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A couple of years ago, Ancestry initiated databases that are populated by users who upload their family histories. These user-generated databases have favourable economics for Ancestry because they do not have to pay people to transcribe records and so are fundamentally cheaper to run. However, the advent of social network sites like Facebook is negatively impacting this business. Facebook also allows users to post their family history (on applications like We’re Related) and Facebook offers a larger audience and a broader social offering. As a result, Ancestry is getting squeezed on this end of the business.
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Ancestry is also feeling the impact of competitors who offer historic genealogical records for free, which is in direct competition to Ancestry’s subscription model. Ancestry is very clear in their IPO documents that they consider FamilySearch.org to be their main competitor. FamilySearch.org, the free genealogy record database run by the Mormon Church has about 1 billion records. This is about 1/8 the size of Ancestry, but it is growing very quickly due to the dedication of the Mormon Church and a vast group of volunteers willing to transcribe records for free. Consequently, Ancestry is also getting squeezed at this end of their business as well.
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Ancestry still continues, however, to dominate the genealogy marketplace. According to the market research firm ComScore, the various Ancestry websites receive 4 million unique online viewers per month. The next largest competitor is FamilyLink, which gets about 1.1 million unique viewers per month.
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Ancestry has about 1 million paying subscribers. That means that the typical Ancestry user visits their website about four times per month. The average user pays for the Ancestry websites for one year before ending their subscription.
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To sum up, here is a synthesis of Ancestry’s business model as described in their IPO documents: “We generally compete on the basis of content, price, ease of use, technology, brand recognition, breadth of products, service and support, and the number of network members with whom other subscribers can collaborate. We believe that we compete favorably with respect to these factors, and that none of our competitors offers as broad an array of products and services or as compelling a value proposition to consumers interested in online family history research.” It certainly looks like Ancestry has staying power.
