Home Technology Facebook introduces online dating to keep young users, market

Facebook introduces online dating to keep young users, market

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Facebook has the largest network of singles in the world, a mission to bring people closer together and, research has shown, so much data that it knows users better than their partners do. So when Mark Zuckerberg, chief executive, unveiled a foray into online dating last week, hearts may have soared.
And shares in the market’s main listed incumbent, Match Group, dropped dramatically. Commentators who were already questioning Facebook ’s social dominance now feared it would monopolise our love lives, too. Kevin Carty — a researcher at the Open Markets Initiative, which has called for regulators to break up the company after the Cambridge Analytica revelations — said Facebook’s data hoards gave it a “head start” over any other entrant to the market.Facebook stores data about what people do on its app and on other websites. Because dating apps such as Tinder and Bumble use Facebook’s platform to identify and connect people, it also theoretically understands how people are using those apps. Ultimately, the biggest threat to dating apps that use the Facebook platform is that the company moves to cut them off. But as Facebook is under public scrutiny for its market dominance, that seems unlikely for now. “We don’t want Facebook to expand into new markets, leveraging their monopolies into new monopolies,” Mr Carty said.
Having thrown off the stigma and become the main way to meet for many people, the online dating industry is an attractive market for Facebook. The number of people using dating apps is expected to soar in the next few years, with annual growth of 30 per cent until 2022, according to research group E-Marketer. Match Group is the largest online dating company with more than 45 brands including Match.com, Tinder and OkCupid. On Tuesday, it reported its highest quarter-on-quarter revenue growth since its initial public offering in 2015. Total revenue increased by 36 per cent to $407m. Net income was up more than 300 per cent to $100m, or 33 cents per share, partly because of tax benefits and exercises of stock-based awards. Tinder has dominated with millennials, with Match reporting that 3.5m people paid for the freemium app in the first quarter of 2018. But a new set of start-ups has tried to challenge what they call “swipe culture”, referring to the quick dismissal of dates by their photo alone. Newer alternatives include Bumble, which ensures women make the first move; The League, which shows fewer matches at a time, or Hinge, which tries to give people more context. Brandon Ross, an analyst at BTIG who covers Match Group, said Facebook’s move took investors by surprise. Many felt Match was insulated from pressure from Facebook, Amazon, Netflix and Google. “One of the reasons the stock traded at the multiple it did was it was one of the few places for TMT [tech, media and telecoms] investors that you said, OK, these guys aren’t really at risk of FANG [Facebook, Amazon, Netflix and Google] disruption,” he said. The business model for online data has evolved in recent years. The oldest model is a desktop site with a higher barrier to entry, such as Match.com, which charges about $40 a month. These sites are focused on finding people a serious relationship and tend to skew towards an older population. Then came sites such as OkCupid, which started on desktop and moved to mobile, offering a freemium version, with users paying for some features.

Tinder, which is focused on photos, was born on mobile and used Facebook to make it far easier to sign up. There were no long forms about your preferences, just ticking which photos to import from Facebook. Analysts estimated there were now about 50m people on Tinder, with a minority paying for services such as swiping back to review candidates they previously rejected. “At first it was completely free. There was no barrier to scaling and that’s why they were able to get to massive scale,” Mr Ross said.Facebook has tremendous scale: with more than 2.2bn users logging on every month, 200m of whom have their relationship status set to “single”. It will also be convenient to join Facebook dating, simply selecting photos to display and picking events and groups that interest you to narrow the search for a potential partner. In the days since Facebook announced it was entering the dating market, Match Group has lost almost a quarter of its value. Analysts at Jefferies downgraded the stock to “hold”, saying Facebook’s appearance on the dating scene created “near-term uncertainty” that is difficult to analyse.

Of all the Match Group sites, the original Match.com might be most vulnerable to disruption, argued Mr Ross. Facebook said it was targeting “meaningful connections”. It spans all age groups, and what it is offering is free, compared with Match.com’s $40 monthly fee.IAC, Match’s parent company, chose to respond to the threat with a jibe. Joey Levin, chief executive, referred to Facebook’s history with US election meddling. “Come on in. The water’s warm. Their product could be great for US/Russia relationships.” On the Match earnings call on Wednesday morning, Amanda Ginsberg, chief executive, said Facebook had always been a competitor — just like bars were a competitor because they offer a place for people to meet. She said that if Facebook restricts its dating feature to connecting people attending events and groups, it will not directly compete with Match’s business. But she admitted it is “really unclear” if it will keep to its original plan. Ms Ginsberg also noted that Tinder has become far less dependent on the Facebook platform since it introduced an option to sign up by SMS last year, with only a quarter of users now choosing to use Facebook to access the app, down from 100 per cent previously.Other apps signalled they might move closer to Facebook, not distance themselves. Bumble, founded by an ex-Tinder executive, said its top team had reached out to ask the social network about ways to collaborate. Hinge praised Facebook’s approach as another step in the battle against “swipe culture”. “It is gratifying to have one of the world’s biggest technology companies enter the dating space and draw so much inspiration from Hinge,” it said. Amanda Bradford, chief executive of The League, a dating app that focuses on educated young professionals, said she welcomed Facebook’s entrance. She said she believed it would be more focused on building better technology, rather than racing to monetise users as Match has.
“Facebook is validating that dating is a high-tech industry with really interesting and hard problems to solve. I don’t think Match looks at it that way,” she said. Amid the concerns about the social network’s dominance, there is also the chance that Facebook could fail. The company has done so many times before, from Snapchat copycat apps Poke and Slingshot to the Room and Paper apps. Brian Wieser, an analyst at Pivotal Research who covers Facebook, said it had hits and misses. “I don’t think you’d want to start with the assumption that it will be successful — nor rule it out,” he said.
Mr Wieser worries that putting dating next to comments from your grandmother might seem like “chocolate in the vegetable aisle” and make Facebook less attractive to people looking for dating. Facebook intends to keep the section separate, only showing a first name and connecting with people who are not friends on the app, but how separate it feels will depend on its design.Facebook’s biggest problem in dating could be part of its larger struggle: to convince users it is a trustworthy custodian of their data. Mandy Ginsberg, chief executive of Match, said she was “surprised” by the timing, given how much personal and sensitive data are kept by dating apps. Didier Rappaport, chief executive of location-based dating app Happn, said he was “confused” that Facebook decided to announce this just as it was being questioned on the data leak to Cambridge Analytica. “When we are talking about dating, safety and privacy are very important,” he warned. “You cannot make a mistake.”

Source:ft.com

Illustration photo: google images

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