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March 25, 2016

Mobile Dating Apps Soar in Popularity, But Will Investors Swipe Right?

In the digital age, you can order a 4K TV for one-hour delivery or find an Airbnb in the Andes in a matter of clicks. So why should finding love be any different?

As it turns out, more Americans are looking for love online than ever. A recent study found 15 percent of American adults have used online dating sites and/or mobile apps, up from 11 percent in 2013. This includes a nearly threefold increase among 18-24 year-olds.

Call it the swipe effect. A new generation of dating apps that match users with a swipe of a finger have surged in popularity and disrupted a marketplace long dominated by websites such as OkCupid and eHarmony.  

While the major industry players are broad-interest apps like Tinder and Bumble, growth is also being fueled by niche apps that cater to specific communities. There’s JDdate for Jewish singles, Bristlr for those into beards, Gluten-Free Singles if you can’t stomach a breadbasket on your first date, and Farmers Only if you’re looking for some country companionship.
 
Here’s how they work:
 
The apps are location-based and pull info from your Facebook account to create a brief profile. You then scan through a feed of potential dates that can be customized by age and gender. If you find the person to be interesting or attractive, you swipe right. If you don’t, you swipe left. If two users both swipe right for each other, a notification will appear prompting them to start a conversation.
 
Swipe-friendly dating apps have redefined how humans connect and build relationships in the 21st century. They’ve also been met with plenty of criticism. Some argue they’re making us more shallow and can even become addictive. There’s also no doubt they’ve opened new doors for creepy catfishers looking to deceive others online – think Manti Te’o.
 
Opinions may swirl about the cultural implications of dating apps, but here’s one thing that’s not up for debate: the mobile dating market has become a multi-billion dollar powerhouse.

Leading this movement is Tinder – the godfather of the swipe. The app boasts 26 million matches per day and was valued at $1.35 billion by Bank of America Merrill Lynch last year.

Tinder has played a key role in the growth of mobile dating apps and continues to separate itself from competitors with creative campaigns like ‘Swipe the Vote’.

For many other dating apps, investment money is running low and new revenue streams are needed. Just like any startup business, the next challenge is finding a way to stay afloat while still providing a valuable service.

This challenge is critical for entrepreneurs because it comes at a time of uncertainty in the tech financing market. Venture capital funding has slowed dramatically, tech IPOs are struggling, and investors are expressing concern about high valuations.

To adapt, some apps are beginning to charge users a monthly fee. This model is risky because the explosive growth of free dating apps has cannibalized services that require pay to play.  
 
One route that’s had a successful track-record in the app economy is the “freemium” model – charging for special services like chatting with an expired match or revealing who’s viewed your profile.
 
And then there’s always advertisements. 
 
Entrepreneurs are aware of these funding challenges, but they point to Tinder as a sign that investors are closely watching.  
 
Millions of couples have already met thanks to dating apps, but the ultimate question is: will Wall Street fall in love with them? 

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