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Laura Forman: Tinder essentially invented the swipe and that changed dating forever. Now almost every app has some version of a swipe or a like. It makes it fun. So it ostensibly makes it fun.

The Journal.

The most important stories, explained through the lens of business. A podcast about money, business and power. Hosted by Kate Linebaugh and Ryan Knutson, with Jessica Mendoza. The Journal is a co-production from Spotify and The Wall Street Journal.

TUESDAY, FEBRUARY 14, 2023

2/14/2023 4:00:00 PM Share This Episode

The Price of Dating Apps

How much are you willing to pay for love? Dating apps are asking users to pay more for features and access to matches as a way to counter slowing growth. WSJ's Heard on the Street columnist Laura Forman talks about the pressure on Match Group, the company behind some of the most popular dating apps.

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Full Transcript

This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

Kate Linebaugh: Do you love love?

Laura Forman: I actually do love love. I love love. Everyone who knows me knows that about me. I am obsessed with setting people up. I've only had one success in my life, but I'm very proud of that success. They're married.

Kate Linebaugh: That's our colleague, Heard on the Street Columnist, Laura Forman. She has another love, reporting on dating apps.

Laura Forman: For this particular podcast I did canvas my friends to ask if they could describe their dating app experience in five words or less, like what would they say about them?

Kate Linebaugh: Yeah, what did they say?

Laura Forman: Ready? "Fun for about five seconds." "No, just no." "A waste of dopamine." "Quantity, not quality." "Diluted, too random." "Time consuming. Takes commitment." "An addiction." But here's the best. "Worth it all, I guess, because I met my fiance."

Kate Linebaugh: Dating apps have exploded in the last decade. Three in 10 adults in the US say they've used one and it's grown to a multi-billion dollar industry. But now dating apps are going through a bit of a dry spell. Their stocks are falling and revenue has flatlined. Are investors losing interest?

Laura Forman: Yeah, they're definitely losing interest.

Kate Linebaugh: They're breaking up with dating apps?

Laura Forman: They're breaking up with dating apps. Very good, Kate.

Kate Linebaugh: Welcome to The Journal, our show about money, business, and power. I'm Kate Linebaugh. It's Tuesday, February 14th. Coming up on the show, dating apps. Have we reached peak swipe? It might be hard to find love, but it isn't hard to find a dating app. There are a lot of them.

Laura Forman: Hinge, Tinder, Grindr, Bumble, Plenty O' Fish, OKCupid, Pairs. Fruitz.

Kate Linebaugh: Fruitz?

Laura Forman: Yeah, Fruitz. Fruitz is great. It's for Gen Z. It's for intentions. So you pick a fruit, I don't know, cherry or grapes, and the fruit symbolizes what you're looking for.

Kate Linebaugh: You get the idea. And we wanted to know what it feels like to use some of these apps. So we asked you our listeners.

Speaker 3: So I have used Hinge, Tinder, Bumble.

Speaker 4: Being a woman in Los Angeles, I filtered for Zodiac signs.

Speaker 5: It feels so mindless. It's choice overload.

Speaker 6: One of the things that I really like about the apps is kind of the options. it gives you. Options and a sense of kind of looking outside your social circles.

Speaker 4: And I also filtered for some lifestyle factors. I didn't want to be with someone who smoked since I'm allergic to smoke.

Speaker 3: What I dislike about dating apps are that I believe it makes me act more shallow than I would in person.

Speaker 7: Another thing I really don't like about the apps is that the odds are good, but the goods are odd.

Kate Linebaugh: There's one company that's behind many of the dating apps you use. It's Match Group.

Laura Forman: Match Group, which is the biggest dating app company that I cover, they own like 15 different dating platforms, Tinder being their biggest. But they have over a hundred million worldwide users. So that's how many people are on dating apps just to put it into perspective,

Kate Linebaugh: Match Group owns Apps, like Hinge, OkCupid and The League. It grew out of match.com, a browser-based dating service that started about 30 years ago.

Laura Forman: This was well before smartphones. On your old school computer, you would go in and sign up, and it was pay walled, so you'd have to pay.

Speaker 8: One of the first dating websites to launch more than a decade ago was match.com. It now has more than a million paying subscribers, proving that there's profit in playing Cupid.

Kate Linebaugh: How did Match Group become so dominant?

Laura Forman: Tinder. Absolutely Tinder.

Kate Linebaugh: Tinder was started in 2012 and targeted college students. It was free and it had a special something that set it apart from other dating apps.

Laura Forman: Tinder essentially invented the swipe and that changed dating forever. Now almost every app has some version of a swipe or a like. It makes it fun. So it ostensibly makes it fun.

Kate Linebaugh: The swipe turned finding a date into a game. You scroll through potential dates and if you like what you see, you swipe right, and if you don't, you swipe left. How did the apps make money?

Laura Forman: So almost every app is what they call freemium, and that means that you can sign up and go on and use the app for free. But, if you pay, you get added features, you get added preference. In other words, you become more noticeable, more flashy. More people pay attention to you the more you pay.

Kate Linebaugh: Most people on dating apps don't pay, but about a third of users say they have. Prices on the apps range from a few dollars a month to a couple hundred for apps that market themselves as being more exclusive like Raya and The League. For years, this was a good business model. The apps saw customer growth and investors were happy. But now, Laura says they're going through a rough patch.

Laura Forman: I think everyone who wants to be on a dating app at this point is already on a dating app. That's the thing, it's entrenched.

Kate Linebaugh: Are we at dating app saturation?

Laura Forman: Yeah, I think we are. There was a big Pew research study that shows that dating app users, the percentage of Americans using them, hasn't grown at all in three years, is a really troubling statistic for the dating industry. There was a period, even just two years ago, three years ago in 2019, Tinder was like at 43% revenue growth.

Kate Linebaugh: And what is it now?

Laura Forman: Zero. You can't just be a solid business as a publicly traded company. You have to show investors that there are new legs to your story. So they have to figure out, the dating apps companies, how to either get more people on their apps that aren't somehow or get the people who are already on them to pay more.

Kate Linebaugh: Coming up, how dating apps are trying to boost their profiles by putting a higher price on love. What words do you think of when I say Valentine's Day?

Rin: Cheesy and chocolate.

Kate Linebaugh: This is Rin. She's 34 and lives in LA.

Rin: I think it's a great holiday. I love candy. I love hearts. I think it's fun to get all excited about the prospect. I'm a deeply hopeless romantic, even though I mildly cynical on top. So, mildly.

Kate Linebaugh: Yeah, deeply romantic at heart, mildly cynical on top. Is that in your dating app profile?

Rin: Oh, God. I can't tell them that. They'll use it against me.

Kate Linebaugh: I don't know. It could be a good, you could try it.

Rin: You know what? I might change my whole view after this interview. I might do everything differently.

Kate Linebaugh: How would you describe your dating history?

Rin: Long, without long-term relationships. I feel like I've been dating pretty much my whole life. I came out to LA and I started getting on the dating apps in about 2010. So I've been in and out of the dating apps this whole time. I feel like dating apps are just kind of a part of my identity now, almost, I think. All of my friends know I'm the single one. I'm always dating somebody. I always know what app there is.

Kate Linebaugh: When did you first decide to start paying for dating apps?

Rin: So, in the first couple years of dating, I paid for a couple of the boosts or the highlights or when you can see just your matches. I paid for that. Like, "Let me just see who thinks I'm cute and see if I think they're cute too, and let's try to bypass all this waiting and just swiping." Because it was like the cost of a cup of coffee, and I was like, "Fine."

Kate Linebaugh: And how much money were you spending on them?

Rin: I mean, for Raya, I've spent close to $300 in my time on Raya, because they require a monthly membership fee. And then off of Bumble and then Match, probably another couple hundred dollars. And this is over a time, but I feel like I'm in the prime of my life. The fact that I've spent $500 on dating apps seems crazy to me, because dating in itself is expensive. You got to get fancy, you got to go out. It's expensive to date, so the fact that I've tacked on that amount on top of it? It makes me take a step back.

Kate Linebaugh: So are you giving up on paying for dating apps?

Rin: Absolutely. Yeah. I'm not giving up on trying or being out there and stuff like that, but yeah, it's just not worth opening my wallet for something where the experience is the same across other apps that are free. Love, happiness, all of the things I'm looking for? I don't feel like because I pay $20 a month, I have a better chance at it.

Kate Linebaugh: Rin is still on the apps looking for romance, but she says she isn't going to pay anymore. And that type of user could be a problem for a company like Match. Match not only needs users to pay for the app, it's trying to get them to pay more. Laura spoke to Match Group CFO Gary Swidler. He made the case of paying for dating apps

Gary Swidler: Paid users are able to get themselves more attention. That's one of the big benefits. So because there's a lot of people on it, one of the challenges of a big platform like Tinder is how do I stand out in the crowd? And by paying something, you have the ability to stand out in the crowd, which is valuable if you want to have success. And so we offer that ability to pay so that you can have a better chance of having that success.

Laura Forman: Can you ever guarantee that someone will find love by spending more money?

Gary Swidler: No. No. And look, that is a difference between an Uber or an Amazon and a dating platform. If you go onto Uber, you have a whatever, 99% chance, of getting a car. And if you order something from Amazon, there's a very high chance it's going to arrive the next day on your doorstep. The problem with dating is there's psychological and sociological things that happen, that even if you're great from an algorithmic standpoint, you might not have chemistry with that person. And we don't have the ability to make better dates in that sense. There's too much human element that interferes.

Kate Linebaugh: But one thing Match can do is try to persuade users to pay more. So the company is launching new premium tiers. Match Group will start offering a subscription to Hinge users that will cost as much as $60 a month and is meant to attract, "highly motivated daters." It's trying a new payment model with Tinder too.

Laura Forman: So they're looking at basically charging people who already pay more. And I'm talking like $500 a month, which is just to me an absurd number.

Kate Linebaugh: It's like the elite class. It's like first class.

Laura Forman: Yeah. So I talked to this pricing expert, just trying to figure out who in God's name would pay that much to use Tinder, which is kind of known as a hookup app. And he was saying that basically there's a certain number of people in the world who would pay for anything just for the status, Like in credit cards, like Amex, you introduce the Platinum card and everyone wants it or the Black card and everyone wants it, and then there's just a status associated with that. But he also said that by having a higher tier price point, just by it existing, it could elevate the brand, so it gives it more clout.

Kate Linebaugh: But getting users to pay for an elite dating app tier might be tricky. When we asked you for your experiences of paying, your responses were mixed.

Speaker 11: I have paid for dating apps before and frankly I thought it was a good decision because using the dating apps is oftentimes like cutting through the forest with a machete.

Speaker 3: Paying doesn't necessarily help you get good matches or better matches. That's mostly about what your photos look like and what your prompts say.

Speaker 4: I'm a big proponent of paying for dating apps, but I don't think that it works unless you're going in with the intention to really use that money that you're spending.

Speaker 6: You figure, "Hey, it's eight, nine, bucks for a month or something like that. And that's pretty much the cost of a drink when you go out." It was well worth it. I met my wife and I know I wouldn't have met her any other way.

Kate Linebaugh: How important is it for these companies to get their users to pay more?

Laura Forman: It's essential. I mean, people are over dating apps, in terms of investors. They're moving on to other areas that actually are growing. So they, honestly, I think I would give Match one to two more quarters to start showing some progress before people completely lose interest. That's where they're at at this point.

Kate Linebaugh: Is the bottom line for dating apps that it's possible that they can make love but not money?

Laura Forman: Yes. I mean the vast majority of users are not paying. I mean, there's always been this overarching question with dating apps as to whether they work for their consumers, for their users, to find love or whether they work for investors to make money? And I think that's still unanswerable. We're not sure. I mean, the cynic in me says they're making money, but also 50% of my friends met through dating apps, so they're incidentally making love along the way too.

Kate Linebaugh: Well, we love having you on the show.

Laura Forman: Aw.

Kate Linebaugh: Happy Valentine's Day, Laura.

Laura Forman: You too. Right back at ya.