Revenue Model

General – Introduction

Dating apps have become key aggregators due to their proliferation and international
popularity. And yet we possess remarkably little knowledge about these apps. Some
questions that spring to mind are: how is economic value attributed and extracted from
dating app data and how is it monetised? Through our research, we seek to provide answers
to these questions, answers that explain why dating apps are so lucrative. We do so through
the examination of three apps. These are: the first is Grinder, which is owned by Kunlun, a
Chinese gaming and internet services firm; the second is Tinder which is one of the many
diverse array of dating apps owned by the publicly listed company Match Group; and finally,
Bumble, which has borne witness to its fair share of acquisition attempts by Match group and
is a dating app wherein women initiate the first contact.

Grindr
Brainchild of founder Joel Simkai, Grindr was launched in 2009. By 2013, Grindr’s revenue
structure took the shape of a freemium business model. To elaborate, this model follows the
twofold process: first, users were granted unrestricted, but ad-supported, access to the app’s
basic features free-of-cost and subsequently, introduced an enhanced version of Grindr –
Grindr Xtra as a paid service with no ads. The subscription-based model proved to be a
success with Grindr’s users. Statistically speaking, the ratio of revenue was 75:25, with the
former generated from subscribers and the latter from advertising (Wilken, Burgess and
Albury, 2019).

Economies of datafication
An analysis of subscription preferences among users revealed that the preferred
subscription length was clearly the 12-month option, out of the other options of one, two and
six month. This, coupled with end-user analytics, revealed a promising tale – one that
executives at Grindr were keen on, Grindr was transforming from a standalone dating app to
a broader social platform. Or, in the words of Grindr Vice President of Marketing, Peter
Sloterdyk, Grindr was becoming a “lifestyle-oriented ‘utility’, a way for users to discover and
navigate the world around them” (Wilken, Burgess and Albury, 2019). The decision to
reposition Grindr as a lifestyle platform was compounded by a desire to control ‘data pours’.
In other words, control not only the end-user data flowing into Grindr’s servers but also the
vendors access to said data. The desire to own both the server and client side pipeline is
evidence of the maturation of the app’s business model. This however is not unique to
Grindr. Our research notes that as platforms mature they metamorph, of sorts, into data
firms whose business models centre on their ability to both harvest and repurpose data. The
rationale behind this is because platforms can set higher advertising rates in exchange for
rich user-generated geodata. In essence, the data comes to form the main saleable asset for
the owners of platforms such as Grindr.

Tinder
As briefly touched upon previously, monetisation opportunities for dating apps tend to fall
primarily into three categories: subscription plans, single purchases and advertising. To this
end, we understand that there are limited means by which revenue can be generated from
end-user data, despite it being the ‘core’ asset. The combination of restricted revenue
options and a preference for freemium business models means that the question of how
monetisation is to be achieved does not typically yield novel solutions amongst dating app
participants. How then do these services distinguish themselves? The answer lies in the
implementation of business strategy coupled with subtle differentiations in revenue
generation methods. Brands within Match Group are a case in point. To elaborate, brands
are aligned according to one of two categories: the first being ‘hard paywall brands’ such as
Match, OurTime and Meetic; the second being ‘soft paywall brands’ like Tinder. That is not to
say that these apps do not enjoy similar free- or a la carte features. Instead, what this means
is that there is great variation with regard to prime subscription drivers. The former, hard
paywall brands, subscribe with the sole intention to communicate with other members whilst
the latter, invest in the flexibility surrounding custom searches. These include expanded
usage opportunities such as Tinder’s swipe right feature in conjunction with consumer insight
functionalities such as the ability to see who has liked or viewed your profile. From this it can
be gathered that these two brand categories have not only distinct pricing structures but also
attract different levels of marketing support. Soft paywall brands like Tinder receive a limited
marketing spend and are more reliant on viral, word-of-mouth growth. In contrast, hard
paywall brands attract users via on-and-off-line marketing spend.

Bumble
Having discussed the aforementioned, it should come as no surprise that the Bumble app
operates via a ‘freemium’ model, at least when it initially launched in 2015. Currently,
however, 10% of users pay for premium features including ‘SuperSwipes’ that allow users to
‘heart’ profiles that they find especially attractive; and, ‘Bumble Boost’, a monthly
subscription which offers users the opportunity to search for other users who have ‘liked’ the
subscriber’s profile, and rematch with ‘expired connections.’ The company has adopted an
‘omni-channel approach’ to the business, diversifying to add a ‘friend-finder’ function
(Bumble BFF) and a platform that matches business contacts, including would-be business
mentors and mentees (Bumble Bizz). However, as in the footsteps of the dating app players,
at the time, the ‘swipe and match’ functions represent Bumble’s core business.

Between the years 2017 and 2018, a paradigm shift occurred – Bumble was re-branding
from a dating app to a ‘networking app’, or rather as Bumble likes to put it ‘a social
networking app that facilitates dating’. But why, you may ask? In the words best explained by
Bumble’s head of brand – Alex Williamson, “We like to think of Bumble as the inverse of
Facebook. Where Facebook is the place where you can connect with the people that you
know, Bumble is the place you connect with the people you don’t know” (Wilken, Burgess
and Albury, 2019). To drive this point home, Bumble simultaneously decoupled it’s user sign-
up and identity verification processes from one that required a linked Facebook account. In
other words, Bumble was shoring up its boundaries of data-ownership and market share.
This is a not-so-subtle nod to the monetisation of user data, as seen in the cases explained
earlier.

What emerges from our discussion is that despite the different stages of development and
operating scale of the three firms, Grindr, Tinder and Bumble, there is a common thread
between them in terms of revenue generation. First, all three of them rely in some manner
on the monetisation of user data; and, second, all of them have adopted a ‘freemium
business model’ -– a mix of ad-supported ‘free’ services and paid subscription services. With
only subtle variations on how these arrangements play out determined by the target markets
and particular platform specificities, how does Tinder emerge as a leader?