Tinder — the real value of a hookup

We’ve all done it. The download, the instant high when you get a match, and the inevitable self-loathing and app deletion that follows a Tinder binge. Maybe you’re cool and prefer Bumble or perhaps you have standards for yourself and use Hinge — either way, singles (and let’s be honest, those in relationships) can’t get enough of these apps.

As a society, we’ve come a long way with online dating. What was once seen as quite a seedy and desperate activity has now become the go-to way for people to make connections. No longer satisfied with the selection of partners available at work, school, and circles of friends — today’s daters are opting to expand their dating pool and meet suitors online.

Surveys by Stanford University show that one in three marriages in the United States now starts with a virtual connection. In today’s article, we will explore just how Tinder has contributed to and profited from this shift in our behaviour.

Company Overview

Tinder was launched and founded in September 2012 by Sean Rad, Jonathan Badeen, Justin Mateen, Joe Munoz, Dinesh Moorjani, and Whitney Wolfe Herd (who later left the company and started Bumble). The app essentially uses location data to show users other profiles they may be interested in. Allowing users to then swipe right to like someone and to swipe left to dislike someone. If both users swipe right on each other’s photo it is considered a match and then you can message each other.

After initially being trialed in a series of US college campuses, Tinder was rolled out fully, processing 350 million swipes per day by late 2013, rising to one billion swipes per day before the end of 2014, that's ~11,500 swipes per second!

In 2017, Tinder was merged into the dating conglomerate Match Group. At that time Tinder was valued at $3 billion. Since then according to an independent valuation in 2019, Tinder is now valued at $10 billion.

For reference, Match Group’s portfolio of apps includes:

• Match
• Tinder
• Hinge
• POF (Plenty of Fish)
• OkCupid
• OurTime
• Meetic
• Pairs
• Upward

Yep, they pretty much own everything with the exception of Bumble (would recommend clicking on the link if you have time)

Revenue Drivers

As of 2020, Tinder’s direct revenue amounted to $1.4 billion, an 18% increase vs 2019. The app makes money through three main streams: advertising, subscription, and in-app purchases.

Advertising

As users are swiping through the app, Tinder showcases a variety of ads. The normal advertising model would imply that advertisers would pay Tinder a fee per let’s say 1,000 views (remember back to our podcast article). Given that Tinder now has approximately 57 million active accounts, revenue from advertising would be sizable

Subscription

Subscription revenue is likely to form the bulk of Tinder’s revenue. The company provides various options for users looking to up the likelihood of getting matches (usually heterosexual men, who receive fewer likes on average than their female counterparts). Currently, Tinder offers the following subscription products:

• Tinder Plus — Unlimited likes, rewind / undo, 5 super likes a day, 1 boost a month, the ability to passport, no ads
• Tinder Gold — All the same features that Plus offers, as well as the ability to preview users that have liked you and the ‘Top Picks’ feature
• Tinder Platinum — All the same features of Plus and Gold, with the added benefits of ‘Priority Likes’ and the ability to message before you match

In-app Purchases

Tinder also allows users to purchase additional ‘à la carte’ premium features regardless of whether they are a subscriber or not.

Cost Drivers

Tinder’s main cost items would include the following:

• App store cut on in-app purchases — Apple takes 30% of all revenue made from in-app transactions
• Marketing — like most consumer-facing companies, Tinder will spend a good sum of money on marketing campaigns
• Server costs
• Office space
• Payroll

Unique Business Strategy

Online dating has been around for a long time, in fact, Tinder was in some ways a latecomer to the market (Match.com was founded in 1993). The issue was that online dating at the time took quite a bit of commitment, both in terms of time and personal information (think bios that include ‘long walks on a beach’ etc.). Tinder revolutionised dating by making it mobile-first, simple and fast (it can take less than 10 minutes from download to match).

Dating apps actually originated in the LGBTQ community with Grindr and Scruff (launched in 2009 and 2010, respectively). When Tinder launched in 2012, iPhone (and later Android) owning people of all sexualities could start looking for love, sex, or casual dating, and it quickly became the most popular dating app on the market.

Gamification is a trend that gets a fair bit of airtime. In Tinder’s case, the gamification of online dating (swipe left/right) has been pivotal to its success. Just as with the ‘like’ on Facebook, Instagram and Twitter — getting a Match on Tinder causes a similar dopamine release, making the process enjoyable and addictive

HTMM Opinion

So where does online dating go from here?

• Post pandemic dating — COVID has meant that for many people, online dating apps such as Tinder have become the only way to interact and meet new love interests. For many industries the shift from offline to online in the pandemic has lead to long-lasting structural changes, however, it is yet to be seen if this is the case for online dating. Given the dominance of online dating pre-pandemic, my view is that it isn’t going anywhere anytime soon
• User safety and platform accountability — This year we have seen many platforms make efforts to make their communities safer and more responsible. Some user profiles on Tinder are verified but the majority are not, and it will be interesting to see how the company deals with the issue of user safety going forward