It’s hard to find a part of our lives that hasn’t been deeply impacted by the internet. But dating is perhaps the most interesting area to consider. Afterall, love, relationships and intimacy are core human activities, and when technology is brought into the picture, the concept of dating turns into a different ball game altogether. Especially right now, in the era where everything is at your fingertips (quite literally), the availability of a plethora of options and prospects, and the power to swipe left or right coupled with the restrictions and lack of human contact due to the pandemic, you have the perfect recipe to explore dating like never before.
Whether it is a positive development or negative, that makes for a different topic altogether. The fact however remains that online dating apps have become huge players with a consistently growing user base, AI based predictive interfaces and increasing YoY revenues. In this article we are going to explore how online dating sites operate and make their money.
When Tinder was introduced for Android smartphones in 2013, it completely transformed the online dating scene. It’s swipe left and right mechanism brought in an aspect of convenience which the previous dating apps and websites lacked. The growth for online dating since then has consistently seen an upward trend with more than 1500 dating apps currently existing in the world. In 2020, Consumers around the world spent more than $ 3 billion on dating apps, a 15% increase from the previous year. According to research, the global revenue of the online dating industry is projected to reach $ 5.71 billion by 2025. In India, Tinder was downloaded 6.6 million times in the first six months of 2019. Given the ever increasing penetration of smartphones in India, the number of users opting for online dating experience has been growing dramatically.
Another factor which has changed the consumption of dating apps are the generational ideologies. Millennials and even Gen Z comprise the largest user base in online dating. The younger generations value diversity and choose to seek a varied range of experiences in their lives, something which online dating provides.
Dating apps thrive strongly on service differentiation and USPs to survive in the market. Generally, most dating apps operate based on below models:
I. Location Specific:
Tinder and Bumble allow users to swipe through possible matches in their local areas. Apps like Happn have gone a step further and show users prospects they have possibly crossed paths with recently.
II. Questionnaire and Algorithm based:
Apps like eHarmony and OkCupid match users based on the questions they answer before signing up. These questions range from topics like relationships, personality and even political views. A compatibility score is then generated based on these answers users provide.
III. Need Specific:
Bumble allows women to make the first move, this was introduced after numerous women complained of increasing harassment and unsolicited messages. Bumble also has the Bumble Friend and Bumble Bizz feature for users seeking to make connections outside the romantic space. There are also apps catering to a target audience like LGBTQ+ community as well as membership based apps where users are only allowed in if their application gets accepted.
Primarily, major sources of income for dating apps are the following:
I. Subscription Plans/Premium Features:
This is a common way for users to pay in order to use the app for a period of time or to unlock some additional features. Majority of the revenue for most dating apps comes through the premium option. Usually, premium subscriptions have different plans with the number of accessible features increasing with the cost of each plan. Premium users usually get profile boost and increased visibility to score more matches. Example, Hinge’s premium subscription offers benefits like unlimited likes and a view of all users who have liked your profile.
Another way apps get users to subscribe or pay for additional features is the Extended Features option or a “Freemium Model”. This model allows users to sign up without any cost and use a basic set of features in order to secure user loyalty. The apps then introduce extended features to help users improve their experience and get an edge over others as far as their profile is concerned. For example, users get unlimited options to swipe back profiles you have swiped left on – This number would have been restricted to 3-4 swipe backs only in the free version. Bumble users using the free version have a 24 hour time window to initiate contact. If they don’t, the match is lost. If a user gets Premium, they get the option to extend the match.
Advanced find options also form a part of premium subscriptions where users can refine their potential matches based on their specific location, educational qualifications, age group, drinking/smoking habits and even their zodiac sign and time of birth! Additionally, many dating apps also make their user interface ad-free for a premium fee.
II. In-App Purchases:
Apps like Bumble have features like Bumble coins, an in-app currency that allows users to purchase additional features such as SuperSwipe – Which lets you tell a potential match you’re interested in them or Spotlight – Which advances your profile to the top of the stack to be visible to more people instantly. OkCupid allows users to purchase Read Receipts – To find out if your match has read your message. These can be purchased individually, or in discounted multi-packs. Another example of in-app purchases are virtual gifts – Icons and Badges to show your potential match your interest in them.
Below mentioned graph indicates most popular dating apps by in-app purchase revenue as of January 2021.
III. Advertisements:
Dating apps make money by selling ad space to third party companies. This method works especially when there is a lack of users opting for the premium option. The important point for apps is to balance the number, the nature and the placement of ads so as to not lose their users. Banner ads strategically placed on app loading screens are a popular choice for Dating Apps. Another option is video ads with built-in reward options like free coins or virtual gifts for watching a particular number of ads.
While most dating apps earn revenues through above mentioned methods, the Dating App Market has its unique set of challenges listed below:
I. User Retention:
Since the main objective of dating apps is helping users connect with the right individual, user retention is a major challenge as most people uninstall the app after they find their “match”.
II. User Loyalty:
Whether people are looking for a serious romantic relationship or a casual match, most tend to have two to three different dating apps installed on their smartphones. Brand loyalty is an unpredictable subject as users tend to install and uninstall apps based on numerous factors like prospects they are currently interacting with, user interface and experience on different apps, and even the quality of matches.
III. Skewed Gender Ratio:
In most cases the ratio of male to female users of dating apps is quite imbalanced with more males using the apps. This is especially true in India where 70% of the internet users are male.
IV. Uncensored content, Bots and Catfishing:
While many dating apps require users to link their social media profiles and use other verification mechanisms, there are plenty of instances of unverified profiles and users getting catfished after meeting their match in real life. Cases of unsolicited messages/ online harassment and unfriendly experiences also put users off dating apps.
V. Strong Presence of Word-of-Mouth User Base:
When a topic as personal as dating is concerned, most new users rely on experiences of people they know. They will also read online reviews before trying out an app. Therefore, dating apps stand a chance to lose potential customers who learn about unsatisfying or negative experiences of current users.
What's Next?
Dating apps continue to thrive in the pandemic fueled era with new users signing up everyday. The distance and lack of traditional social activities to find potential matches has turned even the most ardent online dating app skeptics to give them a try. With every product and service increasingly catering to personalised experiences and individual customer needs, Dating Apps are no exception. There is a strong possibility to tailor and customize the user experience even further with the use of AI. Apps are already considering Facial Recognition technology to help users find a match who looks like someone they have in mind – like celebrities. Dates set up in a Virtual Reality mode can also provide a unique experience. Users stand a chance to see prospects closer to their “type” as AI continues to capture data after each left and right swipe. Another way AI could help users is by linking their calendars and finding the perfect time to have a date. There are even talks of DNA comparison to find “The perfect biological match” for every user.
To conclude, the Online Dating Industry has a bright future. The ever increasing presence of technology and the need for human contact and social interaction continues to grow hand in hand. What remains to be seen is how these Apps further differentiate themselves in the market and how they can try and keep the human and individual spirit alive in this experience.
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