As online dating has become as easy as swiping your phone screen, companies that own apps like Tinder and Bumble have become Wall Street darlings. But nearly a decade later, these platforms are now struggling to live up to expectations, and investors have grown disillusioned and are eager for something new.
Match Group and Bumble — which make up nearly the entire industry by market share — have lost more than $40 billion in market value by 2021. Even at a time when apps are a staple on people’s smartphones, the two companies laying off workers and reporting low revenue increases.
Both companies have recently brought in leaders who have vowed to experiment with new features, hoping to capture the growth investors crave. But they face a critical hurdle: Not enough young people are willing to pay for dating app subscriptions — in part because younger daters are increasingly looking to platforms like Snapchat and TikTok to make connections — and it’s unclear what will change that.
Match Group and Bumble generate most of their revenue — about $4.2 billion for both companies last year — by selling subscriptions, with smaller revenue streams from advertising. But they are struggling to grow those sales. Match Group managed to keep revenue steady last year just by raising its prices.
As for investors, businesses need to get more new 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 scanning 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 you’ll find what you’re looking for.
“It’s really different to pay for access to people,” said Kathryn D. Conduto, a professor at Boston University who studies dating apps. “Paying for it makes it feel a bit forced.”
In the United States, 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 them, with men and higher-income adults more likely to pay than others, the survey found.
Millennials, the nation’s largest generation, were in their prime dating age when Tinder first launched, but more and more of them have gotten married in recent years, a decision that usually results in people abandoning the apps. Now the main users are from Gen Z, a younger—and smaller—demographic group with less disposable income. This generational shift is challenging 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 an instant message on platforms like Instagram or Snapchat. Dating apps are for casual use, “like a game,” he said.
“People use dating apps, but I don’t know anyone who pays for it,” Ms Wang said. In fact, he said he would consider it “bad” if he found out someone was paying for a subscription.
Jess Carbino, a former Tinder sociologist who is now a consultant and dating coach, said younger people “still feel the urge to use online dating apps, but they don’t necessarily feel the sense of urgency to find a partner.”
“I think what we’re seeing is clearly a demographic shift,” said Dr. Carbino.
Match Group and Bumble declined to comment on their plans to attract more paying users, pointing to public statements 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, by adding “personalization and flexibility” to the experience.
Bumble’s biggest competitor, Match Group, was an early player in the online dating market, starting with Match.com in 1995. The company acquired Tinder in 2017 and Hinge in 2018, beginning a period of growth that drew the attention of investors.
Tinder is the largest brand in the Match Group 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 swiping has worn off and Tinder has lost its momentum. The number of paid users on the app decreased by almost 10 percent in 2023.
Tinder’s struggles, and those of the broader dating app industry, are due in part to the format being essentially the same as it has been for more than a decade, said Zach Morrissey, an analyst at Wolfe Research, a financial research firm. But the way people date may have changed.
“This is a space where product innovation has been relatively quiet in recent years,” he said.
This is starting to hurt. Bumble, which went public in 2021, initially soared in value, but after a steady decline, its stock is now 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 that they can work things around, but it’s unclear what will solve their problems. “There is no obvious silver bullet they have to deal with,” Mr Morrissey said.
Both companies have had some leadership changes: In January, Ms. Jones joined Bumble, and Match Group promoted Faye Iosotaluno, the former CEO of Tinder, to CEO of the app.
Bumble announced last month that the company is laying off about a third of its workforce in the first half of this year. It also cut revenue forecasts for the first quarter, below Wall Street expectations.
“Demand for connection and love continues to be really strong – two billion single people around the world,” Ms Jones told analysts in February. However, the products that bring the whole set of experiences to make these connections aren’t serving users the way they want.
Match Group CEO Bernard Kim told analysts on a Jan. 31 earnings call that this year Tinder has “adopted a fail-fast mentality, a strategy that prioritizes rapid experimentation and testing.” Mr Kim took over the company in 2022 after previously serving as chairman of Zynga, the maker of mobile games such as Farmville.
He said the company will attract more paying users through marketing and that it is customizing its products in a number of ways, including introducing new à la carte premium features.
Match Group has also expanded its offerings, including an LGBTQ dating service called Archer and a service aimed at Latinos called Chispa. Revenue from these products is down 4 percent in 2023.
Mr. Kim said Tinder is completely redesigning the swipe feature and will launch new features this year. The platform is also pushing more users to be verified, a move aimed at improving security and helping 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 an opportunity for growth.
Elliott declined to comment on his discussions with Match Group. Mr Kim told analysts that he and the company had a “cooperative dialogue”.
Despite the challenges, the dating industry isn’t going anywhere, said Wells Fargo analyst Ken Gawrelski.
“Dating, in general, and love in general, is a basic human behavior,” he said. “So it’s hard to believe that it’s materially changing. But the way we date, or the way we match, is very much a topic in this conversation.”
