Tinder

Despite still facing the occasional naysayer, the Internet and dating have proved to be a match made in heaven. With consumers using the Internet more and more each year, demand for online dating services continues its meteoric rise. In particular, the ever-increasing popularity of smartphones has made mobile applications a booming business for dating services.

IBISWorld, a global business intelligence leader specializing in Industry Market Research and Procurement and Purchasing research reports, recently put together a comprehensive guide to the online dating industry's market size and growth prospects. By all accounts, the future looks bright for the industry's biggest forces.

InterActiveCorp is the one to beat. The largest company in the industry, IAC counts Match, OkCupid, and Tinder amongst its brands. The New York City-based company is expected to grab 27% of the estimated $2.2 billion market for US dating services in 2014, according to the new IBISWorld report. Analyst Jeremy Edwards predicts IAC's US Match revenue will rise 11.5% to $605.1 million this year, with operating income up 14% to $192.8 million.

Coming solidly in second place is eHarmony, a privately held company based out of Santa Monica, CA. eHarmony proudly dominates 13.8% of the US dating service market, IBISWorld says. The company’s projected US revenue for 2014 is $310 million, up 6.9%, with operating income up 9.6% to $35.3 million.

Spot #3 goes to San Francisco-based Zoosk, with 5.1% market share. 2014 has been a big year for Zoosk so far. The company filed for an initial public offering in April and IBISWorld predicts it will generate $114.2 million in US sales, up 24.5%, and operating income of $3.5 million. That's a nice change from a loss of $100,000 in 2013.

Finally, occupying fourth place, is dating service Spark Networks, with 3.2% US market share.

Altogether, the four largest companies account for 49.1% of US dating service revenue. The industry’s other winners are mobile dating (26%), matchmakers (14%), and singles events (7%).  IBISWorld expects the US dating service industry to grow at an annual rate of 4.2% from 2014 through 2019 - at which point it predicts sales will reach a whopping $2.7 billion.

"It is estimated that niche dating networks and services catering to the baby boomer generation will see the most growth," Edwards said. "In addition, revenue for the mobile dating market is expected to nearly double in the next five years, with rising smartphone adoption and new location-based features leading the market." 

Most of us know about dating apps like Tinder that can help you meet people. But what if you need help picking out a good restaurant to meet a date, or what line should you use to approach a woman at a bar? Don’t worry, there are apps for those things, too.

Apps can give you a wealth of creative ideas for everything from where to go on a first date to how to pick out a good wine. An app can be a lifesaver if you get lost on your way to someplace new, or if you need last-minute tickets to a concert. It can also be a good source for discounts, since dating can get expensive.

Following are some apps you must download today to help your dating life – just be sure to put your phone away once you’re on the date:

IAC has released its first quarter 2014 financial results. All in all, the company reports $740.2 million in revenue for Q1 2014, more or less on par with the $742.2 million in revenue of Q1 2013.

Websites revenue increased thanks to the acquisition of the “Owned & Operated” website businesses of ValueClick (which the company acquired in January of this year), the contribution of CityGrid Media, and growth at About.com. On the other hand, applications revenue decreased, primarily due to lower queries in B2B. Adjusted EBITDA decreased as well, as a result of lower revenue in B2B and higher marketing expense in B2C.

The Match Group – which includes Match.com, Chemistry, People Media, OkCupid, and other dating businesses – saw 9% growth in dating revenue (broken down into 7% growth in North America and 12% growth in International). Non-dating revenue grew 53%. Despite the higher revenue, driven mostly by increased subscribers, IAC’s profits declined due to a significant increase in marketing expenses for certain businesses.

Dating revenue for North America totaled $134.5 million in Q1 2014, up 7% from $125.6 million in Q1 2013. International dating revenue jumped 12% to $70.5 million in Q1 2014 from $63.2 million in Q1 2013. Combining both, IAC’s total dating revenue for Q1 2014 is $205 million, an increase of 9% from $188.9 million in Q1 2013.

The question now, of course, is what does the rest of 2014 have in store for IAC?

One major change that stands to make a huge impact on IAC's bottom line is the monetization of Tinder. Though IAC has declined to specify its exact ownership stake in the company, it has said that Tinder is now completely owned by IAC and Tinder executives, with CEO Sean Rad at the helm. The hugely popular mobile dating app is the hottest company in IAC's portfolio, but it doesn't yet generate any revenue. IAC has announced that 2014 will be the year that changes, though they've been vague so far about the exact way that monetization will take place.

The most obvious strategy would be to run ads on the service. In fact, it wouldn't be the first time it's happened. Fox used fake profiles to promote The Mindy Project, as did the USA Network program Suits, though they did not bring Tinder or IAC any revenue and a company spokesperson maintains that the campaigns were "strategic partnerships" rather than advertising.

Happily ad-free Tinder users should enjoy the experience while it lasts – with all the money-making potential the app packs, it’s probably only a matter of time before ads become the new norm.

What makes Tinder so damn special?

There’s certainly something that’s catapulted the dating app straight into the mobile stratosphere, but users, investors, fans, and detractors alike are still trying to put their finger on exactly what makes the app so popular. Carrie Yurie, a writer for the Huffington Post, had a chance to interview Tinder CEO Sean Rad after his talk at GigaOm Roadmap to hear more about what's going on behind the scenes.

Though Tinder seems simple on the surface, the app leverages a fundamental understanding of human behavior in order to optimize user experience. Rad says “We built…a flow that emulates interactions in the real world. What we’re striving to do with Tinder is understand what are the sort of social dynamics, physical dynamics, the flows of where you start with a request or desire to make a new relationship and how that progresses to you actually meeting that person, talking to that person and getting to know them.” Armed with an understanding of how human relationships are built in the real world, Tinder attempts to emulate that natural flow with its app.

One question that continually comes up where online dating is concerned is whether users are looking for serious relationships or just searching for short-term hook-ups. Rad thinks Tinder is effective either way – it all depends on a user’s original intentions.

“I think it emulates whatever you want in the real world,” he told Yurie. “So if you are young and you don’t want to be in a serious relationship, you are going to look for that on Tinder, or if you are older and desire something more serious you will look for that.” Ultimately, the younger generation that makes up the largest portion of Tinder's user base is all about going with the flow and dating without a specific outcome in mind.

Tinder has worked hard to appeal to its target millennial market. We all know how it works on the front end, but what’s happening backstage? According to Rad, Tinder observes a user's behavior in the app to determine compatibility. That's nothing new, but Tinder is able to take it to an extreme degree. “When you match with somebody,” Rad explains, “we look at the depth of the conversations you are having with your various matches. You might have a deeper conversation with one person of a certain characteristic or another person of another different characteristic.”

At the end of the day, Tinder prefers to keep things simple. The app is consistently grounded in real life, putting the focus on the human experience outside the digital realm. “It all comes down to what do people want to do, how do they want to do it, and how do we create a frictionless experience to allow them to do that?” Rad says. “Whether we are coming up with a feature or improving something, we always look at, first and foremost, how does that relate to some desire or some thought process that the user has.”

For more on this dating app you can read review of Tinder.

Is a company that's only 20 months old and has no revenue model really worth $5 billion? Spoiler alert: no.

IAC/InterActiveCorp recently bought back 10% of mobile dating service Tinder. Although it's easily the hottest mobile dating app on the market, it’s hard not to approach Tinder with a healthy dose of skepticism. $5 billion is, to put it bluntly, a completely insane number for such a young company.

According to the market research company IBISWorld, the entire online dating industry is worth just $2 billion. How on earth could a company that gives away its dating app for free be worth more than the entire dating industry? The answer is simple: it can't.

The number, first reported by Bloomberg and quickly picked up elsewhere, was based on the $500 million IAC had allegedly paid to buy a 10% stake in Tinder from venture capitalist Chamath Palihapitiya, but it's far from accurate. Sam Yagan, CEO of IAC’s Match Group (which includes IAC’s online dating companies) recently confirmed that a deal was made, but declined to comment further.

“I can confirm on the record that we did a transaction with Chamath, but this valuation is nowhere near the truth,” he told Forbes. Tinder CEO Sean Rad added that the Bloomberg report was “meaningfully incorrect.” Forbes found that an e-mail to Palihapitiya did not receive an immediate response, but noted that his statement on Twitter read “My Tinder sale for $500M is inaccurate. I sold my stake but value was much less. Thx @samyagan for official IAC pos’n. #wishfulthinking”

That being said, it's far too early to write Tinder off as worthless. Just because it has no revenue model to speak of to date, doesn't mean it has no value to investors. With 10 million active daily users, Tinder is fundamentally changing the way a massive number of people behave and engage with each other. That's bound to be worth something.

“Tinder’s really doing something that has been the Holy Grail for online dating: it becomes fun,” says Mark Brooks, a consultant to the Internet dating industry. Unlike traditional dating sites, surfing profiles on Tinder is fun, low risk, and not time-consuming. Users don't have to fill out tedious surveys and the swiping process practically eliminates the fear of rejection. Thanks to Tinder, mobile dating is exciting and mainstream, a major coup that the rest of the dating industry has never been able to figure out.

“IAC’s not valuing Tinder based on what it’s worth,” Brooks notes. “They’re valuing it based on what they’ll lose if they don’t own it. If Tinder can own mobile and own the younger demographic, then IAC is owning the future with Tinder. It’s an international phenomenon.”

Tinder just announced that it's reached a seriously impressive milestone: it’s made 1 billion matches between its users. That number was just 1 million in January 2013, making Tinder one of the most memorable success stories in online and mobile dating history.

In fact, Tinder has been so successful that even celebrities are getting in on the game. Although you might think it wouldn't be hard for good-looking, A-list of famous folks to find a date, it looks like they have a little more trouble on Tinder than we under-the-radar people would expect.

“We’ve had celebrities reach out to us frequently throughout the last year, sort of calling out various frustrations convincing users that they were actually who they are,” Tinder co-founder Sean Rad told TIME. “One impediment is that sometimes their Facebook accounts, which we pull information from, includes different names than their actual likeness… So [celebrities] were asking for the ability to modify their Tinder name and maybe have a verified badge.”

That's right – apparently all kinds of famous people want nothing more than to be able to swipe right, but their potential matches assume that the well-known faces in their profile pictures mean their accounts are fakes. Making it worse is the fact that Tinder requires Facebook account authorization in order to verify identity, and a lot of celebrities use fake names on social networking sites for privacy purposes. It's a combination that's almost guaranteed to make the average mobile dater send a profile straight to the rejection pile.

Rad and his co-founder Justin Mateen know first-hand what that feels like. For a while, they both listed themselves as the app's co-founders in their Tinder profile taglines. Again and again, they found themselves rejected by users who didn't believe they were telling the truth about their identities.

“It was awesome [to know celebrities are on Tinder] because it sort of validated our theories that everyone, even people of influence, need help forming relationships,” Rad said. “It’s important to us that our users know we are committed to authenticity on every level.” So with that in mind, Tinder is adopting verification badges like Twitter in order to confirm celebrity identities and allow the famous and non-famous alike to intermingle without fear of being scammed.

Of course, Rad won't disclose which celebrities are using the app, but he assures TIME that “These are A-listers.” Sochi Olympians admitted to using Tinder during the Games, and Lindsay Lohan told her Instagram followers know that she found her brother on the app, so you at least know that you stand a chance of meeting one of the world’s most talented athletes and one of the world's most famous redheads.