How Dating Apps Contribute to the Demographic Crisis

The consequences of monetizing love!

The dating apps are under a lot of pressure. Falling revenues, people not wanting to pay, and Gen Z seemingly uninterested have led to collapsing stocks and circling activist investors. Their only path forward is monetization - but what does that mean for the demographic crisis?

Dating apps are a puzzle. Like most apps, they solve a matchmaking problem¹. Doordash matches customers to food. Uber matches the customers to the drivers. Dating apps match the customer to love… right?

Sort of.

According to the Census Bureau, about 47% of the US population has never been married (about 117 million people), and almost 60 million people in the US² (about 3 in 10 people) have used online dating services. That number skyrockets if we do a bit more age bucketing - almost 60% of people under 50 have used the apps.

Dating apps promise love. The entire premise is pretty straightforward (and if you don’t know what they are, some might call you lucky). Jadrian Wooden described the apps as the opportunity - to “break free from geographic constraints and match with someone who shares your interests and preferences.” It’s algorithmic matchmaking.

Or more simply - “Hey, you might find someone who you would never have found using our special algorithm (which sometimes might work against you if we can make money on it) but at least promises a base set of occurrences of potential love. Thanks for PAYING!”.

It works for a lot of people!

But the stocks look like this right now³ - and that could change how the apps operate in the future, with potentially unexpected consequences.

Bumble (blue line) charted against Match Group (green line) and Grindr (purple line).

Let’s start from the beginning.

The History of Dating Apps

I’ll keep the background on the apps brief. Dating apps began with Match.com back in 1995. There had been predecessors, but Match was taking advantage of the rapid rise of the World Wide Web and the shifting trend of people waiting later to marry. Match was a byproduct of the online classifieds section - and people loved it. 

The dating industry continued to grow, and Match decided rather than compete, they would buy. They purchased OkCupid, a top competitor, in 2012. This began the reign of what I like to call the Match.com Mafia. They were ruthless in acquisition and single-mindedly focused on monetizing love and love lost. Match grew but the stigma of online dating was still a problem.

But by the early 2010s, dating apps became the norm.  More and more people had smartphones, and the game of love became one that you could carry in your pocket. Grindr, a geosocial app for gay men, launched in 2009. The dawn of dating apps was upon us - and the big three were created.

• Tinder: They launched in 2012 (and Match purchased in 2017 for $3b) was the first time that online dating was ‘cool’, scientifically speaking. Tinder made it fun - and that’s why more than half of people between 18-29 years old have used a dating app - because it’s fun. 

• Hinge: They were also created in 2012 (purchased by Match in 2018), was meant to be the ‘relationship-minded’ app popular with the Millennials and Gen Z. It is a mobile-only experience with a higher level of ‘intent’ - it’s not a pure hookup app like its competitor Tinder. It’s an app that’s designed to be deleted.

• Bumble: They came along in 2014 - a novel app designed for women to swipe first. The company was founded by Whitney Wolfe Herd, formerly of Tinder, and quickly became popular. They went public in 2021. Match.com did not buy them because Bumble had Badoo money.

So in terms of market players, there is Match, Bumble, and Grindr. Match has a portfolio of 40+ companies, including Tinder, Hinge, Match, OkCupid, Plenty of Fish, Meetic, The League, and a bunch of other “Insert Name Here” People Meet type apps like Petpeoplemeet - with almost 15 million paying users across the world.

Match separated from their parent company, IAC, in 2020, and both Ryan Reynolds and Wendi Murdoch joined their board. They had a market cap of $30 billion then.

Now, their market cap is $9 billion. Match reported earnings on July 31st and posted slowing growth - Tinder is up 1%, and payers are down 5%. Hinge is still doing quite well - up 48% on the quarter (due to growth in users and the a la carte options, which we will discuss later).

But there is stagnation across the board, and their stock prices reflect that. Match now has three activist companies going after it - Elliott Management⁴, Anson Funds, and Starboard. Match needs to make money or perish.

Bumble is down over 90% since their IPO. On August 8th, Bumble shares fell 38% at open - the largest drop on record. Their earnings report showed that they were nervous about their future (much like their users), had missed revenue, and are totally rethinking their entire strategy.

This is the kicker: Match and Bumble reported slow revenue growth for their most recent quarters, at 4% and 3%, respectively. People no longer want to monetize their loneliness - but that’s the plan dating apps have for them.

I Give Up

Many people aren’t finding love - and seem to be giving up. The number of monthly active dating app users worldwide has dropped from 287 million people in 2020 to 237 million people in 2023, according to the Economist.

Part of the reason that people are ‘giving up’ is that people aren’t that interested in dating anymore, as shown in this graph from Pew Research. 50% of singles are tapped out of the dating market. According to Morning Consult, 79% of women are uninterested in using the apps in the future. This is unsurprising. The US is already an individualistic society, and being single is more affordable than ever (however, married people do better economically).

To be clear, the apps work for some people.⁵ According to Pew Research, 1 in 5 partnered adults under 30 met on a dating app. It’s a brilliant way to get outside of a social bubble, to meet people you might have never crossed paths with, and to get practice dating (and find love!) There is a reason that 10% of adults met their significant other on the apps (rising to 20% for under-30s) - and it’s because they can work.

Freemium For Love 🤨

However, the dating app business model is rapidly shifting, and as discussed earlier, it’s not working anymore - it is a mismatch between user and platform. The consumers and the company have competing goals. The dating apps want you to continue paying into perpetuity because your subscription (and subsequently, your inability to find love) is how they make money. Morgan Stanley, always business-minded, wrote this on the apps opportunity to monetize:

A focus on getting users who are already paying to increase their spending could be one tactic toward growth, as analysts believe the top 1% of dating spenders remain heavily undermonetized. Additionally, apps could target payers who can't afford monthly subscriptions or other premium features with more a la carte features or weekly subscriptions. Even the holdouts who prefer not to pay at all offer a large revenue opportunity via advertising. 

You are mere dollar signs to the company. But you want to find love!

As Planet Money described, Hinge has a “freemium” model. If you really want to play the game of love, you have to pay up for things like ‘Roses’ which are a way to signal to someone that you think the algorithm did a great job putting them in front of you. You can also pay for unlimited likes, see who likes you, set more preferences, boost visibility, etc. Gamify the game.

Almost 30% of Americans have paid for dating apps - spending almost $20 a month on a la carte purchases (the Rose, the Superlike) or subscriptions (Hinge+ is $100 for 6 months, allowing users to like an unlimited number of people, see who likes them, blah blah. The League, a fancy app, costs $400 for 3 months).

This also leads to the apps pooling people you’d likely match into a category they want you to pay for (Hinge Standouts, for example) which degrades the user experience.

And of course, it’s not all bad. Part of the appeal of paying is that it shows you’re more serious about dating. You’re paying for a premium service - just like we would pay for Lyft or Spotify, as CBS News highlights. Some see it as an investment. Some see it as time curation. Some see it as extractive.

The Convenience Contradiction

Dating is not easy. Every human being is infinitely complex, and algorithmic matchmaking can simplify the complexity for pairing purposes, but it is a large task to tackle!

Numerous articles have been penned on the problems with dating apps and the problems with hookup culture. ‘Tinder and the Dawn of the Dating Apocalypse’ was written almost ten (!) years ago about how Tinder was morphing modern dating into pure hookup culture.

All sorts of words tie into the various articles - “immediate gratification,” “choice paralysis” “the millennial lifestyle subsidy,” and “zero-sum mindset” are just a few.

I think there is also something called ‘the convenience contradiction.’ We believe things should be far easier (and cheaper!) than they are. So when things become hard (or expensive!), it gets frustrating.

Dating apps, like most things that seem easy and cheap but in reality are hard and expensive, are a byproduct of the ZIRPy world of easy money and fast checks. The appification of society fueled by a land of low interest rates and herd mentality.

The apps are struggling now because they have to prove profitability, and are experiencing ‘platform decay’. Turns out, it costs money to grow, free money isn’t free, etc. Now, everyone is no longer grinning, laughing, and chanting “growth at any cost!”. Now, they just ask about margins with a single tear running down their cheek.

Finally, there is a demographic shift hidden in all of this.

• 41% of online dating users over 30 have paid for the app - but only 22% of under 30s have paid.

This is important. The youth aren’t (1) paying and (2) they aren’t really dating - only 56% of Gen Z adults and 54% of Gen Z men have been in a romantic relationship during their teen years, compared to over 75% of Baby Boomers and Gen Xers according to the Survey Center on American Life.

So what happens next?

Demographics

There is a convenience contradiction here too - where love feels like it should be easy. It is easier to give up when you feel like you’re failing at something that is simple.

• Gen Z is not down with the apps - only 21% of college and graduate students use dating apps once a month, according to an Axios/Generation Lab survey. This age group is shrinking too - the 18-29 year old age group has fallen from 53 million to 52.6 million

But the data gets interesting here. A Guardian survey⁶ highlighted that 63% of men under 30 are single, compared to 34% of women⁷. There are all sorts of complications with this. As the Guardian points out, sure, the men aren’t dating… but also aren’t hanging out in general. According to a USA Today survey, only 21% of young men received emotional support from a friend within the past week, versus 41% of women.

So I think we have two problems.

1. The foundation for relationshiphood (housing, childcare, beginner wages) is exorbitant. Insurance costs, especially auto and housing, are skyrocketing. This is what Talmon Joseph Smith calls ‘structural affordability’, and it’s challenging to form a solid foundation for a relationship if there is no underlying foundation. The average age to leave home in the 1990s was 23 - now, it is 26. The labor market dynamics have shifted to where it’s tough to get a job if you’re looking for one right now.

2. We have an aging population. The fertility rate is 1.8, far below the replacement rate of 2.1. By 2040, 1 in every 5 Americans will be 65 or older - up from 1 in every 8 in 2000.

The US population is aging. We need either 1) more legal immigration or 2) more opportunities for partnership and babies.

Social security, Medicare, Medicaid, and eldercare are all going to become bigger issues. Eldercare is an average $5k a month! The sandwich generation, the Gen X’ers, and elder Millennials are dealing with childcare costs (up 32% since 2019) and aging parents. 43% of Baby Boomers have no retirement savings and will need help from an expanding workforce.

According to Morgan Stanley, the number of 65+ singles is forecast to expand from 26.3 million in 2021 to 34.4 million in 2030. Prime dating app targets - but what about the next generation?

Dating apps are a beacon of hope - but when a lack of love becomes monetizable… what does it mean for the demographic crisis?

The Economic Value of Loneliness

Some countries help newlyweds out with housing and childcare costs. It’s very tough to build a relationship if you’re not secure in a job, living with your parents, and can’t save money. It’s structural affordability all the way down.

But the other end of the extreme is things like the $ 190k-a-month dating app assistant. The Tinder Premium $500/month model. People who are looking for love and can pay are the perfect candidates.

And dating apps (and apps in general) have changed the way we interact with one another.

• It is now it’s possible to avoid the risk of asymmetric commitment entirely.

• There is now a seemingly endless optionality and infinite pools of potential candidates.

But when we think about dating in light of the demographic crisis, we have to ask what these business models mean for our future. People are able to find love on them, that’s for certain.

But with the stocks cratering, Gen Z uninterested and smaller as a cohort, one can only imagine what the payment models and dark UI/UX will look like as they attempt to revive shareholder value.

There are two paths forward

1. Meeting people in real life. Running clubs have gained popularity because you get to gut-check someone’s choice of shoes and assess beyond an algorithm. The dating apps have invested in IRL experiences, so this is something that people are thinking about.

2. Unmonetize the apps (lol). Part of it could be… federalism. Japan has a government-controlled dating app. Part of it could be an acknowledgment that we exist in the online space in a major way, and the digital world is now a place we go, versus an extension of reality. Who even knows what is going to happen with AI. Like this chart is a trend, and it probably won’t change anytime soon. But maybe we shouldn’t charge? It’s a big ask.

But we have a rapidly aging population and are facing a demographic crisis. The dating apps are not at all at fault for that - that is an issue that would take a few more newsletters to unpack.

To be very clear, this is not a “everyone must have babies” post. It’s highlighting the parallels between dating apps and the broader societal demographic problem.

But the monetization of love has consequences, and we have to give people avenues to meet one another (not just to address demographics, but for broader vibes too) - and literally, love is the only thing that can save us.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

1. Real kyla's newsletter fans will remember when I did a whole write-up on the Gale-Shapley algorithm and analyzed my scraped dating app data

2. The rub here is that these don’t necessarily have to be single people. For example, Grindr has 13 million users, and Hinge has roughly 20 million. Both apps cater to people with a wide variety of dating intentions (and some who might just be sneaking around)

3. This piece is very much focused on heterosexual focused dating themes. As you can see in the graph, Grindr is doing GREAT. They are having their own problems as an app, but the focus of this piece is more on the thematics created by Match and Hinge and Bumble.

4. Elliot Investment Management took a $1 billion stake in Match to push them to make more money, which is more of a going turbo mode situation than a single tear, but the metaphor stands. 

5. It did not work for me, despite my best efforts for about 4 years. I met my boyfriend on a group bike ride through a mutual friend (thanks Mitch).

6. The methodology of this survey was weird because people might define ‘partnered’ differently - so women might be like “yes we are dating!” and the guy might be like “that’s someone I see once a month” etc. Surveys!

7. The numbers are similar for people who identify as LGB - 62% of LGB men and 37% of LBG women