Tinder

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.

Let’s face it, we human beings are visual creatures. When you meet someone new in person, what’s the first thing you do? Most likely, you look at him and decide on how attractive he is. Would you pursue him if you had an opportunity?

This type of superficial behavior is pretty standard. Most of us assess and judge others according to their appearance. The soaring popularity of apps like Tinder give us evidence that even in the digital age when we can get more information on almost anybody we meet if we just took the time to Google them – we prefer to say yes or no based on their looks.

Case in point: in the two years Tinder has been on the market, smartphone sales have gone up dramatically, which means more people have access to the app. The statistics speak for themselves. Tinder processes more than a billion swipes daily, matches more than 12 million people in the same amount of time (only a fraction of the overall swipes are mutual however), and though the company won’t release information on the number of users, sources say it could be as large as 50 million active users.

More important than people signing up for Tinder is the fact that they use it – as regularly (if not more often) as other popular social media like Facebook or Pinterest. According to a recent article in The New York Times, on average, people log in to the app 11 times a day. Women spend as much as 8 and a half minutes on it, while men spend 7.2 minutes (sorry guys). If you add it up, that’s almost 90 minutes per day.

But is the phenomenon of Tinder purely based on our basic animal instincts? Are we really only looking for someone who is physically attractive, or who embodies a physical ideal of some sort?

Maybe not. Many of Tinder’s users (mostly men) are looking to rogue apps like Tinderoid that manipulate Tinder’s database so they can “swipe right” to multiple profiles at once without even looking at a single photo. They are looking to increase their odds of matching with a woman, rather than looking for someone they find physically appealing. But what is the goal - is it just to hook up with more women? Maybe, but that’s another matter.

Tinder is a vehicle for meeting more people, and works a lot faster than your traditional online dating process. Maybe it’s appeal is not just about the photos, but instead due to the vast quantity of people you can “pick and choose” anytime, anywhere - and how quickly you can match and meet up.

The real question is: does it improve the overall dating experience? The jury is still out on that one.

IAC has released third quarter 2014 results. Revenue for the quarter totaled $782.2 million, up from $756.9 million in Q3 2013.

In the third quarter of 2014, consolidated revenue for IAC increased 3% year-over-year driven by solid growth at The Match Group and strong growth at Vimeo and HomeAdvisor. The Match Group revenue increased 12%, driven by 9% growth in paid subscribers to its dating websites. They now number over 3.6 million globally. Contributions from The Princeton Review and FriendScout24 – acquired on August 1, 2014 and August 31, 2014, respectively – also played large roles in The Match Group's success in Q3 2014.

Several other important segments also ended in the green, making Consolidated Adjusted EBITDA the dark spot in an otherwise-bright quarter. Third quarter adjusted-EBITDA was $135 million, down 18% from the third quarter of 2013. However, it was down only 1% when excluding approximately $14 million in net gains related to asset sales and the impact of around $13 million of acquisition-related differed revenue write-downs for the Princeton Review, FriendScout 24, and Slimwear.

At the end of 2012, dating site Hinge had recently launched and was overshadowed by the popularity of dating app Tinder. Unsure of how to proceed with less than $32,000 in the bank and only a few thousand users according to Business Insider, Hinge decided to bet big on the mobile platform.

"We made some business assumptions that turned out to be wrong," Hinge CEO and founder Justin McLeod told the news website. "We were like, 'This thing is running out of money, and we need to do something drastic."

In what seems to be a spur-of-the-moment business decision, McLeod and a couple of developers holed up for a few weeks and launched a mobile version of Hinge on February 7th of 2013. But the launch wasn't as smooth as expected - Apple at first rejected the app, which caused many sleepless night for McLeod and his company. They had planned a huge launch party in Washington DC where the app first launched, and until the morning of the launch party, there was no app available.

The launch party turned out to be a success, and more people signed up right after it than had signed up for the beta in all of 2012. It seemed Hinge struck a chord with users where Tinder left them feeling insecure - especially women. Hinge does not just match users based on location like Tinder does (which means a lot of random profiles get into the mix) - you only get matched through your circle of Facebook friends of friends, so everyone you meet on Hinge has some kind of link to your circle. This security has been particularly attractive to female dating app consumers.

McLeod is not about to sit still. He is grabbing a good portion of the dating app market share, and expects to compete heavily with Tinder for its core user base. But he's taking things one step at a time.

Instead of launching his app nationally, he has launched city by city, building up a solid user base based on demand before he moves into a new market. Also, potential Hinge users must be invited by current Hinge users - adding a level of exclusivity and security to the app.

Hinge is now one of New York's hottest startups. Although Tinder is much larger (it makes more matches per day than Hinge has in its entire history), McLeod's company is starting to steal some Tinder users. It has expanded to 20 cities including Los Angeles, San Francisco and Washington, D.C. It uses a waitlist to assess demand in other cities, then launches when a few thousand people have signed up.

"There is no shortage of companies that have tried to build what we've built," McLeod says to Business Insider. "But we're using the organic, city-by-city method, which I think is the biggest thing ... We're a utility to help users meet great people in the flesh as effectively as possible ...We want to be a house party that has a really good host."

Online dating sites like OkCupid and Plenty of Fish have had a free model for a long time, which has managed to expand their membership databases and make them tough contenders with paid sites such as Match.com and eHarmony. But now that free dating apps like Tinder have entered the picture and taken the dating world by storm, the paid dating sites have seen not only a decline in membership, but also in revenues.

Is online dating on its way out?

According to a recent article in The Economist, paid online dating sites have reason to worry. In the article, The Economist points out Cupid, who runs subscription-based dating websites such as Cupid.com, UniformDating.com, and LoveBeginsAt.com, announced a $4.9 million loss in the first 6 months of 2014, up 20% from last year. The number of members has dropped, too. At the end of 2012, Cupid’s sites had 113,000 paying members, but by June 2014, they had just 48,000.

While this is a disturbing trend for online dating sites like Cupid – which haven’t really taken off like other paid sites Match.com and eHarmony – it could weed out many contenders in the online dating market over the next couple of years. However in contrast to Cupid's earnings, eHarmony recently reported incredible subscriber growth and better earnings than they have seen in years, due to focusing on long-term relationships and technology that they market as extremely valuable for finding the “right” match.

But what about popular free dating apps and websites like Tinder and old-timer OkCupid? They have attracted users because of their easy set-up and accessibility. They have made online dating less intimidating, (although a little more sketchy according to some users). Are they responsible for the decline in companies like Cupid? 

Not necessarily. Even free apps and websites aren’t so free anymore.

There has been a shift for the free dating apps and online sites to offer “freemium” services – that is, additional features to the basic service but for a price. In the current online dating market, revenue growth needs to happen for investors to remain interested, and that means charging for services once the user base is built. Tinder recently announced that it will launch a premium paid service in early November, while the basic features of the app will still be free. OkCupid started with a freemium model a while ago, charging users who want to filter profiles according to user preferences, or to be able to review and see reviews of other members.

Still others like eHarmony are adding more personalized matchmaking services at a very high price – thousands per year – for those who want a relationship but would like someone else to do the heavy lifting. eHarmony has not reported numbers to see the success of this particular service.

So what does the future look like for online dating? One thing is for sure: free models likely won’t last forever.

At the recent Forbes Under 30 Summit in Philadelphia, Tinder cofounder Sean Rad made the surprise announcement that the company is launching a new premium service in early November. The upgrade will allow paying users more options beyond just swiping left and right.

This might make some Tinder fans uneasy. After all, the value of the app is in the sheer number of people using it. Will restricting certain new features to paying customers cause others to drop off and look for other cheaper alternatives for hooking up?

Not according to Rad. He says the premium service will include functions that Tinder users have long been asking for - including the ability to travel and use Tinder in multiple cities. Currently, you can only use the service locally, which means if you live in Los Angeles you can't look for hook-ups in New York.

But will people pay for this type of technology? Several hackers have taken advantage of Tinder's technology already and used it to create the very features users have been requesting and the premium Tinder will be offering - such as fooling the GPS-based technology into thinking you are in another city so you can scroll through profiles in multiple cities. Also, several hackers have come up with technology to "mass-like" profiles in mere seconds without having to manually scroll through, which is a very popular request from current Tinder users to increase their odds of a match.

And what about Tinder's current features - will new users have to start paying for basic services, or will some features be taken away to add to the new premium service? Rad says there will be no changes under the current free app, so users can rest a little easier. Forbes reported that people now swipe through 1.2 billion Tinder profiles a day, and that each day Tinder makes more than 15 million matches. The company needs to hang on to these users because its value is in the numbers. 

But Rad is trying to continue Tinder's growth, and that means it's time to add revenue - especially for investors like Barry Diller.  “We had to get our product and growth right first,” says Rad. “Revenue has always been on the road map.”

Forbes said the Tinder founder hinted at offering other types of services that go beyond dating, including features for travelers, though he didn't cite anything specific. Could we see a Tinder app that includes restaurant, car service, or hotel choices in the near future?

Clearly, Rad has big plans for his popular app. But we'll have to wait and see how the market (and their pocketbooks) respond. For more on this dating app you can read our Tinder review.