So how did you two meet?
Once upon a time, behavioral economics and technology both swiped right. They hooked up. And now we have dating apps. These mobile matching markets have revolutionized the way singles meet. Tinder alone leads to approximately 26 million matches between users per day .
For background, Alvin Roth and Lloyd Shapley won the 2012 Nobel Prize in Economics for their work in matching markets, which revealed that “systems designed to elicit people’s true preferences generated better matches, between hospitals and doctors, for example.” Applied to dating, these intermediary platforms leverage Facebook profile information and algorithm-based economic analysis, allowing for significant predictive power around the most anxiety-inducing obstacle in real-world dating: determining mutual interest.
Per Roth and Shapley, the best matching markets are “thick,” benefitting from numerous participants, thereby increasing the chances that you’ll meet someone who also enjoys Carly Rae Jepsen and Long Island Iced Teas. Combined with geo-tracking technology on our smartphones, the likelihood of a connection based on proximity also goes up .
By obviating this nerve-wracking step of putting yourself out there, leveraging technology around smartphones and social media, and capitalizing on network effects, dating apps have gained tremendous traction since their advent in 2012.
But will we compatible longer-term? And why do apps matter?
Well, you could meet the one! Or maybe not. But anyway. From a sociological standpoint, dating apps will impact demographics in a big way. In the long-term, they could significantly boost trends toward “assortative mating” (i.e. biased selection of partners based on similar income and skills). Studies posit that this trend accounts for 18% of income inequality growth between 1960 and 2005 in the US . Already though, 5% of Americans who are married or in a committed relationship met online , and with more than 500 dating apps currently available on iTunes, this proportion is projected to grow steadily in coming years.
Playing the field? Meet Hinge.
“With a young, increasingly busy and mobile audience […] the market is big. Dating apps are expected to log $628.8 million [in 2015], up from $572 million in 2014 .”
Dating app Hinge took note of this opportunity. Their business model mirrored that of their better-known competitor, Tinder: sign up, share info, determine preferences, swipe right, swipe left, match, catfish, swipe left, swipe right, match, date . However, Hinge’s business model was predicated on connections exclusively through shared Facebook friends, an important differentiator that helps mitigate the creepiness factor of online introductions.
“It’s complicated.” Challenges for Hinge, and the industry more broadly. And some solutions.
The Dating Apocalypse. Users started to swipe left on the whole industry, as “81% of Hinge users never found a long-term relationship on any swiping app”; “only 1 in 500 swipes on Hinge turn into phone numbers exchanged”; and “4 of 5 Hinge users can’t recall the first name of their last right swipe .”
Over-saturation of the market. Unfortunately, as hypothesized by Roth and Shapley, “congestion” of markets leads users to become overwhelmed by choices, and consequently, to remove themselves from the platform altogether.
App makers responded with specialization. For instance, Bumble, an app where the woman must initiate conversation, targets feminist users, while JDate focuses Jewish singles – mazel !
Hinge responded with its newest operating pivot, which required members to respond to “endearing” questions to create a “story” instead of a profile. Information sharing increased, and their matching market became even thicker. Per company estimates, members are now 4x as likely to initiate conversations, and connections are 9x more likely to result in a date.
Operating & strategy. “Money can’t buy me love” – right? Most dating app operating models are based on some form dynamic pricing. Hinge posits that a subscription model should help “weed out creeps and flakes .” Contentious as it may be, dating apps favor those who can afford to be upsold to a paid subscription. Regardless, keeping a free user base might prove additive to the thickness of the matching market.
A self-defeating proposition. Investors will remain wary, simply because a successful relationship means two fewer users on your two-sided platform. Marketing teams would be wise to advertise success stories – we all have a friend who met their better half on an app – to help with broader brand awareness, and mitigate any lingering taboo associated with virtual connections.
Happily ever after?
Have romance and meeting IRL grown apart? Probably not. All at once though, dating apps are becoming increasingly specialized by type of user, less taboo by public perception, more sophisticated in their algorithms, and more effective in their sharing of information. As a result, they are optimizing networking effects, and perfecting matching markets. For singles out there, sounds like a solid wing.