Legal

IAC, the company who is the majority stakeholder in popular dating app Tinder, no longer wants Sean Rad in the driver’s seat. As of late March, the company has named the new CEO who will be taking his place: Christopher Payne.

Payne previously worked for eBay as a senior vice president in the company’s marketplaces division, where he was responsible for the North American market. He also founded Positronic, a search technology company, which eBay acquired in 2008. Before that, he worked for 13 years at Microsoft, including heading its search unit, which was then called Windows Search Live.

“Christopher brings invaluable experience running consumer technology businesses that operate at massive scale,” Mr. Rad said in a statement.

But the change might not be completely embraced by Rad, who was embroiled in a very public sexual harassment lawsuit brought about by former employee Whitney Wolfe. They settled out of court for an undisclosed amount, and she has now launched a new dating app of her own that directly competes with Tinder. Rad will remain President of Tinder and retains a seat on the company’s board. According to reports, he will still be in charge of product and marketing, but Payne will take over everything else.

The spotlight that has been on Rad the past few years has not been flattering, and the most recent scrutiny has come as a result of the new premium service Tinder Plus, which is costing as much as $19.99 US per month for two additional features. Users have asked to be able to use Tinder in multiple cities, as well as to “go back” and swipe right on matches they’d previously turned down. The new service offers these features for a price – but if you want to just keep the basic free service, the company has also put limits on the amount of swiping you can do in a 24-hour period. This caused controversy when it launched in the UK, and the app’s rating in the iTunes store went down to one and a half stars as a result.

Another controversial decision was pricing for the new service, which is based on age. For users under 30, Tinder Plus costs $9.99 per month, but for those 30 and older, it goes up to $19.99, and even more in European countries. Rad says a lot of research went into the pricing, and he stands by what he says customers are willing to pay.

Tinder also plans to launch an ad product, but has not disclosed how this will affect the service or user’s experience. Until now, advertising revenue has come from product placement, but the app has a lot of valuable user information for marketing departments to tap into.

IAC hopes that Payne can refocus Tinder’s business goals and help it grow into a more profitable as well as popular company.

Read our review of Tinder to find out more about this popular dating app.

While Tinder is looking for ways to increase its revenue stream with new premium service Tinder Plus, it is steering clear of any advertising that affects its service.

Although the company has strategically lent its brand to clever marketing campaigns - like Gillette’s facial hair survey and Domino’s Pizza Valentine’s Day campaign – they have avoided advertising that would compromise the app experience for users. Namely, in-app advertising.

The Gap however, decided that Tinder was the perfect fit for its new social media-inspired ad campaign: #SpringIsWeird, which included in-app advertising on Tinder. The campaign featured fake “profiles” of the Gap logo with messages including “you’re invited to the pants party” and “we’re taking 30% off all Gap denim,” which would appear when users were swiping through potential matches on the app. The Gap also created a “micro series” on Instagram as part of the campaign.

The Gap announced their campaign to a reporter for AdWeek in a story he promoted on Twitter after it was posted. But Tinder never approved the campaign, and apparently did not know it was happening.

In a tweeted response to the AdWeek reporter, Tinder’s VP of Communications & Branding, Rosette Pambakian, responded: “@GarettSloane we will be deleting those GAP profiles. It violates our TOS. We did not approve this campaign and it is not an ad.”

Trishna Nichols, The Gap’s leader of consumer engagement and brand strategies, described the campaign to AdWeek before the fallout: “We did a little something special on Tinder. It's a guerrilla [marketing] idea where you'll see a profile with clever messaging in the spirit of love and the perfect match. It's the perfect fit for Tinder.”

Unfortunately, the campaign wasn’t a fit for Tinder, and The Gap had never received authorization to post the ads. Tinder’s terms of service state that the service is "for personal use only" and that users may not use the service or any content contained in the service for "advertising or soliciting any user to buy or sell any products or services not offered by the company."

Other companies have done guerilla marketing on the app before, such as in 2013 when USA Network was promoting their show “Suits.” Advertisers for the show posted profiles of the show’s characters on Tinder, and they were not taken down. But now that Tinder is gearing up for creating new revenue streams, it could be that they will be cracking down harder on this type of “organic” advertising.

For now, The Gap will be moving forward with the campaign via social media, releasing an episode a week of its micro series on Instagram.

Coffee Meets Bagel has been overshadowed by its more aggressive competitors (like Tinder), but lately has emerged as a serious, lasting contender in the dating app space. The company is showing its app has real growth potential by securing $7.8 million in a Series A financing round led by existing investor DCM Ventures. Quest Ventures and Azure Capital also participated in the round.

This round of financing is followed by the steadily growing success of an app whose founders like to take things slowly, testing what works in each market (starting with its launch in 2012 to New York and Boston markets) before moving on to the next. Recently, the company expanded from an iPhone-only app to include an Android app as well, opening markets further.

Coffee Meets Bagel sets itself apart by making the dating app experience feel more personal. People are connected through their social networks – through mutual friends on Facebook, for instance – so there is a level of assurance that you can avoid the scammers and fake profiles. Also, CMB users receive only one match per day, avoiding the whole Tinder hook-up potential. Each day, users have 24 hours to message their match, and then a week to set up a date before they vanish into the ethers. The point is to keep the conversation going, instead of just letting messages and matches accumulate while users see who else is out there.

While the design is game-like (you can get “coffee beans” by providing information or referring friends to the service, which in turn can be used to access additional features, like the ability to see who your mutual friends are, or to rekindle the flame with a match you neglected to message in time.) The company also teamed up in certain cities with local businesses to offer discounts to places you could go for a first date, although the growth of the app nation-wide has prevented them from doing this in more than a few major cities.

The additional funding will pay for engineers and developers to help build the core business so it can handle the projected growth in users. While the company hasn’t publicly shared their subscriber figures lately, the interest from investors is telling.

CMB has been compared to dating app Hinge and Are You Interested, which also focus on matches based on mutual social media connections.

The additional financing follows the company’s earlier participation in the TV series “Shark Tank,” where the founders proposed their business plans to celebrity investors in the hopes of gaining additional funding. While they didn’t get it from the TV show’s panel of judges, they have been successful in raising the funds elsewhere.

Just as Tinder’s founder Sean Rad was at the top of his game, enjoying the enormous success of his dating app Tinder after two short years on the market - and about to announce the new features offered in the latest version of the app - the board has decided to take away his CEO title.

As reported originally in a cover story for Forbes Magazine, Rad has been demoted to President, his management power greatly reduced for a yet-to-be-determined CEO who will take the reins of Tinder from him. According to Forbes, IAC decided that the company needed a more seasoned CEO (“an Eric Schmidt-like person”) leading it and taking it to the next level of a viable, revenue-generating business, as opposed to the young and green entrepreneur who brought Tinder to its current success. And also, preferably not a CEO tainted with scandal.

When Rad first launched Tinder, he did so with a lot of help from his friend and social trendsetter Justin Mateen. By approaching social influencers at universities (such as fraternity leaders), Mateen managed to get a lot of people using the app quickly, so the user base only grew stronger with time and more than a little PR.

Mateen and Rad built up the company together, but the scandal started when Mateen started dating one of their employees. When that relationship went south, the employee decided to pursue a sexual harassment lawsuit based on angry and inappropriate texts she had received from Mateen, and sued the company. She reportedly walked away with a little over a million dollars, but Mateen and Rad seem to be paying a higher price. Rad was implicated because he was the one who stripped her of her VP title and later “wrongfully terminated” her, according to the lawsuit.

But will all this drama derail Tinder itself? Not likely. The company continues to grow, and the revenue plan for its new premium service – Tinder Plus – rolls out this month with two new features for paying customers. The basic Tinder app will remain free.

The new version includes a travel feature called Passport, which lets users journey around the globe, swiping through matches in various cities instead of having to choose one based on their GPS location. The second feature is something users have been requesting from the beginning – an “undo” button that lets them revisit profiles they’d already rejected. Everyone deserves a second chance, right?

The company plans to launch another feature in the near future called “Places,” which will allow users who frequent the same places to meet over the app.

Will Tinder maintain the enthusiasm of its investors and the public at large after Rad steps down? Will customers be willing to pay for the benefits of Tinder Plus? We’ll have to wait and see.

The operator of a dating site for people with sexually transmitted diseases is facing a $16.5m pay out after losing a privacy case.

The site in question in PositiveSingles, a dating service for singles around the world with herpes, HPV, HIV / AIDS, hepatitis, chlamydia, gonorrhea, syphilis and other STDs. Back in 2011, an unnamed claimant sued the parent company, SuccessfulMatch, as part of a class action case.

SuccessfulMatch offers an affiliate scheme for new dating services as well as running a number of niche dating sites of its own. It offers both software and databases that contain the details of "hundreds of thousands of profiles" registered to its existing services – and therein lies the problem.

In the 2011 lawsuit, the owner of PositiveSingles was accused of sharing pictures and profile information from the site with other dating services, despite promising privacy and confidentiality. It was revealed that PositiveSingles is one of more than a thousand different websites that all funnel members' personal information into a single database that does, in fact, share that information with third parties.

The plaintiff acknowledged that upon completion of the registration page, members' are given a link to the Terms of Service which state that profile details – including details about HIV and other STD statuses - may be shared with other sites in the SuccessfulMatch network. By posting a profile, he said, users agree to those terms.

But he also acknowledged that few users ever read the Terms of Service, because...well...who does?

A jury found PositiveSingles guilty of breaking local consumer laws, fraud, malice and oppression. The company is now faced with paying approximately $1.5 million in compensatory damages and $15 million in punitive damages. In a hearing on October 29, 2014, the court indicated that it will issue an injunction prohibiting the illegal conduct and declared that three provisions of the Terms of Service are unconscionable.

This story follows a previous lawsuit filed by two women who attempted to sue SuccessfulMatch on similar grounds earlier in the year. A judge dismissed their claims in April after, saying they had failed to specifically allege they had actually read the Terms of Service they claimed were misleading. Despite the judge's dismissal, the women filed an amended claim and the case is still active.

The FTC has filed its first lawsuit against an online dating company, accusing UK-based JDI Dating of luring customers to pay money through fake profiles the company created.

A settlement between the FTC and JDI Dating prohibits the company from using fake profiles and requires it to refund more than $616,000 to customers. JDI operates 18 websites including cupidswand.com, flirtcrowd.com and findmelove.com.

According to a press release distributed by the FTC on the matter, JDI was tricking customers by offering them a free plan and allowing them to set up profiles and upload photos. Once customers completed this process, they began to receive messages supposedly from other users, but were unable to respond until they bought a paid membership. Membership for the sites ranged anywhere from $10 to $30 per month.

Unfortunately, the profiles that usually attracted paying customers were often virtually generated, so once new members were paying for their subscriptions, they weren't able to communicate with the matches they thought they were getting - because they never existed.

“JDI Dating used fake profiles to make people think they were hearing from real love interests and to trick them into upgrading to paid memberships,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

The prevalence of fake profiles has long been an issue for online daters, but this new lawsuit is finally shedding some legal light on the problem. Because of this, more online dating companies will probably be re-thinking their freemium services (attracting users with free services and later asking them to pay for certain "privileges" on the site.) Freemium services are often based on how many members join the site - numbers are key in the online dating world, because high numbers attract more people. The more valuable a company's user database, the more likely people would be willing to pay for their matches, because they feel that they are getting more choices.

In addition to generating fake profiles, the FTC found that JDI was also misleading consumers about payments. The company did not inform customers that subscriptions would have recurring charges until the customer canceled the service (which was tricky to find on the site), so many people paid for the site after they stopped using it without realizing it.

Rich added, “Users were charged automatically to renew their subscriptions – often without their consent.”

Again, this is a common practice among online dating sites. Several do have recurring charges, and it's often difficult to figure out how and where on a site to fully cancel services and erase your profile. For example, free dating sites like Plenty of Fish have kept profiles of members who are no longer using the service without clearly explaining to customers how to fully delete them. Although they are not charging for their services, it could be misleading to other daters.

The FTC lawsuit is a positive step in helping companies in the online dating industry clean up their databases and be more honest with the services they provide. We'll see if other companies are named in the future.