As online dating became as easy as swiping a finger across your phone screen, companies that own apps like Tinder and Bumble became Wall Street darlings. But about a decade later, those platforms are now struggling to live up to expectations and investors are frustrated and eager for something new.
Match Group and Bumble, which account for nearly the entire industry by market share, have lost more than $40 billion in market value since 2021. Even in an age where apps are a staple on smartphones people, both companies are laying off workers and reporting lackluster revenue growth.
Both companies have recently hired leaders who have promised to experiment with new features, hoping to capture the growth investors crave. But they face a critical hurdle: There aren't enough young people willing to pay for subscriptions to dating apps, in part because younger people are increasingly looking to platforms like Snapchat and TikTok to make connections, and it's unclear what that will change.
Match Group and Bumble generate most of their revenue (about $4.2 billion for both companies last year) from selling subscriptions, with smaller revenue streams coming from advertising. But they are struggling to increase those sales. Match Group was only able to keep its revenue stable last year by raising its prices.
As far as investors are concerned, companies must convince more young users to pay.
“Wall Street loves subscription models because it gives them the convenience 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 has swiped on 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 feels really different to pay for access to people,” said Kathryn D. Coduto, a professor at Boston University who studies dating apps. “Paying for it makes you feel a little gross.”
In the U.S, 30 percent of adultsand more than half of adults under 30 use dating apps, according to a Pew Research Center survey published last year. About a third of dating app users reported paying for them, and men and adults with higher incomes were more likely to pay than others, according to the survey.
Millennials, the country's largest generation, were the prime dating age when Tinder first launched, but more and more have gotten married in recent years, a decision that typically results in people leaving the apps. Now top users are Gen Z, a younger (and smaller) demographic with less disposable income. That generational shift poses a challenge for the dating app industry.
Mandy Wang, an 18-year-old student at New York University, said she preferred to meet people in person or through a direct message on platforms like Instagram or Snapchat. Dating apps are for casual use, “like a game,” she said.
“People use dating apps, but I don't know anyone who pays for them,” said Ms. Wang. In fact, she said she would consider him a “pig” if she knew someone was paying for a subscription.
Jess Carbino, a former Tinder sociologist who is now a dating consultant and coach, said younger people “still feel the desire to use online dating apps, but they don't necessarily experience 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 CEO Lidiane Jones told analysts last month that the company would revamp the app to attract more users, particularly younger ones, adding “personalization and flexibility” to the experience.
Bumble's biggest competitor, Match Group, was one of the first in the online dating market, starting with Match.com in 1995. The company acquired Tinder in 2017 and Hinge in 2018, kicking off a period of growth that called 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 when it introduced a swipe feature, which is now ubiquitous on dating apps. But the novelty of the coup has worn off and Tinder has lost momentum. The number of paid users of the app dropped by almost 10 percent in 2023.
Tinder's difficulties, and those of the dating app industry in general, are partly because the format is substantially the same as it has been for more than a decade, said Zach Morrissey, an analyst at Wolfe Research, a research firm. financial research. But the way people go out may have changed.
“This is a space where product innovation has been relatively quiet in recent years,” he said.
That's starting to hurt. Bumble, which went public in 2021, initially rose in value, but after a steady decline, its shares now represent about a quarter of its IPO price. Match Group's share price hit a high of $169 in 2021. It now sits at $34, about a fifth of its peak value.
Match Group and Bumble have made some changes recently to convince investors they can turn things around, but it's unclear what will solve their problems. “There's no obvious silver bullet that they need to address,” Morrissey said.
Both companies have had some leadership changes: In January, Jones joined Bumble and Match Group promoted Faye Iosotaluno, Tinder's former chief operating officer, to CEO 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. He also lowered his first-quarter revenue forecast, below Wall Street expectations.
“The demand for connection and love is still really strong: two billion single people around the world,” Jones told analysts in February. “However, products that offer the set of experiences to create those connections do not serve users in the way they want.”
Match Group CEO Bernard Kim told analysts on a Jan. 31 earnings call that this year Tinder was “adopting a fail-fast mentality, a strategy that prioritizes experimentation and rapid testing.” Kim took over the company in 2022 after previously serving as president 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 several ways, including introducing new premium features a la carte.
Match Group has also expanded its offerings, including an LGBTQ dating service, called Archer, and one aimed at Latinos, called Chispa. Revenue from those products decreased 4 percent in 2023.
Kim said Tinder was completely reinventing swiping and would roll out new features this year. The platform is also pushing for more users to be verified, a move that aims to improve security and help women feel more comfortable using the app.
Activist investor Elliott Management, which previously led turnarounds 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 his conversations with Match Group. Kim told analysts that he and the company had a “collaborative dialogue.”
Despite the challenges, the dating industry is not going anywhere, said Wells Fargo analyst Ken Gawrelski.
“Dating, in general, and love, in general, is a fundamental human behavior,” he said. “That's why it's hard to believe that that will change materially. But the way we date or the way we find matches is a very important topic in this discussion.”
