Why there are so many dating apps and why it's worth investing in more

Bill Alena · January 14, 2021 · Short URL: https://vator.tv/n/51a4
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Take a closer look at the dating market as an investor

Nowadays there are over 1,500 dating apps or websites looking to draw single men and women to their product, and to match them with one another. At the first sight, it seems to be enough, bearing in mind that there are hundreds of niche apps — the beard enthusiast app, the one which matches current and former collegiate and professional athletes, apps for every generation and so on. However, this is far from the truth. 

In 2019 Facebook launched a new dating app demonstrating the huge potential of the market. Covid-2019 just confirmed this statement — the number of daily active users has increased to 15%, the number of users entering into conversations on dating platforms increased by 18%, the average time spent on the dating platforms has increased by 14%. The trend will not turn up — according to Technavio, a leading global technology research and advisory company, the online dating services market is poised to grow by USD 3.56 bn during 2020-2024. 

So, if you ask me if there is any future in dating and when you should take a closer look at the market as an investor, I will answer: “Yes. Now.”

Why people prefer not to use Facebook and other social media to start relationships

As I mentioned, in September 2019 Facebook launched its own dating app called Facebook Dating. The idea was simple — to help two people start meaningful relationships through things they have in common, like interests, events and groups. As Facebook suggests, it takes the work out of creating a dating profile and gives a user a more authentic look at who someone is. In October Facebook claimed that 1,5 billion matches had been made so far in the 20 countries where the service had been available. It was first expected to launch in Europe before Valentine’s Day 2020, but was delayed after scrutiny from European Union regulators.

Facebook has a massive audience, knows a lot about people likes and dislikes, even what their friends and family like and dislike. Of course, it can use that massive amount of data to help you find the right match. The overall online dating industry is nearing $10 Billion in annual revenue.  Facebook sees an opportunity to capitalize on this still growing market.

When it was announced, it was obvious that Facebook was going to be a very significant and impactful competitor in the category. However, it yielded mixed results.

It’s possible for traditional social media outlets like Facebook and Instagram to create viable dating platforms within their ecosystems but it comes with many challenges. Facebook has attempted Dating in the past and has failed. Why?

From my perspective, I see two obstacles that Facebook would have to overcome. Firstly, in the app world people tend to use different apps for different things. The app world is designed for very narrow usage. Each app carries a very specific use case — that’s it. In this case, Facebook is used mainly to communicate and keep in touch with your friends, family and colleagues.  

The second concern is closely tied to the first. Dating is often a very private aspect of people's lives; they don’t necessarily want to share that experience with an entire community.  Just like in the real world, people tend to keep their early dating experiences away from their large social network of friends and family. That is exactly one of the reasons why there are hundreds of dating apps.

What’s going on dating apps right now

Landscape is large and offers a myriad of ways for people to find a significant other. What makes an app successful is the ability to something unique that fills a need for people’s dating lives. Some apps offer massive scale and speed, some offer a more detailed experience that takes more time to find the right person and engage. Others offer a more niche experience where you’re finding someone in a specific demographic. There’s an unlimited way these can be proliferated. In order to succeed you have to find a need and niche people want and develop a product that makes this process as simple and engaging as possible.

Nowadays there are two trends I’ve noticed in both start-ups and established platforms.  As the pandemic of Covid-2019 continues to prevent people from getting together in person we’ve seen the proliferation of video and gamification.  

Video in dating was always going to happen but the pandemic has highly expedited that experience. We’re seeing platforms emerge delivering everything from one-minute speed dates to a full virtual dinner-date experience. 

However, it’s difficult to really get to know someone in the virtual dating environment. Creating games in which people can play to both get to know and learn about each is something we’re also seeing a lot of in both startups and traditional platforms.

I honestly believe you will continue to see the development of these trends. Video dates have already become the new norm as 90% of video date attendees said they would do it again.

Besides, you will see the niche dating apps expand. While the larger platforms will continue to exist and be the dominant players, I expect a suite of more narrow platforms emerging allowing people to find a very specific partner.

Why today is the time to invest 

Thus, right now is absolutely the right time to invest in dating apps. The demand for an online dating experience continues to grow. As mentioned, the large players will continue to exist but there is always a market for new players. Too often people use the traditional platforms and don’t find success. There will always be a market for a new platform. Creating the right one is the trick!

For instance, Bristlr —the beard enthusiast app — leads the niche dating scenes in Michigan, New Jersey, and Pennsylvania. Its founder likes to compare types of dating apps to the classic bar scene: while mainstream dating apps are designed to appeal to the most number of people like chain bars, niche apps are more like the quirky cool bar your friend told you about. Find the right idea — or at least invest in an existing one!

Investing in dating is no different than any other start-up. We look for two core attributes. First and foremost, the leadership team. We need to make sure we have a high energy, passionate, strongly motivated team with an exciting vision. 

Second, is, of course, the product. We need to see a product that we believe can be scalable.  It’s the combination of team and product that drive any decision on whether or not to invest.

If I’m looking strictly at KPI’s there are a few key metrics that are most important to understand. The first thing we look for is growth rate of both users and revenue. Total users and total revenue aren’t what’s important, but the key question to ask is are they growing.

Once we understand the growth rate, we then look to understand how they’re growing. We look at marketing spend and how that translates to the revenue being generated. Essentially, Cost Per Acquisition (CPA) vs. Lifetime Value (LTV) is the most important formula we need to understand.

If you experience and are interested in investing in the dating ecosystem, I would recommend beginning by reading Global Dating Insights sites and attending their conferences. On a platform like this you can learn about everything going on within the space and by attending their events (they offer virtual events during Covid-2019) you will be able to meet many start-ups looking for investment opportunities.

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Bill Alena

Managing Partner at Dating Group VC Fund. Digital Media and Dating specialist with over 20 years’ experience.

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