Swipe right if his annual returns are higher than 20%.
Online dating was once viewed as a niche industry, reserved for those introverted souls unable to find love in the real world. But over time, it has grown and stealthily worked its way into our everyday lives. Led by Match.com, Zoosk, and Tinder, the online dating industry is revolutionizing how we define relationships. While newfound dating apps might not be the perfect match for everyone, they have generated billions in revenue and grown to become some of the app store’s top-grossing apps. With so many people flocking to this new form of dating, we at Rapunzl used this week’s Industry Spotlight to examine the promising future of dating apps through our financial fluency lens.
The Rise of Online Dating
In 1959, the first notable matchmaking service was created when Stanford students Jim Harvey and Phil Fialer created a school project for the “Happy Families Planning Services.” They used punch cards and, with the help of Stanford’s IBM 650 mainframe computer, matched 49 couples for a date function.
After the birth of the internet in 1994, many of today’s biggest dating sites were launched, setting the foundations for a now-massive industry that continues to grow by the day. By giving people access to the world wide web, the doors to online dating were finally opened as online communication applications like E-Mail allowed for instant messaging between potential couples.
In 2004, Facebook (FB) was founded and the world of online relationships was forever changed. The final touch before Facebook’s publication was the addition of the “relationship status” because, as Mark Zuckerberg so famously quoted in The Social Network, at the end of the day, people really just want to know whether they have a chance at getting laid. With the rise of Facebook (FB) came the rise of a slew of social media platforms. Pictures, statuses, interests, and everything in between became public information, and the world of online dating was flooded with new members.
Online dating has spiked in recent years due to the proliferation of internet availability and, more specifically, social media platforms and the plethora of intimate public information that has come with them. Singles of all ages have flocked to dating apps in an effort to find anyone from their soulmate to a casual intimate encounter. But how many people exactly are using dating apps, you ask? Let’s take a deeper look as we step closer to achieving financial fluency.
Dating Apps by the Numbers
In a recent study by Statistic Brain, about 49.5 million people have tried online dating before. There are currently 17.5 million eHarmony members and 25.6 million Match.com members. And as our relationships continue to grow in the online space rather than in person, these numbers are only expected to swell.
According to a study by Statista, about 19% of general internet users also use online dating apps. Day by day, technology pervades an increasing portion of our lives. We have socialized everything from our pictures to our payments, so it only makes sense to socialize our social lives.
Although eHarmony and Match.com are the formal, early pioneers of the online dating industry, a spirited newcomer has risen from the App Store and entrenched its place at the top of the dating app sector: Tinder. Tinder is a simplified version of popular dating sites as its only function is swiping right if you are interested in the person and left if you are not. If both people swipe right, a match is made and a conversation can begin. The fastest-growing dating app currently boasts about 50 million users who swipe, on average, 1 billion times per day. Tinder has simplified the way people date online, and it has especially grown in the millennial community due to its quirky yet efficient matchmaking scheme.
While Tinder has experienced rapid growth over the past several years, dating apps created outside the US have shown arguably more success. Momo (MOMO), the largest China-based dating app, has almost 100 million active users, which is more than 3 times that of Tinder, and just acquired China’s equivalent of Tinder, Tantan. But with countless matches being made all over the world, we must ask: where does all the money come from?
The Value of Swiping Right
People value love and relationships, thus, it is easy to understand why there is such a lucrative business in dating apps. Through the third quarter of 2017, Tinder was the highest-grossing app in the entire App Store, beating out other tech giants like Pandora and Netflix (NFLX).
Tinder is part of a larger company, Match Group (MTCH), which, you guessed it, owns Match.com as well.
Tinder was recently valued at $3 billion while Match Group as a whole was valued at $4.8 billion, clearly showing a shift in value from dating sites to mobile dating apps.
Tinder and other dating apps are able to take advantage of the growing online dating presence by offering premium services such as Tinder Gold with extra amenities. Although Tinder is free to download, it offers several “Freemiums” such as extra Super Likes and the ability to see who has liked your profile in the past for an additional charge. This “freemium” business model has been a major driver of revenue for Tinder and many other popular apps (particularly gaming apps).
Tinder’s success has opened the door for many similar services to mimic its fast-paced, efficient matchmaking service. Bumble is a nearly identical app, however, it only allows women to start conversations after a match has been made. Grindr also emulates Tinder’s simple service, however, it specializes in LGBTQ matchmaking. Tinder’s success has created a ripple effect in the dating industry as a whole, and several companies have been able to take advantage of the growing interest in fast-paced dating apps.
Momo’s acquisition of Tantan for $600 million proves the true value of the dating app industry. Tinder’s success around the world made clear to Momo the high potential of a Tinder-like app in the country with the world’s largest population, China. Currently, 43% of Chinese nationals have used online dating, and Momo’s acquisition of Tantan proves their intention to take over even more of that percentage.
Although the rise of the online dating industry has led to countless relationships, it has also led to some negative repercussions of taking away the intimacy of face-to-face interactions.
What Could go Wrong?
The online nature of dating apps has led some to point out the harmful effects of meeting people exclusively over the phone. By taking away the in-person interactions of meeting face-to-face, some people are concerned that online dating apps are changing the way we date for the worse.
The rise of Tinder on college campuses has lead many to believe the fast-growing app is leading to the proliferation of hook-up culture. According to Statista, 24% of US online dating users are looking for a sexual relationship. By simply choosing matches based on several pictures and a short bio, many argue that Tinder is basing interaction more on the likelihood of a sexual encounter rather than on long-term relationships.
Additionally, Tinder has drawn criticism for its datafication of dating culture. For example, Tinder draws a wealth of personal information from Facebook, Instagram, and other sites, which may include, “your profile and personal information such as your name and contact information, photos, interests, activities and transactions.” This data is of immense commercial value to Tinder and advertisers that work on their platform, as they hold a great deal of information on your personal interests and preferences, making it much easier to tailor advertisements to your desires.
Technology continues to change the way we live as it integrates itself deeper into our daily lives. Amazon (AMZN) changed the way we ordered books, Netflix (NFLX) changed the way we watched TV shows and movies, and now dating apps are changing the way we meet, interact with, and ultimately select our potential life partners. As long as we are alright with sharing our personal preferences and deeply intimate information with our electronic matchmakers, their algorithms will improve and so will (some of) our love lives.
Social Investing Ideas
Match Group is the general ownership group that owns dating app giants Match.com and Tinder, among others. Match group represent an exciting investing opportunity as Tinder continues to rake in revenue on app stores.
Momo is the largest dating app in China with more than 100 million daily active users. Momo is an enticing buy after its recent acquisition of Tantan, as it continues to devour market share in the world’s largest online dating community.