In the most recent lecture of Information Strategy (26-08-2019), the online dating platform Inner Circle was discussed. The question was how the Inner Circle could expand its operations to a new city. The exclusive character of the platform makes it difficult to enter new local markets, since members can only join the platform by means of an invitation of a current member. A possible solution, as suggested by a fellow student, was to fill the platform in a new city with fake accounts, hereby providing new members with a quality offer of potential dates, which will lead to word-to-mouth promotion and the invitation of new members, allowing the platform to expand.
To fuel expansion, The Inner Circle did not use fake profiles, but affiliate marketing programs.
However, the creation of such fake profiles is a used technique in the current dating platform market. This Wednesday, the 25th of September, The Wall Street Journal declared that the Federal Trade Commission had sued the Match Group Inc. for the alleged use of fake profiles on dating platforms. This incorporation is owner of popular and well-known dating platforms such as Tinder, Match.com and OkCupid. According to the Federal Trade Commission, the Match Group has send dating platform users messages that a certain profile, which turned out to be fake, had interest. Using this interest, the organizational manipulated users to subscribe for a payed account. The Federal Trade Commission states that Match Group has influenced half a million users to subscribe for a payed account using this manipulation, from 2016 until 2018.
This manipulation shows how fake profiles initially created more value for the company and its users, following network effects. The messages send by these profiles increased customer value. Customer willingness to pay increased significantly, so that users were willing to use the paid, instead of the free version of the dating platform. However, when the profiles turn out to be fake, this value decreases, hereby realizing a negative same-side network effect. Namely, when the Federal Trade Commission turns out to be right, platform users will suspicious towards profiles, potentially leaving the platform for its competitors, with potentially devastating effects for the Match Group.
The reaction of the organization on the allegations are, therefore, expected. The Match Group calls the imputations unfounded and states to not cooperate with the judicial investigation and provide fierce defends in the courtroom. Whatever the decision, this case shows the power of network effects, both positive and negative.
Wall Street Journal Article:
https://www.wsj.com/articles/ftc-sues-match-for-allegedly-tricking-users-with-fake-ads-11569429886
