.com, which is ad supported sites. And then of course there are social networks. Forty one percent of online daters say they also use sites like Facebook to find dates. But so far the explosion of social networking hasn't proven a threat to paid sites.

Piper Jaffray's Munster says eHarmony is a natural acquisition target for a company like AOL or Yahoo, or even IAC if Diller wants to make a big push for this market. He says we can also expect some of the larger players to snap up niche sites, as the whole market grows.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.