Tinder: Business vs. Operating Model – is it a match?
The popular hookup app is looking for the most attractive operating model and is constantly changing to promote romantic connectivity online.
Tinder, a free mobile dating app, was launched in 2012 by Match, which also owns OKCupid, PlentyOfFish, and HowAboutWe, with the mission to increase romantic connectivity worldwide. Three years later, it is not only famous for promoting millions of hookups (a total of 10 billion matches generated by a daily average of 800 million swipes and 15 million matches[1, 2]) but also for becoming one of the most valuable social networking apps (JMP Securities predicts Tinder to be worth $1.6 billion[3]). This is an example of company that successfully aligns its operating model with its business model – It’s a match!
An attractive business model
Tinder creates value to customers by filling a gap in the market of online dating as an app that provides affordable, local, instantaneous, and safe way to meet potential partners that are outside the user’s circle of friends. Eligible candidates provide information on their public profiles (pictures and a brief text) in return for access to the pool of profiles of potential matches, which can be filtered by distance, gender, sexual orientation and age. Successful matches unlock a chat screen that enables both users to communicate. Revenue is generated through the paid-for subscription service “Tinder Plus” and advertisements. In order to avoid obsolesce, a very common outcome for most of the online dating ventures, and keep up the momentum, Tinder is constantly changing its model and trying different features to become more customer-centric and monetize its value.
These are some of the main features of the business model:
- Subscriptions: New users can only join the app through connection with and verification of users’ Facebook account.
- Profile completion: Basic information, such as name, age, and gender, are imported from user’s Facebook account and cannot be changed. All photos displayed must first have been published on Facebook or Instagram. Information about pages “liked” on Facebook are also recorded.
- Common interests: Users can see whether they share common Facebook connections and “liked” pages with other candidates.
- Match: Swiping, one of the main features of the app design, allows users to “like” or “pass” other users anonymously. The “double opt-in” system notifies users who liked each other’s profile about the match and allows them to chat. A new feature launched on October 1, 2015, called “Super Like” allows users to notify other users, with a limited frequency, that there is interest [4].
- Monetization: Tinder monetizes their business model in two ways. First, the app introduced ad campaigns displayed in the format of users’ profiles. Secondly, Tinder Plus subscriptions allow premium users willing to pay $9.99 monthly to change their location, use “Super Likes” without limits, rewind last swipes, and turn off ads.
Swiping right to the best operating model
Tinder delivers value to customers by maximizing their chances to make meaningful matches. The key characteristics to fulfil the customer promise are the following:
- Database: Tinder outsources its database management to focus on the product itself [5]. This is a good strategy for a company with fewer than 100 employees and that is constantly improving the app in a growing market.
- Network: As the largest mobile dating app, with more than 250 million active users [1], Tinder benefits from network effect and is able to offer its users the option to connect with the greatest variety of potential matches.
- Culture: Tinder’s culture fosters close and personal relationship among its employees, a right choice given the nature of their product and the desire of their users. Sexism, more common in the tech industry, is addressed by the company [6].
- Credibility: Unlike other previous online dating alternatives, Tinder integrated with Facebook and verified the identity of each of its users on the social network. This partnership allowed the company to build its brand and gain recognition as a safe, trusted and respectful application. By requiring users to share information about their network connections and “likes” the app fostered a culture of transparency and more authenticity.
- User-friendliness: Tinder’s instant profile completion using Facebook and its intuitive and simple interface amplify the network effect of the app and increase the likelihood of success for each user.
- Customer-Centric: The company is constantly changing the app to test new options to increase users’ satisfaction.
- Advertisement: Ads are presented in the same format of users’ profiles and can be “swiped left” easily and fast.
References:
[1] http://www.businessofapps.com/tinder-mobile-app-statistics-and-revenue/
[2] http://www.usatoday.com/videos/tech/2015/11/09/75446060/
[3] http://www.businessinsider.com/jmp-securities-analyst-note-on-tinder-2015-4
[4] http://techcrunch.com/2015/10/01/tinders-super-like-rolls-out-globally/#.gbgtsiq:CD0A
[5] http://thenewstack.io/tinder-is-scaling-with-mongodb-and-some-help-from-objectrocket/
[6] http://techcrunch.com/2014/07/09/whitney-wolfe-vs-tinder/
I think this post is really interesting. I believe Tinder, as Facebook, generates a lot of value from its current users which are their biggest assets. I am sure no one would like to pay the subscription model if there was no potential to meet a real “match” at Tinder. This potential comes from the current 250M active users who appear to be “real human beings” based on the verification of their Facebook. As you mentioned, this verification generates trust and associates Tinder with a recognized brand name.
I believe that the most important part of the operating model you mentioned is the fact that Tinder is a customer centric company and adapts to the need of the consumer to generate value. This flexibility and focus on innovation is critical to ensure they stay relevant in the fast paced app market.
My concern with their business model is with keeping its user base
How does Tinder keep its users from continued usage after a match is made. It almost seems as though a romantic match is another lost user! Like Facebook where users have data and pictures that they have collected over a long period and continue using it, here as soon as long lasting match is made the couple would drop off.
Additionally competitors – There seems to be a fairly low barrier to entry, and a number of users maintain their accounts on more than one app. How does Tinder keep a users interest live on their app.
Aditya raises two great points. A business model that loses users if the product is successful doesn’t seem sustainable. Unfortunately, it seems like this isn’t a problem – user numbers are growing, which could imply one of two things:
1) Tinder isn’t an effective tool to achieve it’s goal of romantic connectivity. or
2) Tinder is effective, but success is defined by leading to a short term romantic connection, after which the user returns to the app.
I believe the latter is what’s going on here, which leads to my main issue with the app: it risks being branded as a “Hook Up” app. Maybe Match knows that, and actively positions Tinder in that way. However, this leads to some degree of social stigma. There seems to be a fine line between social media sites / apps that help users find relationships, and those that merely seek to generate short term connections. There’s a nuanced difference between saying, “We met on Match.com” and “We met on Tinder.” This doesn’t mean their business and operating models are misaligned, but I do think that stigma is something Tinder should avoid.
CT6000 and Aditya’s points are valid. Even more so as we try to understand the monetization model: most of the revenues will come from “serious” users who are willing to pay for a suscription. In all likelihood, these type of users will only invest their money in a site where they believe they are likely to find a long-term relation. If Tinder gets labeled as a “hook-up” app, the user base will be much more casual, as these users are likely to switch easily between competitors and unlikely to commit to a monthly suscription fee, thus losing its main revenue source, and risking to follow the fate of many apps that were unable to successfully monetize its business model.
I clearly see the potential for growth of this business. I think the biggest asset is “credibility” which are guaranteed by affiliation with Facebook. My concern here is their monetization strategy seems a bit week, despite its very strong attraction for users. Monthly subscription and campaign only is a bit underestimating the potential for monetization from this business.
Great pick, great article.
(1) I don’t think that a matching company with flame in their logo is aiming to form romantic relationships. (2) There is circulation in terms of number of people in “the relationship funnel”. As Tinder pushes new people in, there sure will be some other users joining the potential customer base. So, after reaching a critical mass, tinder will easily be the established brand of this market as Facebook. It needs to add ancillary products like Facebook did to renovate itself, keep the user attention on and to strengthen company’s position in dating market. Secondary struggle will be connecting these new products to monetization instruments. Do you know any plans around how company is planning to expand its product offering and its monetization instruments?
Thanks again for the very interesting article. It is particularly intriguing after having the Facebook case in class