Analysts have reported mixed reviews for dating platforms as they strive to generate more revenue from users.
Popular dating apps have found love with users during the pandemic, but data and analyst commentary indicate that to continue to grow, dating platforms will need to find new ways to innovate as COVID themes -19 unfold.
When global lockdown conditions set in at the start of 2020, people weren’t able to meet and interact directly with others for dates or adventures. Trapped in their homes, singles eventually started turning to their phones to find potential partners, benefiting big dating companies including Bumble Inc. and Match Group Inc., owner of apps like Tinder, OkCupid and Hinge. More recently, however, that growth has plummeted, leaving companies looking for new ways to attract new users and upgrades.
Fishing for new users
Between the first quarter of 2020 and the second quarter of 2021, Bumble increased the number of paying users from 2.2 million to 2.9 million. Growth stalled in the third quarter, however, with paid users remaining flat quarter over quarter.
Apps like Bumble, Tinder and Hinge provide a base free service allowing users to swipe right – or “like” – a potential date. But apps try to convert free users to paid users by limit the number of swipes on the free tier.
Bumble, for example, gives users an indefinite swipe limit to encourage more thoughtful use of available swipes. When a user runs dry, they are prompted to upgrade to a Boost or Premium plan which gives them unlimited likes and other features. Hinge limits users to eight likes per day, then prompts users to upgrade to a subscription version of the platform.
Like Bumble, Match experienced strong growth during the early stages of the pandemic, adding 3.3 million total paid users between Q1 2020 and Q3 2021. In Q4 2021, however, the company lost paid users on a sequential basis, down from 16.3 million to 16, 2 millions.
Love in the time of COVID
“We’re not back to normal,” Match chief financial officer and chief operating officer Gary Swidler said on a fourth-quarter earnings conference call Feb. 2. “We don’t see the strength of new users yet. And so it affects the business everywhere.”
Negative impacts from omicron should continue to be a factor in the first quarter, the executive said.
Still, executives see long-term growth opportunities as online dating gains popularity in society.
In North America and Europe, 44% of all singles used dating products in 2021, up from 34% in 2015, according to Match. The number of apps used by these singles increased from 2.0 to 3.6 during this period.
“As people become more comfortable with using technology to interact with others and more and more users have seen the value proposition that online dating offers. .we think there’s a big lead,” Bumble CEO Whitney Wolfe Herd said on a recent earnings call. “And online dating is not a zero-sum game, with most users on multiple apps at any given time. So that long tail of secular growth.”
fight for sharing
Analysts believe that some apps are better placed than others to convert free users into paid users. Hinge, for example, should generate revenue for Meet in 2022 and 2023 because Hinge user base is heavily under-monetized, according to Brent Thill and James Heaney, analysts at Jefferies.
In-app-purchase, or IAP, revenue data from Apptopia shows that Hinge has apparently taken shares of its sister app Tinder in recent quarters. US IAP revenue for Hinge increased from $2.3 million in Q1 2019 to $15.0 million in Q4 2021, while Tinder’s US IAP revenue increased from 71, $9 million to $56.6 million over the same period.
The same trend could also be observed globally.
Still, some analysts choose to “swipe left” on dating app owners in general. Ford Equity Research gave Match an “average” rating in a Feb. 4 memo, saying Match had weak earnings momentum given its declining EPS numbers.
Neither Match nor Bumble are solid investments at this stage of the cycle, according to quantitative analyst firm CFRA. He gave Match a “hold” rating with negative readings on both valuation and growth. Bumble landed as a “strong sell” at CFRA.
The dark side of online dating
A growing risk for these companies is the sharp increase in online romance and activation scams over the past two years. On Feb. 10, the Federal Trade Commission reported that romance scams hit an all-time high in 2021, costing scam victims $547 million for the year.
Many people who experienced scams said they were contacted on dating apps, the FTC said, although some cases occur in social media posts. Scammers manipulate users to transfer money.
App owners will have to work harder to reduce the presence of fake accounts, otherwise they risk losing users who ended up not only with broken hearts, but also with empty wallets.