Why are there so many dating apps?

A read on why dating apps continue to evolve and the demand for niche dating apps

Sep 01, 2020

Online romance scams on the rise as dating apps proliferate – prameyanews.com

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Odd subject to write about right? I struggled with writing this for quite a while but I decided write this finally. I think there is a lot of interesting stuff happening with one of the most basic activities that human beings have been doing for hundreds of years - Finding a partner. What prompted this article was a couple of different things in no particular order. Being an avid ProductHunt user (like daily!) I have been noticing a trend in the number of dating products that are being created. Did we really need one.more.dating.app? (Rolls eyes)

I think the answer to that is nuanced and there are several interesting things happening. I’m going to look into a brief history of dating, current trends, network effects of dating and how this ties back to a product category that will continue to evolve because well, human beings are human beings …

A history of dating

Dating has gone through multiple avatars and wasn’t always associated with romance. During the ancient times dating didn’t exist, in the middle ages, men literally fought over women (has that changed?), In the 1600’s-1700’s dating was all about power consolidation. Rich, titled families. In the 18th century dating and courtship became commonplace before being frowned upon in the 1900’s with a variety of different stages through today and that brings us to today : modern dating.

From How Dating Has Changed Through History:

Finally, in the modern world, dating apps rule all. Internet dating is still popular, but dating apps like Tinder, Bumble, and Hinge are all the rage. Fortunately, all of the stigma surrounding online dating has pretty much vanished. According to the Pew Research Center, "nearly half of the public knows someone who uses online dating or who has met a spouse or partner via online dating — and attitudes toward online dating have grown progressively more positive." Additionally, dating app Tinder boasted over 57 million users in 2018 alone, so clearly meeting someone on your phone is the modern world's answer to falling in love — or at least finding a date.

So then how did people meet in the past: Here is an infographic from Statista (below) that’s somewhat accurate trend-wise and I suspect that 2020’s just hockey-sticked it from 39%. This link also has a cool visualization of how couples met has changed

Why did online dating take off to being with?

There are several reasons for this:

Migratory patterns

In the past you lived in a small neighborhood and you knew everyone else and your family and friends played the role of the dating website. Making the connections and let’s face it choice was limited. Younger people tend to move to larger cities and collect in pockets - work, school and a host of other reasons. Your parents are no longer around to introduce you …

From the 2010 census report:

Smartphone revolution.

Not much to say here but having a device in one’s hands all the time makes it that much more easier to use an app

Busy Lives

Americans definitely seem to be busier whether that is true or not and whether its self-inflicted or not. This leaves less time to date, meet, connect - a swipe would just have to do to start with…

Expanded Pool

Suddenly it’s no longer the 50 or 100 potential mates from your school, town, neighborhood. You had better options than Derek (random person) even if he was the Prom King. Dating websites have enormous advantages of scale. Even if most of the people in the pool are not to your taste, a larger choice set makes it more likely you can find someone who suits you. Of course with options comes a cost. A never ending swipe dopamine hit to see what’s next. Barry Schwarts has argued in his book “The Paradox of Choice” that having too many choices results in not making a choice. There are of course several reasons for marrying later (Income, Stability, Work, Not willing to settle with the wrong person etc)

Open Mindedness

For decades there have been stigmas associated with LGBTQ and thankfully that has changed. From How a Dating App Helped a Generation of Chinese Come Out of the Closet

Like many gay Chinese growing up at the turn of the millennium, Duan Shuai began his long, deliberate process of coming out online. After school, he would visit the newly opened internet cafe in his hometown, Xinzhou, a small city in Shanxi Province bounded by a veil of mountains. He would pick a desktop facing away from the wall so that nobody could look over his shoulder. Then he’d go to QQ, the new instant-messaging service and online forum, and type in the Chinese word for “homosexual” — tongzhi, or comrade.

Given that dating apps took off let’s look at what makes a dating product tick (or not tick). To understand this we need to think about network effects …

Dating websites or apps have several types of network effects in play but before we go into that lets define some basic network/platform terminology

What is a ‘side’?

In platform terminology a side is nothing but a grouping of users. For example for Uber riders is a side and drivers is also a side but they are distinct. They serve different purposes:

From : The Network Effects Bible (which is a MUST read!)

For a non-heterosexual dating product the product is homogeneous. The best way to explain this is telephone lines. Each telephone line is the same but for a heterosexual dating app that isn’t true. There are TWO distinct sides, men and women, that behave differently (since men are not looking for men on this type of a dating site). The interesting things here is that for a gay dating site the network is homogeneous - there is only one side - men.

Network Effects

From my previous article on moats:

Network effects are often conflated with virality but they are not the same, Virality is primarily about “rate of adoption”. It primarily deals with how fast a product/app grows. You talk to your friends about it and they use the product. Take for example Dollar Shave Club and their viral video. People shared the video, invited more people to try it (referrals) and this led to their growth, but the product’s value did not improve just because more people used it (I didn't consider shaving more because more of my friends bought the product. Counter that with an email address, telephone, or just blue bubbles (iMessages). I did send more iMessages as more of my friends joined). To be clear, the distinction that I’d like to draw out here is that virality helped the company improve their business. The point I’d like to make here is that Dollar Shave Club (to use that example) probably was able to negotiate better prices, or make better blades because they had the customer base. However these are still not network effects. The last point is a product can have virality and network effects at the same time.

Ok so then how do you define a network effect?

A network effect(and there are several different subtypes such as same side, cross side, direct, indirect). NFX has a bible on this. A must read!) is one in which more or less usage of the product by a user changes all other users behaviors.

Cross side network effects

Let’s take the example of a product with (positive) cross side network effects : Uber

The cross side comes from the fact that if there are more drivers, there are more riders and they affect each other positively. More $ for the driver and reduced wait times for the rider. I don’t want to dig too deep into this but really you should read the above article.

In dating the same holds true, again taking the example of a heterogeneous dating app, the more women or men there will help the other side gain traction. Thus, dating has positive cross side network effects.

Same Side network effects

Same-side network effects are direct network effects that occur on the same side of a multi-sided (2-sided or N-sided network). Same-side network effects refer to the change in value that occurs for users on the same side with the addition of users on that side. For dating there exists negative network effects since more men or women on the same side adds to the competition leading to the value going down for a new user and every existing user. NFX further breaks down negative network effects into : network congestion (increased usage) and network pollution (increased size). Sides in a dating app suffer from both these problems. More people using a dating app and congestion will become commonplace when the numbers of users go up leading to a negative cycle which leads to a demand for a new product. For a dating app the “pollution” is quite simple. The more women there, the more men will swipe - in fact on *almost* all profiles. This leads to a woman getting inundated with the number of connections she has to review/make and leaves her jaded. The same thing happens with messages where a man will have to send 114 messages to be certain to receive a response. (note : this of course changes depending on the product and this is just to give you an idea)

One thing to remember here is that such externalities (an externality is nothing but a benefit or harm experienced by one party due to the actions of another party).

The negative externality here can be eradicated/fixed (internalized in network terminology) by the dating product. For example, limit the number of messages a man can send on a daily basis or better yet, monetize! Of course on the assumption that some of these things don’t get solved a user would prefer to find another product. This is when switching costs kick in …

What are switching costs? Do dating apps have a ‘switching” cost?

The best way to explain switching costs is the effort, time, money you have to put into “switching” to a new product. Let’s say you use Office 365 and want to switch to Google Docs. There is a learning curve for you and if its excruciatingly hard you wont switch. Dating apps don’t really have this problem because you can easily switch. If you have made any connections on the app you are switching from you can go “off-platform” by exchanging names or numbers or some real identifier. You could also just multi-home which means using multiple dating apps at the same time (also called multi-tenanting)

New Dating Apps

Cold Start Problems : Chicken or Egg Problem

Given that dating apps have positive cross side network effects (at least initially) the “chicken or egg” problem refers to getting one of the sides of the platform to join. There are many ways to solve this but I won’t dive deeper into any of these. (Side note : There is also another issue called the “Penguin Problem” which is more for non-existent markets. This should no longer be an issue at all for dating products; in fact it probably never was)

Can Dating Apps Ever Be Winner Take All markets?

No. there are low to no switching costs or multi homing costs but there is also another key consideration which is the demand for differentiated platform functionality which is why dating apps will continue to evolve.

How do dating apps make $?

There are several ways that dating apps make money:

Subs : Exactly like an NFLX subscription where you pay for the product
Ads/Spon con : in-app ads. A small twist to this is an app allowing you to “boost” your profile. You are kinda the ad and you are going to be shown to more people. Except of course you don’t show up as an ad :)
In-app purchases : More likes, messages, profile “boosts”, unlimited matches etc
Feature purchase: Specific features are charged for (rematch, increase time to connect, undo a missed match)
Affiliate marketing (don't see this too often) but imagine being able to buy actual roses through an affiliate link and send them to you match

Is it hard to make $ on dating apps? Yes!

You don’t date forever right. It’s not like a NFLX sub for *most* people so the retention rates will be lower unless the dating product on purpose shows me horrible leads! So dating apps need to constantly acquire customers at scale or show bad matches to retain users? If the dating app “works” you don’t need it anymore. If it doesn’t “work” then you are going to be frustrated and churn. Either way, you ARE churning.
Too many men, too few women. Enough said.
Multihoming; so which app should you pay for if any? This is one reason why Magic Labs owns multiple dating sites including Bumble
Building one or more long term defensible moats is hard because of the continuous churn in users

Some options to solve the above problems:

If your platform is 2-sided or n-sided pick the hardest part to grow (heterosexual dating app would be the female)
Focus on a region/area/religion - there are generally lots of nuances
Focus on a niche (mixed race dating)
Quality; keep fake profiles off platform
Identity; Identity IS KEY to keeping fake profiles offline
Create FOMO with a velvet rope (hype and exclusivity)

So in short it’s hard to make $ or even get users to a new app. Love should be free right???

Fact of the matter is that it might be really hard to compete with Tinder but also that:

Because of the aforementioned platform externalities there is room to compete with a superior niche offering
You can capture new users (new users are being created continuously)

Lets look at some examples of how crowded the product space is (we’re not talking monetization for now)

Now lets break down the types of dating apps and why possibilities are endless

I really do think that there are many more permutations and combinations possible within these segments. The real question is how well can these new startups monetize, gain users, trust, and not get replaced by Yet. Another. Dating. App. I think we’re gonna see more outcome and service based products. Some examples I can think of are:

Dating apps/products for: