TREND WATCH
It’s a new year. Time to lose weight, get in shape, and… sign up for an online dating service. According to various dating websites and apps, the busiest day of the year for online dating is the first Sunday in January, when average traffic spikes as much as 75%. As more people have embraced looking for love virtually, online dating services have begun shifting from promises of endless variety to promises of fewer, better matches with the help of Big Data. Looking forward, the industry can expect years of strong growth driven in part by generational change.
Online dating has come a long way since the first major dating site, Match.com, launched in 1995. Once viewed as a refuge for the desperate, online dating has shed much of its stigma and become a fixture of single life among people of all ages and backgrounds. (See: “A Total E-Click of the Heart.”) Over the next 15 years, Match was followed by high-profile sites like Jdate, eHarmony, and OkCupid—and with the rise of smartphones, dating and hookup apps like Skout and Grindr. In 2012, the industry entered a new era with the debut of Tinder, which quickly became the most popular dating app and cemented “the swipe” as the symbol for digital-era romance. Today, industry revenues run about $2.9 billion in the United States and $4 billion globally, and these revenues are up 140% since 2009.
According to a 2016 study from the Pew Research Center, 15% of American adults have used online dating sites or mobile apps, up from 11% in early 2013. This growth has been especially pronounced among two groups: young adults ages 18 to 24 (among whom usage surged from 10% to 27%), and those in their late 50s and early 60s (from 6% to 12%). These figures have almost certainly continued growing. As early as 2010, dating sites and apps had overtaken churches, classrooms, and the workplace as the setting where couples meet their partners. Among same-sex couples, it’s the number one setting by far. Overall, online dating now accounts for nearly a fifth of the first meetings that lead to marriage.
With technology growing ever-more central to our lives, it was perhaps inevitable that we would start shopping for love online the same way we do clothes and furniture. But plenty of other trends have also contributed to online dating’s popularity. Longer work hours means less time to search for a partner. Growing concerns about impropriety in the #MeToo era have many men worried about crossing boundaries in a casual real-life encounter. And with more Millennials delaying marriage and more Boomers getting divorced, there are far more single people in age brackets that used to be more heavily partnered.
The appeal of online dating is obvious. It allows users to choose from a bottomless pool of romantic prospects—while simultaneously narrowing the search according to specific preferences. There seems to be a dating service for every ethnicity, religion, relationship type, and interest imaginable, including Star Trek lovers (Trek Passions), Trump supporters (Righter), the rich and famous (Raya), aspiring sugar babies (Seeking Arrangement), the “aesthetically average” (The Ugly Bug Ball), and even those attracted to convicts (Meet an Inmate). It also alleviates the pressure of the initial approach. On a dating site or app, users can presume that everyone they see is single and looking. Potential partners usually send a message and exchange texts before ever meeting up, making it easier to put out feelers without requiring the commitment of a date.
But the abundance of choice, combined with the lower stakes, has created its own set of problems. A good chunk of the terms used to describe the pitfalls of modern dating reflect not-so-honest daters entertaining many options: catfishing, ghosting, orbiting, benching, stashing, breadcrumbing. Women frequently report receiving inappropriate photos and explicit comments from harassers. And some customers find that it’s much harder to subscribe than unsubscribe: Last year, eHarmony, Jdate, and Christian Mingle all agreed to settle lawsuits accusing them of deceptive automatic-billing practices.
Above all, the issue that comes up over and over again—among both women and men—is fatigue. After enough dates, people tend to burn out. Couples therapist Matt Lundquist told The Atlantic that a decade ago, the complaint he heard most often was, “Boy, I just don’t meet any interesting people.” Now, he says, “It’s more like, ‘Oh, God, I meet all these not-interesting people.’” The never-ending variety also lends itself to decision paralysis. Many users find it overwhelming to sort through their options and are reluctant to choose when a better (read: hotter, smarter, richer, funnier) match could be just another swipe away. (See: “When Less is More.”)
Online dating companies are responding by taking an increasingly paternalistic approach to their users. More are cutting through the clutter by delivering pre-vetted matches, whether in the form of “one match at a time” services like Coffee Meets Bagel and Once or features like Tinder’s Top Picks and Hinge’s Most Compatible. This approach hearkens back to the early days of online dating, when older-skewing services required compatibility surveys and paragraphs of personal information before showing users prospective matches. The newer apps rely on algorithms instead of user-submitted surveys, but they result in the same outcome that Millennials and Homelanders are yearning for: fewer choices. (See: “Did You Know? Slow Dating Makes a Comeback.”) Consumers are clearly onboard: In early tests of Hinge’s Most Compatible, users were eight times more likely to go on a date with those matches than with other choices.
There are many reasons to be optimistic about the future of the industry. For one, despite its rapid recent growth, the market is still largely untapped. For perspective, Tinder’s young-adult userbase amounts to less than 3% of the total number of U.S. singles under age 30. What’s more, with the average age of marriage creeping up among young adults and the divorce rate rising sharply in midlife, a growing share of the population is single or unmarried at both ends of the age spectrum. Generational and social trends are also buoying online dating: Millennials start dating online at earlier ages than previous generations, and a disproportionate share live urban lifestyles that are correlated with higher average marriage ages. And of course, the potential value of finding a lifelong partner is inestimable—which gives online dating companies impressive pricing power and abundant opportunities to “upsell.”
Ultimately, online dating is a big business whose audience will never run dry. Overall, according to Evercore ISI, industry revenue is expected to grow 25% through 2020. Any way you slice it, this industry is a win-win. A successful service with a reputation for finding quality matches will have daters flocking to use it. And a less successful one doesn’t have to worry either, because if those matches don’t work out, they’re going to split up, dust off their profiles, and start swiping all over again.
TAKEAWAYS
The maturation of the Internet and mobile IT has paved the way for online dating, which over the past twenty years has transformed from niche to mainstream. More people are finding love online than ever before, drawn to the endless options and ease of use central to online dating.
- Online dating is a global phenomenon. Online dating’s reach stretches far beyond North America. It’s gained traction in pretty much every country with Internet access at comparable rates: 12.4% of South Koreans, for example, have dated online. In the Netherlands, it’s 12.5%. Though some of the services popular in America have also found success overseas, the top services in other countries are often homegrown and tailored to their country’s dating culture. In China, for example, the leading online dating service is Momo, a social-networking giant that recently acquired its Tinder-like competitor, Tantan.
- Investors have only a couple of publicly held players to choose from. The industry’s single biggest moneymaker is Tinder, which has 4.1 million paid subscribers and whose revenues were expected to top $800 million in 2018—more than double the amount the year before. Tinder’s parent company is Match Group, which also owns 44 other dating brands, including Match, OkCupid, and PlentyOfFish. The firm is highly valued, with a P/S ratio of 9.03. The other option is Spark Networks SE, a German firm that owns 10 niche brands, including Jdate, Christian Mingle, and EliteSingles. Though the firm failed to turn a profit in 2017, its affordability (P/S: 1.23) may entice investors looking for a dark horse.
- Facebook’s impending entry into the market will help, not hurt, the existing players. Last May, when Facebook announced plans to launch its own online dating service, shares of Match plunged 22%. With Facebook’s deep pockets, enormous userbase, and giant trove of user data, it’s easy to see why the news spooked investors away from Match. But this reaction wasn’t warranted. While Facebook is competing directly with Match in one specific market (online daters looking for algorithm-approved serious relationships), there’s plenty of room for both, since online daters tend to use multiple services at a time. If anything, the endorsement of one of the world’s biggest companies will reduce the barrier to entry for online dating.
