Dating platforms have revolutionised worldwide romance, but due to the ‘Platform Paradox’ these apps are largely local rather than global, Cambridge Judge Dean Mauro Guillén says in his latest blogpost.
by Professor Mauro F Guillén, Dean of Cambridge Judge Business School
Look up the term “network effect”, and obvious examples pop up to illustrate how larger webs of users can boost usefulness and customer satisfaction: e-commerce (eBay and Amazon), ridesharing (Uber), social media (Facebook and Twitter) or delivery (Just Eat in the UK, DoorDash in the US).
Yet as Valentine’s Day approaches, we shouldn’t forget how the network effect also applies to matters of the heart: the reason people flock to successful dating apps like Tinder and Match.com is that people in the romantic marketplace for whatever reason (casual, lasting or something in between) seek a broader variety of potential partners to choose from (or vice-versa), just as someone selling a long-idle drum kit on eBay seeks to reach many potential buyers.
As Smokey Robinson and the Miracles sang in the classic 1960 Motown song Shop Around: “Don’t be sold on the very first one”, because “You better shop around” – and the network effect can facilitate that.
Network effect far from perfect and far from global
But how does the network effect work in practice when it comes to dating platforms? Far from perfectly and far from globally, because while platform and app-based dating in many countries has now far surpassed meeting potential partners through friends or other means, online shopping around for love doesn’t normally mean shopping the world over.
Whereas some sectors operate on a national or even global scale when it comes to potential buyers or users – think of an online auction of an easily shippable item like a watch, or a vacation home in New Zealand that can rented by a tourist from anywhere – the customer base of an app like Tinder is essentially local, because users aim to find someone in the same city, region or even restaurant.
So at the risk of pouring a cold shower over 14 February, this upcoming most romantic of days, the huge popularity of dating apps presents an opportunity to explore a topic that I find stimulating: how digital businesses can succeed in our fast-shifting global economy, something I termed The Platform Paradox in a book published last year.
Any platform needs to understand its true network effect
Here’s that paradox in a nutshell: while platforms can be global and many aim to be so, in fact most digital platforms are not global but rely instead on a more local or narrow audience.
Any platform – whether for dating or ride-sharing or vacation rentals – needs to understand what the true network effects (plural) are for its product or service in order to grow. These effects can be between pairs of users (known as dyadic networks) or can instead be multiparty networks; both dyadic and multiparty networks can be unidirectional, bidirectional or multidirectional depending on who can initiate a transaction. Then there are both one-sided networks in which all users are in the same category (such as a telephone directory) and two-sided platforms in which users are differentiated (such as riders and drivers in ride hailing services).
Intent of the users is key to dating apps
For dating platforms, the network effect often revolves on the intent of the users. Casual dating platforms usually rely on purely local network effects, because people use apps such as Tinder to find someone in the same vicinity very quickly. Matchmaking platforms like Match.com (which is owned by the same parent company as Tinder) are usually targeted at people seeking more lasting or serious relationships, or perhaps marriage, so the network effect is likely to be more national because users are casting a wider net over a longer time frame.
While Tinder has recently ranked as a market leader in the US, UK and some other markets, this success is not universal owing to Tinder’s mostly local network effect. Among some other parts of the world, Badoo leads in most regions of Latin America and the Middle East, Lovoo in parts of central Europe, Frim in Russia, Momo in China, and so on. The same pattern occurred with Uber in ride sharing, as the company was outgunned by local rivals such as Didi in China and Grab in parts of Southeast Asia.
The pandemic saw a slowdown in growth of new users and willingness to pay for dating platforms (not surprisingly, those aiming for more serious relationships or marriage through matchmaking apps pay more per month than those seeking a fling through casual apps), but a spike in engagement by existing users as people were stuck at home during lockdowns.
As the world hopefully emerges from the pandemic, dating apps are surely here to stay – and they have clearly revolutionised romance: in the US, online is the most frequent first meeting route, replacing friends as the leading matchmaker. And while there is little difference in breakup rates between couples who first met online or offline, a recent study found that meeting through friends actually increases the rate that couples go their separate ways – an outcome that may in itself seem to many like a bit of a paradox. Dense social relationships are not necessarily conducive to long-term, successful couples.