The online dating industry is a big market currently raking in $2B in annual revenue and expanding at an annual rate of 5% from 2010 to 2015.[i] Young adults, age 18-24 years old, have led this surge in usage with 22% having used a mobile dating app, compared to just 5% in 2014.[ii] With users spending an average of 90 minutes a day browsing through dating apps, logging in on average 11 times a day, dating sites have an incredible opportunity to capture value from these users looking to find a connection.[iii]
However with over 500 dating apps now on Apple’s App Store[v], it is getting harder and harder for dating apps to create value through scaled growth of network effects and to capture financial value. In this industry ridden with multihoming, the Wall Street Journal found that “the abundance of options means (consumers) are rarely loyal to one dating site.”[vi]
Tinder, the mobile dating app that introduced the concept of “swipe right” and “swipe left” into our daily vocabulary, has found value in being one of the first movers in the mobile app dating space. With 50M users worldwide, Tinder boasts that its user-friendly platform produces 1.2B profile views a day leading to 15M matches![vii] Through using a “freemium” model and developing a less time consuming platform through which users can create enticing profiles, Tinder has maximized the number of users entering the platform looking for a connection. When a female user is looking for a male connection, for example, and vice versa, indirect network effects are at play as each gender receives more value from the platform when additional users of the opposite gender join the app.
To capture value from these users, Tinder has introduced three key elements that continue to drive their revenue up.
Tinder Plus, Tinder’s subscription model, at $9.99/month[x] let’s the user undo an erred swipe left as well as view and swipe right on users outside of the geographical location of the Tinder Plus user, a constraint of the freemium model. With 284,000 paid users added in Q3 2016, Tinder has reached 1.5M paid users thus capturing financial value from these subscriptions.[xi]
Tinder has also introduced the concept of Tinder Boost, which Tinder Plus users can activate once per week to increase their view rate for 30 minutes. Freemium users can also access Boost at a $3.99/activation creating a revenue stream from Tinder’s primarily free users.
Lastly, Tinder has partnered with a number of advertisers to place curated profiles into its app to connect with users. In 2015, Domino’s created a Valentine’s Day campaign in which users were matched with Domino’s profile leading to engaging mobile chatting connecting with 234,358 consumers and a PR reach of over 2.2M impressions.[xiii] These creative campaigns allow Tinder to utilize and capture value from its platform for love, by connecting users to products, movies, celebrities etc..
As stated above, the challenge for Tinder remains that as the mobile dating app market continues to grow, users are increasingly downloading multiple dating apps to increase their odds of success. This multihoming effect requires that Tinder continue to develop user engaging features that entice new downloads and entrants to the platform. And the unfortunate irony of the dating app world is that the more successful the app is at matching companions, the quicker those users disappear from the platform following that success.
Can Tinder maintain its lead in number of users thanks to its first mover advantage? Or do you see other players more successfully creating and capturing maximum value in the mobile dating platform?