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.

File this one under “Not a surprise.” IAC/InterActiveCorp – owner of Match, OkCupid, Tinder, and more – has released its fourth quarter 2013 financial results, and things are looking good almost all the way across the bar.

IAC’s performance was strong in Q4 2013. Match closed up the year well with 12% revenue growth and 21% OIBA (Operating Income Before Amortization) growth in the fourth quarter. Total revenue for Q4 2013 was $203.9M, up from $182.6M in Q4 2012. For the year, Match grew revenue 10.5% and OIBA 16%, and the company predicts an even better year of growth in 2014.

After pulling out of European markets to focus on the United States in 2009, Match has managed to successfully grow in the US as well as across the globe. The company doesn’t hesitate to call itself “the unquestioned global leader in dating,” with 30 million active users and 3.4 million paying subscribers in 2013.

Core, Meetic and Developing revenues grew 4%, 8% and 69%, respectively, to $115.7 million, $58.9 million and $29.4 million. That growth was driven by an increase in subscribers and as well as the contribution of mobile app Twoo, which was not in the prior year period. On the whole, profits increased due to higher revenue and lower customer acquisition costs as a percentage of revenue.

The most interesting source of IAC’s potential growth is Tinder, the rapidly growing social dating app primarily owned by IAC. Tinder clocked in at 100M daily profile views in August 2013, and is expected to hit 1B daily profile views in April. That’s some serious swiping. Although Tinder's implied valuation today is low, it could prove to be worth more than IAC's current market cap of $6.4B.

Even for IAC’s traditional dating sites, mobile has been big. 50% of all communication for Match.com US is sent from mobile devices. At OkCupid, the number rises to over 60%. Those numbers were single digits as recently as 2010, and IAC says it has just barely scratched the surface where optimization for geo-specific features and mobile markets are concerned.

2014 promises to be full of mobile product enhancements across the board, so IAC expects to see even greater engagement and customer acquisition resulting from smartphones. These are the kind of changes that allow IAC’s portfolio to continuously thrive, despite the changing world around it. The future looks predictably bright for the company.

Bad news for Tinder fans: all those creepy people you've been avoiding on the app may now know exactly where you are.

It turns out the dating app suffered from a bug for most of last year that would've allowed hackers to determine the exact location of its users. And Tinder chose to cover it up until just a few weeks ago. The information security firm Include Security exposed the security vulnerability in mid-February, saying that anyone with the right kind of knowledge could "get the exact latitude and longitude coordinates for any Tinder user" provided that the app was running.

Hello, major privacy violation!

The company confirmed that "anyone with rudimentary programming skills could query the Tinder API directly and pull down the coordinates of any user." From that API data, it is then possible to triangulate the exact location of the user with a very high degree of accuracy. We're talking within 100 feet. And remember that part where they said "rudimentary programming skills?" So not only can creeps get incredibly close to you, they don't even have to be smart creeps in order to do it.

So much for the fun of all that mindless swiping.

It’s a bad bug, for sure, but before you go cursing the day Tinder hit the app-mosphere, Include Security also noted in an FAQ on its disclosure blog post that these flaws can be "common place in the mobile app space" and will “continue to remain common if developers don't handle location information more sensitively." Is that more comforting or less comforting? I'm not actually sure…

What I am sure of is that Tinder should not have failed to disclose the vulnerability when it was privately reported. Users deserved to know that the security of their location data was potentially compromised, even though the bug was fixed sometime between December and January.

Your questions now are probably "Has anyone actually exploited this?” and “Can I tell if someone has tracked me using this privacy vulnerability?" According to Include Security’s post, “there is no simple way to determine if this attack was used against a specific Tinder user." In other words, nope – you have no way of knowing if that slightly unbalanced-looking person you just rejected is about to come knocking at your door.

Good luck sleeping (or swiping) with that on your mind.

See a demo of the Tinder vulnerability at work:

“They both swiped right. (For professional purposes, that is.)”

That’s how TIME describes the meeting of Sean Rad and Justin Mateen during the first semester of their freshman year at University of Southern California in 2004. At the time they were both working on their own businesses, but soon enough they joined forces and became co-founders of mobile dating’s most impressive success story so far: Tinder.

In just 17 months, Tinder has become a phenomenon. “For the uninitiated,” writes TIME, “Tinder is a smartphone app that at first seems like a higher tech version of ‘hot or not.’ Users are shown photos of nearby potential matches and can swipe right to ‘like’ and left for ‘nope.’” It's now getting 600 million swipes per day from its obsessive 18-24 year-old userbase, and landed two of its founding team on the Forbes 2013 “30 Under 30” list.

Why did it become so big, so fast? Because traditional dating sites require extended periods of time and attention spent filling out and browsing long profiles, and in our speedy modern era we no longer have time for that kind of commitment. Tinder can be played – because yes, it is a game – in short bursts on the go, making it the most convenient way to meet your match currently on the scene.

Tinder snagged TechCrunch’s Crunchie award for best new startup on February 10, 2014, an honor it fully deserved for its mind-boggling success in 2013. There's no doubt that Tinder is the hottest thing on the mobile market right now, but the question is: can it maintain its success in the future?

“Nobody joins Tinder because they’re looking for something,” Rad told TIME. “They join because they want to have fun. It doesn’t even matter if you match because swiping is so fun.” So with fun in mind, the Tinder team plans to extend their reach beyond dating. The plan is for the app to evolve into a social discovery service, one that’s useful for meeting people beyond the romantic context.

“You’ll be able to eventually interact with friends for other purposes,” Mateen said. “So even if you’re in a relationship you’re going to be able to find good value in Tinder in the coming months.” The problems encountered when connecting with someone new are universal, whether you’re meeting someone with romantic, professional, or friendly intentions, and Tinder hopes to help.

Other plans for the future of the app include an updated communication system that goes beyond text messaging and further international expansion.

According to a recent study aiming to find the most desirable single in 2014, you'll have the most luck if you're 25 years old and rich.

The study pooled information from about 81,000 singles between the ages of 25-35 on the dating website Plenty of Fish, along with about 1.8 million messages to see what traits were the most desirable in both men and women who are online dating.

For both sexes, men and women in their twenties received more messages than those in their thirties. Women who were between 25 and 26 years old received the most messages, with a sharp decline once they turned 33.

It seems that both men and women prefer singles who make money. Women who earned between $50,000-$75,000 and men who earned between $75,000-$150,000 attracted more prospective dates than those earning less. And men who have law degrees are also likely to be the most successful in garnering attention online, with 33% more messages than the average single guy.

While data like this paints a certain picture of online dating, it's good to keep in mind that this is information gathered from only one online dating site and from just one demographic. If we were to look at online dating as a whole, the fastest-growing segment is singles over 50. And many people prefer paid dating sites like Match.com or eHarmony because daters tend to be more serious if they buy a subscription.

Free dating sites have always skewed younger, because many young daters aren't interested in serious relationships and want a chance to meet a lot of people. Paid dating sites tend to attract users of all ages who are on different levels of the dating spectrum - from casual to marriage-minded.

Twenty-somethings are also gravitating towards dating apps rather than online dating sites. Apps like Tinder, Hinge, and Are You Interested have been on the rise, mostly because of the ease of creating a profile and meeting people immediately, whereas most online dating sites require a little more effort and time before you're meeting each other face-to-face.

So while the POF study might feed into the stereotypes that persist about online dating (that singles prefer if you're young, earn a lot of money, etc.) - there are in reality a wide variety of singles who are online dating. Don't be afraid to explore a number of dating sites and see which one works best for you. This is the best time of year to do it, since more people than ever are online dating!