Technology of the week: The dating industry
In the dating industry, a platform is multi-sided, as men are mostly looking for women and women are mostly looking for men. In this blog we discuss two types of dating platforms: Profile-based dating and Location-based dating.
Profile-based dating
The dominant player in the Dutch market is Lexa, with a little over 2 million users. The main reason for their dominancy is the so-called network effect. Lexa uses a business model based on subscription tiers. This model makes use of a free base service. Users can create a profile, send a limited amount of messages and have a limited amount of people they can be matched up to. This tier is primarily used for driving people towards the service and increasing the network effect. The full membership is used for lock-in, keeping switching costs high.
Location-based dating
Another technology that disrupted the regular dating market is Tinder. Tinder is a mobile dating application that matches potential partners with one another through an algorithm based on your friends in your Facebook account and other people using the service from the surrounding location. Therefore, the location determination plays a crucial role within this application. Furthermore, Tinder makes use of already available personal information, as users have to log in via Facebook.
When looking at the business model of Tinder it can be observed that this dating platform is completely free to use. However, the amount of likes one can give is limited per day and users can buy a Tinderplus subscription to have an unlimited amount of likes. Therefore the business model of Tinder can be described as a freemium business model.
The similarities
The first similarity between both platforms is that the success rates depend on demand and supply of man and woman active on the platform. When one side of the platform is heavily outbalanced the platform value for both female and male users will not be in balance.
Another similarity can be found in the market dynamics. The online dating market is highly competitive. For location- and profile-based dating there are many other alternatives offering the same kind of service. Think about platforms like Happn and Badoo.
The differences
When looking at the differences between Lexa and Tinder. One can observe that Tinder offers full functionality with the additional opportunity to buy Tinderplus with unlimited likes. Therefore this platform model is based on a freemium model. On the other hand, Lexa offers you only the opportunity of the online network when you take a monthly subscription. Therefore, the lock-in with Lexa is a lot higher. So, to conclude Lexa has created a mono-homing platform structure, while Tinder is still in the multi-homing platform structure.
Furthermore each platform has another approach to generate potential matches between its users. Tinder’s algorithms make use of the location and mutual friends within Facebook, whereas Lexa lets its users fill in a form with personal questions. Subsequently, an algorithm will create matches based on your personality instead of location.