The business behind dating apps

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As a 20-something millennial I regularly have conversations with my friends about dating and relationships. Naturally, dating apps, such as Tinder, Bumble, Hinge, and The League come up in conversation. Many of my friends (and myself included) have tried, are trying, or are done trying to use these apps to find a special someone to add to their life.

 

While the social, psychological and societal impacts of these dating apps is up for debate (a post for another day) I’ve become interested and fascinated by the business opportunities that this industry presents. Currently, the online dating industry sits at about $2.2B dollars (as of 2014.) With the stigma of online dating lowering, technology increasing and demographics expanding, the industry looks like it will continue to grow for years to come. IBISWorld estimates there are over 3900 dating sites out there today, and 100 new companies will enter the market each year.

 

I find this industry fascinating because it A) is addressing a problem that I believe many people face and are willing to seek help for and B) there are countless market dynamics that should prevent this from working but yet the amount of dating apps continues to rise Here’s a few points to illustrate what I mean

 

If you’re product is successful, people will leave

If you’ve truly succeeded with your dating app, people will find their soulmate and thus have no reason to come back. Sure, it may take some time for that to happen which typically means you’ll be able to generate revenue off of them for a finite period of time, but in theory, if you do your job well they’ll eventually find someone and leave you. In most businesses, companies want to build long-lasting relationships with their customers, but in the world of finding your soulmate that doesn’t quite apply.

 

It costs a lot to acquire customers

When you start a business, acquiring customers can be one of your biggest challenges. If you don’t have strong brand awareness or recognition you’ll generally turned to paid acquisition channels to find potential customers. This gets tricky (and expensive) for dating sites because the more you pay to acquire a customer the more you’ll have to generate revenue from them in order to have a positive customer lifetime value (and remember, you’re LTV is going to be lower because they’ll eventually leave you) However, due to technology advancements, user interface design and interaction, and general acceptance of dating apps, many dating apps (i.e. Tinder, Hinge) have experienced strong organic or word of mouth from their customers which has enabled them to grow a critical mass of users without having to spend exhorbitant amounts of money on acquisition dollars. One interesting tactic that The League did was it created a “waiting list” for it’s app that people could see. It did this because it wanted to vet every single candidate that joined its community, but it was also a great marketing/branding move that gave it a sense of exclusivity which encouraged others to sign up to join the waiting list. While it doesn’t look like The League is generating revenue, it at least is not spending a ton on marketing at an early stage of its company.

 

Freemium Business Models don’t always work well

The Freemium model (where there is a free version with x features and a paid version with x features + additional ones) is great in theory and is very popular amongst startups. Having said that, the model has its share of flaws, and tends to favor those that can scale and innovate quickly so they can get the economics of the paid users to not only work, but to continuously deliver innovation that brings in new customers. Almost all dating sites and apps have a freemium model, with Tinder being the most recent one to follow suit with its Tinder Plus. While many of these apps (Hinge) have not yet focused on revenue, it will be interesting to see how they plan on scaling and finding ways to generate income.

 

Most of your customers aren’t brand loyal

If you’re on one dating app, chances are you probably are on others. People only have so much time to dedicate to dating, and there’s only so many apps that fit on your smartphone, as such, the competition for eye balls and user engagement is fierce.

 

Innovation and Revenue continue to rise

Despite these business challenges, the number of dating sites and apps continues to rise. The industry has its fair share of hurdles and challenges but so does every industry. And while these apps have the same end goal and many similarities differentiation exists within the industry. Here’s a quick look at what some of the apps have done to separate and differentiate themselves from the competition

The Tinder app has helped many find dates in Provo without the pressure of online dating.

Tinder

A few months ago Tinder rolled out Tinder Plus, a paid version of Tinder that for $9.99 or $14.99 per month allows people to have unlimited swipes, and the ability to swipe and browse in locations that they are not currently residing in. Due to the size and popularity of Tinder, it became very easy for people just to swipe right without much care or concern. By placing restrictions, it allowed Tinder to segment their customers and generate an additional revenue stream.

 

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Bumble

Bumble was founded by Whitney Wolfe, an ex-Tinder Co-Founder, and on first glance looks and operates very similar. The catch: matches only last for 24 hours and the female has to initiate the conversation. In terms of revenue generation – guys have the option to “extend” a match for an additional 24 hours. This signals to the female that he’s interested all while generating some extra money for Bumble. No word on their revenue figures but certainly a creative way to generate revenue early on for the company.

 

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The League

The League is a dating app that’s a bit exclusive – while anyone can download the app, users have to be admitted through a screening process. The process tends to favor those with advanced degrees and strong work pedigrees (see lawyers, MBA graduates, Founders, I-Bankers, PE Guys/Gals, etc)

 

Founded by Amanda Bradford, an ex-Googler and Stanford GSB Alum, Bradford’s inspiration for the app came from the challenges that she and her classmates/friends had with other wide/broad dating apps such as Tinder. Instead of focusing on a broad/wide customer base, The League has narrowed theirs.

A really smart and savvy business decision/marketing move The League made was to create a thorough vetting process/waitlist for those who downloaded the app. Not only did this give it an air of exclusivity (lets be honest, who doesn’t love being part of something exclusive?) but it also has allowed them to carefully construct their dating pool and make the experience for those in the pool as strong as possible. Currently, they just setup shop in New York and are expanding soon to London, and they even have some tips for you on how to maximize your chances of getting accepted.

 

CMB Founders on Shark Tank

CMB Founders on Shark Tank

Coffee Meets Bagel

Perhaps one of the more notable/successful apps to date – they got their fame for when they appeared on Shark Tank because they turned down $30M from Mark Cuban. Thus far, CMB has not only built up a formidable user base, but it’s found ways to generate revenue. Each day, everyone gets one match that they can either like or pass on. If both people like, then they get connected. However, you can also buy another match for the day through their own currency (known as beans) You can also earn beans that you can use to get more matches, by recommending someone to another person, or by engaging with CMB on various social media channels. Lastly, you can also buy beans which you can then use at your own discretion. These are all unique things CMB has done to try to drive both engagement and revenue.

 

Conclusion: Dating Apps are here to stay

At the end of the day, it looks like dating apps are here to stay. While markets/industries will always have winners and losers, it will be exciting to see how this market evolves over the next 18-24 months. In my next post, I’ll walk through some of the strengths and weaknesses I see in some of these apps, and make some predictions of what’s to come. In the meantime, happy swiping!

Shyp, Marketing, and failing fast and often

Last night, I had the chance to attend General Assembly SF’s Changemakers event which showcased Lauren Sherman, Head of Marketing at Shyp. The Changemakers Series interviews professionals under the age of 30 who have done and are doing cool shit, and Lauren certainly fits the mold. A veteran of startups such as Taskrabbit, ZipCar and now Shyp, Lauren answered questions from  Ben Muessig from the San Francisco Chronicle about Shyp, her career, marketing, and tech in general. She also took some Q&A from the audience.

General Assembly

What I most appreciated was her honesty and candid nature, especially around talking about failures and missteps along the way. Recently, at her address to the Kellogg MBA graduation, Gina Rommetty said something that I have been thinking alot about in that comfort and growth do not always come hand in hand. Lauren illustrates this perfectly, as she’s taken on meaty and challenging roles pretty much her entire career, and despite her failures (or what she considers failures) she’s in a pretty awesome spot.

Below are some of my notes from the event. And of course, if you need to ship something, don’t have the materials, but do have $5, check out Shyp!

Lauren Sherman Head of Marketing Shyp

Lauren Sherman
Head of Marketing
Shyp

Notes

On Shyp

  • Shyp solves a problem that many of us didn’t know we had until we learned about Shyp
  • Our Founder is so laser focused on solving this problem. He was an eBay powerseller that almost had to shut down because it was so difficult to manage shipping.
  • Lauren’s role right now is to build a world class-marketing team. She’s using the structure of an agency as a model to build her team, which is a little bit different than what others do, but she’s confident that it’s what is best for Shyp.
  • Early versions of Shyp included a Google Form, and the Founders using Lyft/Uber to deliver packages
  • Most business is in the Consumer segment, but there are opportunities down the road for B2B
  • We’ve got seen several different uses cases for Shyp and it continues to grow. We’re in 5 markets today, and we’ll look to expand
  • Not revenue positive – any money we make we’re plowing back into the business

 

On Managing and Leading

  • It’s a challenge, I make mistakes, but I learn and move on
  • I took the role because Kevin told me that he didn’t know a ton about marketing but that he trusted me unconditionally to run marketing and to help him learn. He also promised he would support me through successes and failures. I try to do the same for people on my team.
  • I want them to try things, fail, learn, and move forward. The only way they can do that is if I truly demonstrate my support for what they are doing
  • One of the biggest challenges right now is focus. There are so many opportunities we can chase – it’s truly exciting! We need to be laser focused on the 1,2, or 3 that will make the highest most impactful progress right now, and wait for the rest to do later
  • There’s some areas of marketing that I don’t know, so I surround myself with people who are really good at those things.

 

Failure and Fear

  • In a startup culture you have to move fast. I move fast, and thus, I fail often. That’s okay, because I can learn quickly.
  • I’ve failed and missed the mark on a lot of things, in my career and at Shyp, but I’m still here so I guess it’s worked out okay
  • You need to determine for yourself what you’re comfortable with. If you’re someone who wants a steady job with steady tasks, a startup probably isn’t the best place for you.
  • I’ve always loved throwing myself into something, having a handful of different roles, failing but learning etc, so I’m totally okay with this environment.
  • I’m working on a redesign right now, and I’m definitely somewhat afraid of what the design bloggers are going to say when they see it. That’s okay – that’s natural, but it shouldn’t prevent you or paralyze you from taking action. Test and learn, and then move on.

 

Some Workplace Hacks

  • I’ll often email people I think are really interesting or have done something cool to talk shop and learn from them
  • I keep track of the people that I’ve worked with who I really liked or respected. Many of the folks on my team are people I used to work with.

3 ways young professionals can crush it at work

Starting off your career as a young professional can be a challenging experience. Despite your intelligence, college degree and work ethic, getting a handle of your role and making contributions to your team is not as cut and dried as taking a test or reading a textbook. It rarely happens right away. In fact, it takes most people a few months (or up to a year) to really contribute at their peak capacity.

For those that are college graduates and joining the workplace for the first time it can take even longer. While many of us are hired for our intelligence and experience, there are some lessons that cannot be taught.

I’ve gotten the chance to work alongside incredibly talented professionals who are making incredible contributions to their teams despite their lack of experience. Through my conversations with these high-performing individuals along with my own observations, the following things are things you can do to begin to do to stand out amongst your team.

Tackle the tough projects

When I worked at Deloitte, one of my managers used to tell me, “clients don’t pay us to solve their easy problems, they pay us to solve their hard ones.” Similarly, if you raise your hand to tackle the tough assignments, perhaps the ones nobody else wants to do, you’ll gain the respect and awareness from your manager and your colleagues.

Taking on a tough project can be a daunting task. Oftentimes, we may feel unqualified or unsure of how to proceed. However, raising your hand to tackle a tough project signals initiative, a willingness to roll up your sleeves, and problem solving skills. Furthermore, it opens doors for you, as others begin to take notice. If you’re able to deliver on these projects, you’ll often find that others will come back to you with future opportunities.

Tip: Next time there is an open project up for grabs, sign up for it even if you aren’t sure if you are qualified to tackle it. Then, reach out to some others who you trust to set up time to talk with them about how you can best approach this project.

Share knowledge

In our information-based economy, knowledge is power. The expertise we develop and the experiences we gain are valuable assets, not only to our work but also for others. This is why sharing your knowledge is something that can make you stand out from your peers.

When you share knowledge that is useful and helpful, people will see you as a trusted source of expertise on a particular topic. This helps you build credibility, trust, and respect from your peers, and again, opens you up to countless future opportunities.

Tip: Think about something that you’ve worked on lately and create a PowerPoint presentation on the topic. Consider sharing it with others on your team who might be working on a similar topic.

Solve unidentified problems

Solving a problem that your boss or manager has come to you with is always a good thing. However, the forward-thinking employees tend to spot problems that others don’t see and find ways to solve them before they become bigger issues. Your manager has a million things on their plate, which is why they’ve come to you with a particular problem. They can’t spot every issue or concern, so when you can find one and solve it before they notice they tend to appreciate your diligence.

Tip: This is a little bit harder to teach since it relies a bit on instinct and experience. Start by evaluating a project or initiative your team just completed and identifying ways it could have been done better or any weaknesses or pain points it caused to employees or customers.