More and more people seem to be swiping dating apps 'left'. These apps face market failure at two distinct levels. First, every successful 'match' reduces size of the market, thus shifting the revenue model of online dating away from its core purpose. Each couple that finds a committed relationship on one of these apps drops out, leaving behind a higher ratio of commitment-phobes. Apps fund ways of making money off the second set of people who linger. Second, the information asymmetry among parties in each 'transaction' leads to adverse selection. Since very little is known about any person on a dating app - each date being 'blind' - the market tends to lump the serious with the non-serious subscriber. This causes a market-wide underestimation of value.
With matchmaking endeavours having been around for some time now, neither of these market failures is fatal, so long as the failures are addressed. Competition ensures that subscribers caught in premium services traps will eventually move on to apps that remain true to their original premise - of finding matches. And adverse selection can be tackled through an externally applied system of information exchange, much like the market for assessed used cars. What, however, tends to happen in the online dating industry is that market leaders expand their dominance through acquisitions and technologies such as AI to tease out information about subscribers, leading to further customer alienation.
Hardly surprising, then, that online dating has such a low matchmaking ratio in the digital era. Other services such as shopping and banking have moved purposefully into digital commerce, but online dating struggles needlessly. Both competition and information-sharing can be improved through customer review. Subscribers will find ways of rating their apps as well as their customers. The market for online dating will fix its flaws in order to retain its relevance. Matchmaking and money-making are not as contradictory as the current state of the industry makes them out to be.
With matchmaking endeavours having been around for some time now, neither of these market failures is fatal, so long as the failures are addressed. Competition ensures that subscribers caught in premium services traps will eventually move on to apps that remain true to their original premise - of finding matches. And adverse selection can be tackled through an externally applied system of information exchange, much like the market for assessed used cars. What, however, tends to happen in the online dating industry is that market leaders expand their dominance through acquisitions and technologies such as AI to tease out information about subscribers, leading to further customer alienation.
Hardly surprising, then, that online dating has such a low matchmaking ratio in the digital era. Other services such as shopping and banking have moved purposefully into digital commerce, but online dating struggles needlessly. Both competition and information-sharing can be improved through customer review. Subscribers will find ways of rating their apps as well as their customers. The market for online dating will fix its flaws in order to retain its relevance. Matchmaking and money-making are not as contradictory as the current state of the industry makes them out to be.
