Dating Apps, Stocks, and Network Effects
Deciding what to invest in often proves difficult, especially in the tech field. Oftentimes, stock options are not entirely settled when first entering the market, and take a while to reach that state of equilibrium where stockholders can feel secure in their investment. Dating apps are, of course, no exception to this rule, and can certainly be turbulent in the beginning. One exception in the case of dating apps appears in their interactive element, due to the security that is triggered by network effects.
Social media and general networking sites are more often than not reliant on the amount of users willing to utilize their platform, with more success coming from an increased amount of users. This situation, identified in class as a network effect, fuels the success and failure of socially driven apps and businesses. This same effect is what makes certain dating apps, such as Bumble, such successful platforms. As noted by Joseph Nograles in his article, Bumble ranks as the most popular dating app globally, which, in a world fueled by network effects, matters when it comes to stock options. Due to Bumble’s incredible popularity across the world, investors can feel assured because the amount of people willing to pay for Bumble only seems to be increasing, even during the pandemic.
The fact that Bumble persevered so successfully during COVID-19, when many other businesses suffered severe economic consequences proves especially intriguing. Right now, Bumble sits atop the it’s competitors in the pool of online dating apps, but what puts it in this position amongst its competitors is incredibly interesting and important to investors. A similar situation can be drawn upon for this example, as discussed in class, with Facebook’s original takeover of the social media sphere, causing the downfall of MySpace and other competitors. Bumble similarly stands above other apps, perhaps due to its own social considerations spurring further network effects.
Unlike other apps, Bumble stands out amongst its competitors due to a particular focus and attention on equality and the power of women. This puts Bumble outside of the realm of other dating apps, drawing a very particular crowd. Spurred by the drawing of this crowd, it is safe to assume that the downloading of this app spread amongst social clusters due to network effects. It is interesting to note that amongst those who use the app, Bumble’s unique take on the dating world seemed to only attract more users, rather than deter them.
In conclusion, while a lot of investors may be hesitant to invest in various new apps, Bumble should not be one of them, at least not for now. While Bumble stands out as unique in the field, and continues to draw attention from users globally due to network effects, the value of Bumble will only remain high. However, as seen in the Facebook example, investors should be aware of competitor apps, and monitor their success in the field, as increased success of another app could lead to a dramatic decrease in Bumble usage.