‘Tinder may not be worth $5B, but it’s way more valuable than you think’
http://www.wired.com/2014/04/tinder-valuation/
The mobile revolution has had an impact on essentially every aspect of human interaction. Today, people are constantly connected through mobile devices, and new mediums tailored specifically for a mobile platform are being released to the public continuously. It should be no surprise that the online dating world has started to adjust to this mobile revolution. Countless mobile dating applications currently exist, however, we wonder why people have started to use these mobile platforms. One such dating app is Tinder.
At any given time, approximately 10 million people are using Tinder (Lapowsky, 2014). After creating a profile by linking Facebook account, Tinder uses location features to match users with people in the area. If both parties “like” each other’s profile, a mobile chat thread is created, allowing users to interact with their matches. Users can choose up to six photographs from their Facebook account to be shown on their Tinder profile, and have the option to edit a small “About Me” section that any other user that views their profile can see. Facebook information is used to include users’ first name and age, as well as any “likes”, which are categorized more generally as “Interests”. Interests are only displayed on a profile if two users share them. In a traditional online dating environment, individuals have the ability to edit a thorough profile and take steps to present their best possible self. However, Tinder offer users a less extensive profile to manipulate. People who use online dating websites do so with the main goal being to attract a potential mate.
What makes Tinder successful, besides its business model, is its network effects as externalities. Based on lecture, this is a situation in which the welfare of an individual is affected by actions of other individuals, without a mutually agreed-upon compensation. As in our example, the benefit of users from Tinder is directly related to number of other people use Tinder. The larger number of users, the higher possibility that one would meet his or her Tinder match. Since this app is free, it is very easy to pass the ‘Tipping point’, and eventually drives up the demand to move to the second equilibrium. The network effect theory perfectly explained the reason that this app has only been released for 20 month, and yet so successful.