Love comes at a price – and this is good news for online dating sites. But how do they actually make money in a competitive market?
When online dating app Tinder launched in September 2012, it turned the matchmaking world on its head. Using your Facebook profile and GPS location, it could find you a mate – or at least a date – with the simple swipe of your mobile phone.
Tinder opened up the online dating market, changing its reputation from the domain of desperate singles to one of fashion and fun. But like all online dating sites, Tinder needs to make money and cannot exist on love alone.
Competing for affection
Playing cupid on the internet can be a lucrative business. In 2015, IBISWorld valued the dating industry in the US alone at US$2 billion. Match Group, the online dating behemoth that owns the wildly popular Tinder, as well as other matchmaking companies such as OkCupid, Match.com and PlentyOfFish, raised almost US$400 million in its initial public offering late last year. Based on the IPO price, the group has a market value of about US$2.9 billion.
In 2014, Fairfax Media-owned RSVP, which launched in 1997 as Australia’s first online dating site, signed a A$90 million merger agreement with rival site Oasis Active in a bid to secure its position against international rivals.
Dave Heysen, CEO of RSVP/Oasis, says online dating apps such as Tinder have forced the market to lift its game.
“It’s very mobile centric, and we’ve had to smarten up our mobile products – that’s been a very big focus for us,” he says.
“People are certainly leaning toward those devises so much more and they want instant results and ease of use. Even without Tinder, we’ve been focusing on [these aspects ] for the past couple of years because we knew that it was coming.”
For love and money
Online dating services have traditionally relied on two different business models – subscriptions and advertising. Until recently, Tinder, which helps 50 million global users find casual hook-ups or true love, got by without any advertising But like any true romance, its model has evolved.
In a bid to monetise its offering, the dating app has introduced a premium service called Tinder Plus. Users who are willing to pay can enjoy a range of new features, such as the ability to undo swipes or to declare a deep attraction through Super Likes.
Based on the IPO price, the [Match] group has a market value of about US$2.9 billion.
While all Tinder users could formerly swipe right if they were interested in someone or left if they were not, the new premium model takes away the unlimited swipe rights for those who don’t pay.
Tinder Plus fees vary between markets. In Australia, it costs A$24.99 per month, while the cost in the US is US$9.99 for users under the age of 30 and double the price for those who are older.
Tinder has been criticised as being more of a popularity game than a serious dating site and the new premium model may put this to the test. Heysen says that while Tinder opened up the online dating market to a new breed of apps, the company is still finding its feet. He thinks the challenge now for Tinder revolves around people’s motivation for using the site.
“Do they just want to see how popular they are on the site? Is there a more casual feel or are people looking for relationships?”
To pay or not to pay
Heysen believes that some users are attracted to sites with subscription models because they signal that people are more serious about dating. RSVP, which has about 2 million users, offers free membership but users must pay between A$5 and A$15 for “stamps” to make contact with others.
“With RSVP, we’re trying to focus on dating rather than relationships,” says Heysen.
“If people pay for a contact stamp or a subscription to make contact with you, it does show a bit of effort.”
OkCupid, on the other hand, is a free dating site that launched in 2004 as an alternative to subscription-based sites like Match.com. Almost all of its revenue is generated from traditional advertising methods.
Oasis Active, which launched four years later, also makes its money from advertising and markets itself as a fun, casual dating site.
“It’s more about real-time communication,” says Heysen. “We hope people get to meet as many people as possible and find the right one.”
New pathways to love
As the online dating market becomes more saturated, new players require a unique angle in order to stand out.
Happn, which launched in Paris in 2014, offers a clear point of difference. Claiming to have 10 million users worldwide, the location-based app connects people who have crossed paths in real life.
By using geo-locational technology on your smart phone, Happn connects users with other users as they pass each other on the street, as long as they’re within a certain radius of one another.
The site, which has raised US$22 million since its launch, says it allows people to “seize everyday coincidences” and “avoid missed connections”. While women can seize these coincidences for free, men have to pay to send “charms”, which are a way of letting someone know you like them.
Happn CEO Didier Rappaport told London’s Telegraph last year that no algorithm will make people fit with each other.
“We believe that love is a question of hazard,” he said. “We believe that anything can happen when you’re not waiting for it."
Another recent Romeo on the block, dating app Hinge, also has a unique premise and is positioning itself as the “anti-Tinder”. The app only connects users who have mutual friends on Facebook, thereby creating a more curated selection of potential dates than the dominant Tinder.
Not only does Hinge give its users more information about their potential matches, it also has the ability to remember the kinds of people you do and don’t like.
Hinge’s popularity is growing steadily. Although its revenue strategy is yet to be announced, its 2014 funding round raised US$12 million to assist with expansion outside the US. Hinge launched in London and Sydney last year and, like so many online dating apps, its plan is to spread love right around the world.