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The End of the Affair

Michelle Gerdes

Michelle Gerdes is associate editor of strategy+business.

 

 

The controversial dating site Ashley Madison is providing the marketing world with a case study in whether it’s possible to rebrand a company whose image, and failings, are deeply burned in the public’s mind.

Admittedly, it’s an extreme case, and the company’s wounds are largely self-inflicted. Ashley Madison set itself up as an outlier in the thriving online dating world with the slogan “Life is short. Have an affair.” Founded in 2001, it intentionally courted controversy, and users, by billing itself as a discreet dating site — for married people. The company built its reputation on the promise of anonymity and secrecy. 

At some level, it seemed to work. Just 15 months ago, with more than 30 million users, then-CEO Noel Beiderman valued the company at US$1 billion. Some analysts and critics balked at the lofty number for this privately held company. But considering that many conventional dating sites owned by publicly held companies, such as Tinder, were reporting reliable profits, there may have been some justification for the high valuation. In April 2015 Ashley Madison announced it was planning an IPO.

And then things started to go wrong.

The company was accused of using “fembots,” computer programs that impersonate real women, to lure in and retain male users. The company denied the accusation for a while, but has since admitted to the fembots. In other words, Ashley Madison conceded that many of the people on the dating site weren’t actually people. Breaking trust with customers when your business model is based on that very trust is a good way to lose those customers. (The company, which has managed to stay afloat, recently said that it shut down the fake profiles starting in 2014 in the U.S., Canada, and Australia, and by late 2015 in the rest of the world, and that it has a no-bot policy.)

Breaking trust with customers when your business model is based on that very trust is a good way to lose those customers.

More damaging was the hacking scandal. In July 2015, hackers stole, and then posted, personal information such as email addresses from 32 million of the site’s users. The company accurately described the episode as “devastating.” It’s one thing for a garden variety e-commerce company to expose customer data to hackers; it’s quite another for a platform that specializes in arranging illicit meetings to do so. So much for the promise of anonymity.

In August 2015, a class-action lawsuit was filed against the company and earlier this month it was reported that the Federal Trade Commission is opening an investigation into the data breach.

Not surprisingly, the self-inflicted wounds have taken a toll on the company’s business. The company, which had annual revenues of $109 million before the hack, expects $80 million in revenue for 2016. But instead of shutting itself down, or going bust, or selling off the assets, the damaged firm has begun to reinvent and rebrand itself. In April, the company brought in two outsiders to remake the company: Rob Segal, founder of Segal Communications, which was acquired by the advertising firm Interpublic Group, became chief executive officer, and James Millership, the former chief financial officer and chief operating officer at the online gaming platform WorldGaming, was named president.

And the pair, who have experience in the communications and tech industries, are using a common playbook. First, they are renaming the company Ruby. The Ashley Madison brand is just too damaged to be marketable.

Next, they’re effectively rebuilding the dam after the flood. To address the hacking concerns, the company is investing millions in technology and security, emphasizing new secure and private payment options.

But in a more ambitious move, the new leaders are trying to rebrand the service itself. The site wants to leave its roguish past behind and be known instead as the virtual meeting place for what it calls “open-minded” encounter seekers.

The old tagline has been replaced with something more tame: “Find Your Moment.” In what seems like a nod to a new spirit of openness, the homepage features a woman’s face smiling out at the user with a simple wordmark. (By contrast,  the old logo included a wedding ring and a photograph of a woman’s lips and index figure in a “shhh” gesture.)

In fact, the company says this pivot is in part a recognition of the way in which people actually used the site. It notes that almost 45 percent of its members are single, and that its users are interested in a range of experiences. Ruby insists that it is simply trying to keep up with the rapid changes in modern dating in the age of Tinder.

The question remains: Is this rebranding going to work?

Ruby faces several obstacles. A challenge for any online business is the speed of innovation and competition. In recent years, for example, Tinder has emerged as a wildly popular, quasi-anonymous dating app.

Beyond the competition, it may be hard for customers to move past concerns over breaches of trust and privacy. It’s one thing to go through the nightmare of having your personal financial information exposed. It’s quite another to have your dating preferences broadcast to the world.

As the company tries to reinvent itself, Ruby may find that the rules for casual-relationship sites also hold for more serious relationships: once one party violates the trust of the other, it’s tough to undo the damage.

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The End of the Affair