In 2002, Wired Magazine wrote, “Twenty years from now, the idea that someone looking for love won’t look online will become silly, akin to skipping the card catalog to instead wander the stacks because the right books are found only by accident.”
It’s 2021 and more than 370 million users are expected to spend well over $ 3B on hundreds of online dating apps available globally. ‘Boy, they were right. Since we now shop, bank, buy, sell, read, write, work, and play online, why wouldn't we date that way as well?
So how did it happen? How did online dating go from being ‘taboo’, to becoming ‘the thing to do’?
Making the first moves
The first well-documented attempt at marrying technology with matchmaking was Operation Match, started by a few Harvard undergraduates in 1965. Using a questionnaire and an IBM 1401, operation match is believed to match a million people by the end of the ‘60s.
In 1995 Match.com went online which remains the oldest active player in the segment. Several websites and apps came into being thereafter, such as PlentyofFish (2003), OkCupid (2004), Badoo (2006), and even Grindr - a dating app specifically for gay people launched in 2009.
But in 2012, Tinder revolutionized online dating with its swipe feature, if it was for good or bad is a debatable subject, but the swipe feature took online dating to online dating on steroids.
Within just 2 years, Tinder was processing 1B swipes per day in 2014. Despite this early success, the subscription-based revenue stream was turned on only in 2015 with the launch of Tinder Plus and later in 2017 with Tinder Gold. Apart from subscription-based revenue, it offers à la carte in app-purchases such as Tinder Boost, Super Likes, Read receipts, etc. While such services are available to both subscribers and non-subscribers alike, non-subscribers make up for a relatively small portion of such purchases. Tech-industry favorite, ad-based revenue also makes up for a chunk of the total. All other players in the industry also employ some mix of the above three business models, predominant being the Freemium-Advertising channel.
With over 6M paying subscribers, Tinder raked in $1.4B in revenue for FY20, which was 58% of the $2.4B total revenue of its parent company - the Match Group.
Turns out, true to its name, Match Group does a lot of matchmaking across the globe. Apart from the market leader brand Tinder, Match Group owns Match.com, Meetic, OkCupid, Hinge, PlentyOfFish, Ship, OurTime, and many others totaling over 45 global dating companies. It went public in 2015 and in July 2020, Ryan Reynolds and Wendi Murdoch joined the board of directors. Headquartered in Texas, USA, Match Group seems to have been on a mission to corner the online dating market by acquiring most budding apps.
But calling Match Group a monopoly would be too early, the company Bumble (earlier MagicLabs) owns the apps Bumble and Badoo which are the second and fourth highest-grossing apps in the segment.
Founded by the former Tinder Co-Founder Whitney Wolfe Herd in 2014, and led by a majorly female team, Bumble has a female-first messaging model and several other features to protect users from harassment, something very critical to customer satisfaction when it comes to dating. Its female-centric approach to the market seems to have served well, with women making a total of over 1.7B first moves in the 6 years of the app’s existence till September 2020.
Badoo on the other hand was founded way back in 2006 with the motto ‘date honestly’. It has been and continues to be a market leader in Europe and Latin America. As of September 2020, Badoo boasts over 28.4M monthly active users, which is more than twice the 12.3M MAUs on Bumble but it pulls a little less revenue than the Bumble app whose revenue growth has been spectacular since its inception.
The combined entity - the Bumble company which serves in over 150 countries, raked in $488.9M in revenue in the year 2019 and went public in Valentine’s week of 2021 - raising $2.15B at a valuation of $8.2B. Wolfe became the newly minted self-made billionaire post listing.
Not here for Hook-ups - The India Story
It is no surprise that dating as a concept in India has long been anything but popular or mainstream. Even today, in certain (and a lot of) parts of the country, it is eyed as something against cultural values. Most attempts at using technology for matchmaking in the country have been focused on matrimony and not casual relationships.
That being said, a lot has changed in the late 2010s. Tinder became available in India in 2013, and by 2014, a host of Indian entrepreneurs dived in to tap the market with homegrown apps such as Truly Madly, Dil Mil, Aisle, Woo, and Matchify. Real boost came to online dating apps in India in 2016, when Match.com opened its first overseas office in New Delhi and started pushing Tinder aggressively among the Indian youth. The French app Happn also became available in the country in the same year giving competition to Tinder. Realizing the potential opportunity of the tech-savvy 80M+ Indian singles, OkCupid and Bumble soon jumped in by 2018. Bumble’s female-centric approach along with brand ambassadors such Serena William and Priyanka Chopra (who also happens to be an angel investor in the company) paid off well in India with Bumble reaching over 4M users in the country recently.
Make my trip co-founder Sachin Bhatia came up with the matchmaking app Truly Madly in 2014. Positioning the product as a “find your forever”’ app rather than a ‘dating’ app, he believed that Tinder, widely thought of as promoting the hook-up culture, didn’t serve the purpose when it came to an Indian audience. As of today, Truly Madly calls itself ‘the best dating app’ in India, a signal of the acceptance of dating in the Indian popular culture. Truly Madly has been able to garner over 6M users since its launch.
Founded around the same time, Dil Mil focuses on the Indian diaspora, particularly in South Asia. Claiming to average about 1 marriage per day, Dil Mil was acquired by European company Dating.com in 2019. Aisle in another “high intent” relationship app developed in India that claims to have 2M unique users, whose CEO Able Joseph recently told Financial times that youngsters moving from Tier I cities such as Banglore and Hyderabad due to the lockdowns have created a surge in dating app activity from Tier-II cities of the country, also adding that high-intent dating apps have twice the average revenue per user compared to casual dating platforms.
“Tinder and Aisle complement each other,”; users usually start with a casual dating app that makes them accustomed to online networking, and then they look for additional customization and cultural nuances. This is when they make the shift to homegrown match-making platforms to look for meaningful, long-lasting relationships." - CEO, Aisle
As far as VC investments are considered, with just 12 investments in the period of 2012-2019, VCs don’t seem to be in love with the segment and appear to merely flirt once in a while. $5.7M raised by Truly Madly in Series A from Kae Capital and Helion Ventures in 2015 has been one of the biggest investments so far.
While online dating seems to fail in impressing the investment community in the country, matrimony has got quite some love. Online Matrimony sites in India have existed for long, Matrimony.com was incorporated in 2000 after being a community portal since 1997. It raised over $20M in PE-VC funding even before the post-2015 dating boom and debuted on the Indian stock market in 2017. It has a current market cap of over a quarter billion dollars. Shaadi.com (1997) and Jeevansathi.com (2004) are the other two long-standing giants in the space. Growing steadily since, and with a significantly higher ticket size than the dating counterparts, the online matrimony market crossed $200M in market size in India last year, expected to be a $250M+ industry by 2024 if estimates are to be believed.
Investor confidence and the subsequent success of online matrimony in the country can be attributed to the fact that when it comes to marriages, it is still more of an affair between two families and not just individuals. If you were surprised by the breadth of Match.com’s portfolio, Matrimony.com’s over 300 community and regional sites might take you by greater surprise. Be it TamilMatrimony.com, TeluguMatrimony.com, EliteMatrimony.com, if you can think of it, you can most likely find it.
Matrimony.com in its latest annual report reported that 88% of the estimated 11-13M marriages that happen in the country are arranged marriages. While online matchmaking has a meager 6% penetration in a market that is largely catered by offline and informal agents, on the bright side the vastly untapped and newly internet savvy ‘Bharat’ appears to be a goldmine of opportunity.
So do the dating apps and online matrimony companies pose a threat to each other? The answer would be, most likely not. Matrimony sites view dating apps as those building the greater ecosystem and preparing customers for them. While there is no doubt that dating apps and matrimony sites complement each other when it comes to ecosystem building, certain apps position themselves as the ultimate matchmakers for the customer, take for example Hinge, which calls itself ‘an app designed to be deleted’.
Red Flags on the rosy road
The churn problem. Churn rate, also known as the rate of attrition, is the percentage of users who stop using an app. within a given period. While churn is a problem for most apps, calling churn a problem in the dating apps world would be wildly wrong. It's like calling a search engine bad if people don’t spend more time on it, nope, a good search engine finds you the right results quickly. Similarly, these apps are meant for people to find a companion so that they can stop looking for one. So a good app would solve the problem and might earn some revenue in the process, but is bound to lose a customer (in fact lose two at once, hopefully) as the outcome. Moreover, churn in dating apps has a propagative effect, if someone closes their Netflix subscription, it wouldn’t mean they’ll stop paying for other streaming services as well; but when it comes to dating and matrimony, well we hope you understand :P.
“How to get the girls on the app?”, is another question that keeps the dating apps awake at night. Harassment, explicit texts, breach of privacy, stalking, and violations of the kind have kept the females a lot more apprehensive about dating apps than their male counterparts. Apart from fast user growth, another remarkable achievement of Bumble in India was its ability to attract more females to the platform. Its sex ratio being 30% while females on Tinder account for only 10% of the users. While this is a step forward, the promised land is still distant.
“Tu Haan kar, ya Naa kar, it's your choice Kiran” read a recent Bumble ad.
Niche vs Credibility is another paradox that dating apps have to figure out their way around. When new players want to get through the barriers of entry, they've often been found to go for a very niche audience. Sniffer, a dating app that is built for dog owners, FarmersOnly - an app meant for farmers that are lonely, and many more are several apps that cater to a niche audience. And not just new and small apps, even the ‘established ones’ have a catchy and differentiating tagline, while this may seem to get them a unique selling proposition, users often doubt the credibility of the profiles on the app when there is lesser traction.
So, What's next?
Solving the problem of India’s singles is both an opportunity that entails cultural challenges, some of which are common with the world (women safety) and some not so much (the strong institution of family-arranged marriages).
Indians are known for being frugal when it comes to paying for software services, Cred Founder Kunal Shah was recently caught pointing out, “Your ARPU comes from America, but you get your DAU from India. When you join the numbers, they look nice.”
Interestingly, when it comes to matchmaking and dating, Indians spend at par if not higher than people overseas. The average annual revenue per user (ARPU) of the dating apps market in India is well over $10.
Statista reveals that the ratio of paying vs non-paying users in the segment is quite higher than average in other digital apps and is expected to get higher, subscribers eventually making the majority of users.
The data points at the narrative that we are not shy in paying for love or more rightly the quest for love, the same way we do not shy away from splurging when it comes to tying a knot to that love - the weddings, or as they are popularly called - ‘Big fat Indian Weddings’. With 25M people spending over $57B each year to let the world know they’re now taken, the Indian wedding market is as big as it can get. Just the Luxury Fashion industry garners $1B in additional revenue owing to the ‘shaadis’.
While dating apps seem far from forward integrating their business to the wedding market, online matrimony sites have tried their hand at it with endeavors such as Bharat Matrimony’s venue booking platform mandap.com which offers 10,000+ venues. But it’s not easy. It is an extremely fragmented market. Most players are informal or small businesses and there simply are too many needs for one single player to be able to cater to.
"True love stories never have endings." —Richard Bach
Lastly, 20 years from now, technology will change, maybe dating apps would expand from just matchmaking to integrating a great network of the internet of things (IoT) that will facilitate all the logistics of an actual meet up post matching-up digitally. "Alexa, I got a date with Eve this Sunday", would be enough command for the vast network of IoT to figure out the restaurants best suited based on your mutual location, specific liking for cuisine, and with a "go ahead", arrange for the cab that picks you up first and while you're on your way to pick her up, would suggest flowers/chocolates of her liking that you may pick from the shops en route.
Wild imagination, innit? Or maybe not. Time will tell. But irrespective it will not change the fact that humans will remain social animals. This very fact will remain the guide for all businesses to ‘getting happily ever after’ with their customers.