Dating apps have hit a wall. Can they change things?

As online dating has become as easy as swiping a finger across your phone screen, companies that own apps like Tinder and Bumble have become the darlings of Wall Street. But about a decade later, these platforms are now struggling to meet expectations, and investors have become frustrated and hungry for something new.

Match Group and Bumble – which account for almost the entire industry in terms of market share – have lost more than $40 billion in market value since 2021. Even in an era where apps are a staple of smartphones, both companies laying off workers and reporting poor revenue growth.

Both companies have recently brought in executives who are committed to experimenting with new features, hoping to capture the growth investors seek. But they face a major obstacle: Few young people are willing to pay for dating app subscriptions – in part because young people are increasingly turning to platforms like Snapchat and TikTok to make connections – and it's unclear what exactly will change this.

Match Group and Bumble generate the bulk of their revenue – about $4.2 billion for both companies last year – by selling subscriptions, with smaller sources of revenue coming from advertising. But they are struggling to increase their sales. Match Group was only able to keep its revenues stable last year by raising prices.

On the investor side, companies need to convince more young users to pay.

“Wall Street loves subscription models because it gives them the comfort of recurring revenue,” said Youssef Squali, an analyst at Truist Securities.

By paying, users can unlock features like unlimited swipes and the ability to see who swiped them. But for many people, that's not enough: Unlike other paid subscription services, like Spotify or Netflix, dating apps can't guarantee that you'll find what you're looking for.

“It’s really different than paying for access to people,” said Kathryn D. Coduto, a professor at Boston University who studies dating apps. “Paying for it makes it seem a little tricky. »

In the USA, 30 percent of adults, and more than half of adults under 30, use dating apps, according to a Pew Research Center survey released last year. About a third of dating app users reported paying for these apps, with men and higher-income adults more likely to pay than others, the survey found.

Millennials, the nation's largest generation, were of dating age when Tinder first launched, but More and more people are getting married in recent years, a decision that usually leads people to leave apps. Now the main users are from Generation Z, a younger – and smaller – demographic with less disposable income. This generational shift poses a challenge for the dating app industry.

Mandy Wang, an 18-year-old student at New York University, said she prefers meeting people in person or via direct message on platforms like Instagram or Snapchat. Dating apps are intended for casual use, “like a game,” she said.

“People use dating apps, but I don’t know anyone who pays for it,” Ms Wang said. In fact, she said she would consider it an “ick” if she found out someone was paying for a subscription.

Jess Carbino, a former Tinder sociologist and now a dating consultant and coach, said that young people “still feel the desire to use online dating apps, but they don't necessarily feel a sense of urgency to find a partner.

“I think what we're seeing is purely a demographic shift,” Dr. Carbino said.

Match Group and Bumble declined to comment on their plans to attract more paying users, pointing to public statements made by their executives.

Bumble Chief Executive Officer Lidiane Jones told analysts last month that the company would revamp the app to attract more users, particularly younger ones, by adding “personalization and flexibility” to the experience.

Bumble's largest competitor, Match Group, was an early player in the online dating market, starting with in 1995. The company acquired Tinder in 2017 and Hinge in 2018, launching a period of growth which attracted the attention of investors.

Tinder is the largest brand in Match Group's portfolio and the most popular dating app in the United States. It shook up the industry landscape in 2012 by introducing a swipe feature, now ubiquitous in dating apps. But the novelty wore off and Tinder lost its momentum. The number of paying users of the app decreased by almost 10% in 2023.

Tinder's struggles, and those of the broader dating app industry, are partly because the format is much the same as it has been for more than a decade, said Zach Morrissey, an analyst at Wolfe Research, a financial research company. But the way people date may have changed.

“This is an area where product innovation has been relatively quiet in recent years,” he said.

It's starting to hurt. Bumble, which went public in 2021, initially jumped in value, but after a steady decline, its stock is now about a quarter of its IPO price. Match Group's stock price hit a high of $169 in 2021. It now sits at $34, about a fifth of its peak value.

Match Group and Bumble recently made some changes to convince investors they can make things work, but it's unclear what will solve their problems. “There is no obvious silver bullet that they need to address,” Mr Morrissey said.

Both companies have experienced some leadership shake-up: In January, Ms. Jones joined Bumble and Match Group promoted Faye Iosotaluno, Tinder's former chief operating officer, to general manager of the app.

Bumble announced last month that the company would lay off about a third of its workforce in the first half of this year. It also lowered its revenue forecast for the first quarter, below Wall Street expectations.

“The demand for connection and love continues to be very strong – two billion singles worldwide,” Ms Jones told analysts in February. “Yet products that provide the set of experiences needed to create these connections are not serving users the way they want.”

Match Group Chief Executive Bernard Kim told analysts on a Jan. 31 conference call that Tinder “is adopting a fail-fast mentality this year, a strategy that prioritizes experimentation and rapid testing “. Mr. Kim took over the company in 2022 after serving as chairman of Zynga, the maker of mobile games like Farmville.

He said the company would attract more paying users through marketing and was adjusting its products in various ways, including introducing new premium features a la carte.

Match Group has also expanded its offerings, such as an LGBTQ dating service, called Archer, and another aimed at Latinos, called Chispa. Revenues from these products decreased by 4% in 2023.

Mr. Kim said Tinder was completely reinventing the swipe feature and would roll out new features this year. The platform is also encouraging more users to get verified, a move that aims to improve security and help women feel more comfortable using the app.

Activist investor Elliott Management, which previously led shakeups at Salesforce and Pinterest, took a $1 billion stake in Match Group in January, a sign that Wall Street sees a growth opportunity.

Elliott declined to comment on its discussions with Match Group. Mr. Kim told analysts that he and the company had a “collaborative dialogue.”

Despite the challenges, the dating industry isn't going anywhere, said Ken Gawrelski, an analyst at Wells Fargo.

“Dating, in general, and love, in general, is a basic human behavior,” he said. “So it’s hard to believe that it’s changing significantly.” But how we date, or how we find matches, is a major issue in this discussion.

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