How does online dating make money?

You already know that dating sites try to get as many people to get on the platform as possible, then force them to pay to contact each other. But this is only the outside edge of their business model. Underneath this, online dating is overturning centuries of custom, and effectively enabling young women to determine the attractiveness of all men, AND older women.

how does online dating make money

Image: On the Internet everyone knows you’re a dog

My wife hates me saying that somebody, anybody, might be summarized as a number. But how often have you heard something along the lines of: that guy’s a mediocre five out of ten? Or that she’s a smoking nine out of ten? The idea that we might get rated for our looks drives my other half nuts. But hey, we’ve all gone to high school. We know it’s happening and we try damn hard to up our scores. From the unmistakable smell of male teenage desperation, (also known as Axe deodorant) to short skirts, we are all keenly aware of the power of attractiveness and the keen awareness of all around us to perceptions of it.

The caveat to everyone getting ranked is that most people’s rankings are subjective and personal. A programmer friend of mine Tony freely shares an idea for an app that plays on this. Each of us has individual tastes, each of us will look at someone and find them more attractive than everyone else. Maybe its red hair. Maybe it’s the year they spent volunteering in Peru. Why not have an app that can set up two people who are undervalued by society, but highly rated by each other? Everyone else thinks they’re sevens, but they see eights in each other. Pretty powerful huh? Go for it, make that app, and save us all!

The rise of online dating

Until then. We have to stick with the online dating apps we love and hate at the same time. Where everyone can be broadly categorized on average, by the average. Now getting categorized isn’t a new thing, but how people are meeting is changing dramatically.

how people meet online dating

Everyone can see the dramatic rise in the blue line of online dating in America. But check out that uptick of people meeting in bars. If you dig into that, turns out that uptick is driven by people initiating contact online and then saying they first met in a bar!

Let’s go back 60 years, back when the top 3 ways of meeting someone were (1) through family, (2) at school, and (3) as neighbours. No one is going to pretend that looks didn’t used to be important, but you’d be delusional to think that when your family are choosing you a partner, their number one criteria is how good they look in a power suit. It is simply not the case.

My parents met via family. My dad told his older brother he was keen to settle down. The older brother was friends with my mother’s older sister. Introductions were made and from there little acorns like me got planted. I haven’t worked up the courage to ask them if they fancied each other when they first met, but I suspect they did. But were looks the number 1 criteria? I really don’t think so. Right sex, right age, available, acceptable family. My guess is looks came in at number 5!

Who knows the truth, but limited opportunity sets and a limited number of potential mates, means looks have to have been less important. At most they were comparing the attractiveness of 3-7 people. Now if they were meeting as neighbours, you might even go as far as saying they were simply the two most similar people in a single road. That’s a comparison set of nobody. Looks did not come into it. You probably didn’t even understand the concept of having a choice.

Dodging the bullet of Tinder

I make jokes about how I missed out because Tinder happened after I met my wife. These jokes are b*/sh*t. Sure I missed out on comparing the looks of infinite women. The relentless endorphin surges of swiping right on lots of hot girls. But I also dodged the relentless judgement of me. Online dating has made looks the number 1 criteria in mate selection. You know that best match thing that sites throw at you? There is zero empirical backing to it. No one has an algorithm for matching two people outside of physical attractiveness. Best match is another way of saying you two seem to be logging in a lot and appear equally desperate.

There are two dimensions that we’re going to work on today. Sex and age. Here’s the distribution of men and women on okcupid back in 2010.

okcupid age distribution

Image: OkCupid

As you can see it starts off more women than men, then it flips to more men from age 23, then goes back to more women around 36. If everyone dated someone a similar age to them, the above chart would drive supply and demand and the situation would go from (early years) women chasing men, (solid adulthood) to men chasing women, (mature citizens) to women chasing men. That ain’t what happens. The reality is that people have age preferences and they are strong.

okcupid where women send online dating messages

where women send online dating messages

Image: OkCupid

The two images are heat maps of where men and women are sending their messages. The allowable match lines on both are where users are indicating their age preferences. Watch what they say not where they do i.e. the yellow area. Broadly women are saying they’ll go 6-10 years older and a few years younger. The reality is a reasonable bit wider. Broadly men are saying they’ll go 2 years older and a third of their age younger. For men they genuinely mean their upper limit and the lower limit is utter hogwash. They’ll cheerfully try it on with women old enough to be their grandchildren. Again the caveat, this is on average. Lots of us prefer outside of these tight lines – a good male friend of mine married a lady twelve years older than him. But on average, we gotta face facts, there is a lot of pairing off of older men with younger women. Only at about 35 do men stop messaging 18 year olds.

Online dating and the power of younger women

A long time ago a female friend of mine blasted me when I said that men get more attractive as they age. She said this was awfully sexist. I have taken on board her criticism. At the time I used the example of George Clooney, a man who very much seemed to get more attractive as he aged. Have you seen him recently?

george clooney and online dating

Image: George Clooney

Still more good looking than me, but more Father Christmas than GQ Man of the Year 1998. Simply saying men get more attractive as they age, and women get less attractive, is nonsensical.

No, what’s going on is that twenty-year-old women prefer thirty-year-old men and thirty-year-old men prefer twenty-year-old women. The age band for women is a bit above their own age. The age band for men is way below.

The detail of age and sex preferences

Let’s define cohorts. A cohort is a military unit of the ancient Roman Empire. It’s also a term used in science to split a large number of people into groups.

Female 18-28                     Male 18-28

Female 29-38                     Male 29-38

Female 39-48                     Male 39-48

Female over 48                  Male over 48

All of the male cohorts are messaging 18 to 28-year-old women. And importantly, the best ones aren’t getting immediately rejected. This is a power play, and whether they know it or not, 18 to 28-year-old women are ranking and setting the attractiveness of all men across all these cohorts. A quick anecdotal point is that women are mostly going for guys that are taller than them. Hence most men lying about their height online in the hope of blowing them away in person when they turn out to be a little shorter.

What is less obvious is that if 18-28 women are taking their pick of men, what happens to women in older cohorts? They are on average selecting on what is left. Their attractiveness is getting determined by the same 18-28 women. I recently read a piece of academic research on online dating, that interviewed a large sample of older men and women. Women would remark on the demoralizing effect of walking into a bar and being stood next to another woman, ten, twenty years younger than them. The hard truth is that if the younger woman takes the attractive older man in the room, then the older woman’s ranking has been slashed.

The sex effect is not one way. After I came out of university, I found dating pretty hard. Women really weren’t interested in me until after 26. At the time I thought my friends and I were simply hanging out in the wrong places. Now I know part of the reason is women my own age were looking for more successful, more mature men. I mention 26 – let’s be very clear the cohorts are very approximate buckets. Maybe you prefer 18-25 as the core bucket. Overall I can’t make a strong argument about where the boundaries lie, only that I know they are there.

There’s even grounds for arguing there are only three cohorts:

Female 18-28                       Female over 29                       Male

Heaven forbid I really hope that this is not true.

Young women in control of dating

Going back to our hypothetical average women. She is a queen in her twenties, and she is calling the shots. One hard data point we are seeing is that young people are having less sex.

online dating and less sex

This will be partly correlated with less alcohol. But my suspicion on part of it is that women are holding out for higher ranked men. The context is that when drunk, women have always aimed for higher ranked men, this isn’t new. And they would catch them, but probably only for sex. So aiming high in the past was a risky strategy, both physically and mentally. One aspect of online dating is dramatically lower risk for women in their twenties. It’s possible to screen much more aggressively. The dates they are going on are less likely to be in the same social circle. They are less likely to be geographically proximate. Women are still vulnerable to psychopaths, but only the most polished. The thugs are relatively easy to weed out. It makes sense that as women start going for guys a class up, that the average male, the less mature male, the poorer male gets squeezed at the bottom. Less sex on average may be a function of tighter selection by women.

Check out this post on Reddit:

online dating and women in power

Deadly right? And totally believable. My opinion will differ on this to many, however I think she should enjoy this as much as she can.

The reason is simple, it won’t last. I have seen estimates that once a woman turns 30, the size of her viable dating pool drops by 60% i.e. that there are only a third as many potential mates. As you get older there are less single people in that age group, and then these younger guys stop being interested. This is exacerbated by adverse selection – the science-y way of saying all the best guys are married or gay. Given this, there’s a pitch here that early twenties men should be going for early thirties women. This pitch is real but the reality of dating is that it’s the women who will make this decision, not the other way around. Do older women have it in them to go for fun and put up with the childishness? Probably not, because it should be obvious to all of us that they already have lots of experience of guys in their twenties! Which is more important out of fear of commitment and low status? I haven’t got strong proof, but my guess would be that twenty year old women care on status and thirty year old women care on commitment – and overall the result is the same, OLDER GUYS.

I’ve got an unfortunate harsh fact for men in their twenties. Literally for me ten years ago. You need to give up the on the idea that you are as attractive as a woman that is the same age as you with the same arbitrary looks rating and with a similar career level. You are equal on paper, but not in online dating. So what’s a guy to do? I leave you with this lovely story where a man could not share photos with his Tinder match, so he posted to a Twitter thread dedicated to her how to make Tortellini pasta. This is how to make yourself on the level.

I suggest you right click and open the whole thread in a new window. The guy got chops.

The business model of Tinder

  • Ensure that the cost of signing up is de minimis
  • Get young women to sign up
  • Empower them to have more control over dating than they have ever had before
  • Men of all age ranges follow them on to the platform in the classic example of a 2 sided network effect, where both Women and Men will go wherever the other congregates
  • Find ways to charge for essential but later steps of the dating process e.g. messaging or viewing individuals who have starred you

There is a negative to the dating business model. In theory, once you have two people matching off, they will fall off the platform. But then it’s about the long game – make sure they have babies and that’s the future customer right there!

Hey if you liked this, maybe you wanna find out how much money restaurants and takeaways make?

Yuen Lo

One Comment

  1. Welcome back Yuen! 2 years goes by fast. Bitcoin went from $20K to $3K to now $9K but the banks are still in charge. In Fintech, Robinhood has disrupted commissions. In politics, the world wants silly men like Johnson & Trump. In tech, Pokemon Go is still going and has almost made $3B. In transportation, Uber and Lyft still can’t make profit but Tesla figured out how to do it and is looking poised in Shanghai. People still love Starbucks, social media and Amazon.

    Fascinating article about how online dating is affecting relationship formations. It is about time ladies have more share of the leverage. Men need to up their game! Your initial reflections about mate selection now prioritizing attractiveness vs. more traditional factors is important. But, the reddit example gives hope that people are filtering for values that assist with long-term relationship success. Like most things in this modern life, relationship formation has drastically increased in complexity due to technological gains. Whenever these types of shifts occur, opportunity exists.

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