The rise and fall of Tinder: what really killed the app?

So dating app Tinder had been a cultural phenomenon and had changed the way dating had worked forever. In just a few years, it had gone from nothing, just an idea, to over $1 billion in revenue a year. And along the way had been changing the way people date, doing over 1 billion swipes a day very quickly within a few years of founding. But fast forward a few years and today, well, Tinder is going the other direction. Young people aren't interested in it, and 80% of people are saying, hey, like, dating apps actually suck. And many of them are giving up on them entirely. And Tinder itself is in huge trouble. They've had massive turnover of CEOs, switching over people 5 times in the past 4 years, just absolute total cratering. This video, which I'm recording in front of a former school, because later on I'll explain to you why school is important to this story. This video is about what went wrong with Tinder and what we as small business owners can learn about it and avoid making those mistakes. Ourselves. So stay tuned. If you're new here, my name is Michael. I record videos about what goes wrong in business. I share lessons that we can all take for our own businesses for that. So if you like that kind of stuff, do me a favor, uh, engage with this video and consider subscribing to my newsletter, which is linked right here. Uh, it's free and I send out content that will be very useful if you're an aspiring or current business owner. Plus it helps with my self-esteem. So the seeds of today's kind of failure of Tinder really harkens back to the very early days of what made it work. And in those very first days, Tinder actually came out of an incubator that was part of a media company called IAC. They did basically kind of the things that Silicon Valley dreams are made of. And the two founders early on, they went out and they did a lot of the things that worked for basically venture-backed startups at the time. They did things that didn't scale. And in fact, they famously took the idea of Tinder and went from college campus to college campus to get people to sign up. In other words, they basically did hand-to-hand combat early on to get the first customers for the thing. And these founders, they came and had this idea at kind of a perfect time for the perfect type of customer around the founding of Tinder. And it happened early, kind of 2012 when all this was going on. And who was dating the most early in 2012? Uh, well, it turns out those are millennials. And millennials are one of the most unique generations in the history of the United States, uh, and in the world for that matter. And there's some of the things things they really like as a generation. And one of those is, well, they want to kind of avoid some of the tougher things in life like rejection. And Tinder came along at kind of the perfect time. You see, old-school dating would have enabled you, like in my generation, I'm Gen X, having to go to a bar and walk up to somebody and talk to them about, you know, hey, are you interested in dating me? Are you interested? The cool thing about doing something like Tinder where all you're doing is swiping right and see who matches with you is that whole thing of fear of rejection, it's basically wiped out and kind of beautiful and came along at a perfect time for a generation who was ready to absolutely buy something of that kind of nature, the millennials. And the second thing that was genius about Tinder was it rode another wave that was coming through, which was the mobile phone wave. And at this point, we were starting to see things like Uber and other things that were entirely made possible because of mobile devices that we were all carrying at all times. And eventually it turns out we were all on them at all times. And in the case of Tinder, right, it rode this mobile wave. It basically turned dating into an app that you could play on your phone that was basically gamifying the whole process of finding a mate. It's absolutely genius. And it came across at the perfect time. And just a couple of years in, this idea and the implementation of it that included the two founders and a core team, including a lady named Whitney Wolfe, who will come back in and be very important later on, basically took this idea and ran with it. And it took off like wildfire. Basically, we had a situation where within a couple years, there were like 16 million matches a day happening on the app. Just absolutely crazy numbers, billions of swipes, and just a crazy kind of a level of adoption. And it absolutely was nailed. They had it all right. The average user was spending 90 minutes a day on Tinder. Just absolutely crazy levels of adoption. Woo! And before Tinder, online dating hadn't been not a new thing. Like, it existed. There were websites, Match.com and the likes that existed before, but nobody had really recognized the opportunity to take and gamify dating and to make it something really kind of an addictive mobile experience. And well, frankly, it wasn't possible before then because mobile wasn't a thing. And this is another kind of theme that you'll hear in the stuff on this channel, which is you have to pay attention to the changes in the world happening around you, and they often present opportunities. And in this case, the idea of mobile becoming pervasive, this technology change created a huge opportunity for these founders to build a business that wasn't new, right? It wasn't a new idea to help people find dates and to find mates. They just did it a different way that was now possible because new technology was around. And during this time, the founders in the business of Tinder started to figure out how to monetize. They allowed people to pay for super likes and promotion, all this kind of stuff. And frankly, like I was already married by all this time, so I've never installed Tinder. I'm not going to. It's not something I want to have to explain why it's on my phone. But they started to figure out monetization, and within a few years, by 2017, they were doing $40 million a year in revenue. And over time, they became the crown jewel for IAC, which had put all of their dating properties into one thing called Match. And the app kept doing so well that it became the crown jewel of Match, this division of IAC. Depending upon the year you look at, they were doing close to $1 billion a year in revenue. And nearly 60% of the total revenue and most of the growth for this Match division. And by 2020, you were seeing articles about how addictive the idea of Tinder was and the gamifying of stuff was going for people. And adoption just kept going up and to the right. As you can usually see with stories like this, just when things seem like they can't stop going right, that's when they usually stop going right. And precisely at this moment, cracks started to occur in the business model. And the first problem is that for an app like Tinder, whose whole monetization model is based on you using the app, there's a fundamental disconnect between the interests of the owners of the business and the users of the business. So why are people using Tinder? They want to eventually find somebody to be a mate and settle down with, right? That's the idea. That's what people use it for, hookups. Now, if you do that and you find somebody and you maybe get married or you find a long-term partner, well, you stop using the app and you stop paying. And that's not what the app wants. If you're Match and you own this business called Tinder, who needs to make money? And in the case of Tinder, there's a fundamental disconnect between the interests of the customers and their goal and what the interest of the owners is. And fundamentally, the owners want to keep people using it and paying, while the users are interested in finding a mate and stopping to be a customer. And you do this for enough years and eventually people start to figure out 'Hey, these dating apps aren't that interested in actually helping solve my problem, which is, you know, I'm looking for a partner. They're just keeping me addicted to the app and keeping me swiping.' And you do that for long enough, eventually word starts to get around that people start to realize, 'Well, oh, I'm not actually going to find success in dating on these apps. They're just going to create more frustration for me and take a lot of my money.' And a second thing started to go against Tinder, which was the competition started to heat up. So remember, this has become a pretty viable big business. They're doing a billion dollars plus a year in revenue. They're growing like crazy, and people are starting to, well, notice that. And so remember early on I mentioned Whitney Wolfe Herd, who was one of the early team members? Well, she eventually goes through a lot of drama with the Tinder team and inside of Match, and it's pretty acrimonious, and I'm not going to talk about that in this video, but she's one of a growing number of people who leaves the company and goes to start up upstart apps that go against the grain of what Tinder is about and start to try to carve up its market share. He started an app called Bumble, and Bumble's idea was that women could contact you first. Rather than men being the initiator of everything. And there were tons of variations like this that go on. Hinge is one where you're actually supposed to like want to find a mate. The app designed to be deleted and all this kind of stuff. And so they started to carve up the business of Tinder and try to basically, well, have some of it for themselves. And so besides the first thing going wrong, which was the idea of the disconnect between the users and the interest of the app, and the second one being that there's a lot more competition, Well, headwinds started to appear for the app with Tinder. Started to hurt the business. And by 2020, people had started to figure it out. Nearly 30% of the population in the US had tried dating apps of one sort or another. And it's interesting that that number was 30% in 2020. Guess when it was also 30%? 2019. And you have a situation where 8 years in, dating apps have been tried by pretty much everybody who was going to try them. And well, people were starting to figure it out. But wait, it gets worse. There's a fundamental problem also with dating apps, which is men in large— by and large, many of them are getting pretty frustrated by them. The number of percentage of times that women will swipe on people to approve them and match them is relatively low compared to men. And I'm paraphrasing kind of the stats, but it's like 3 to 1 more likely. Women are very selective and men are not. And what you have is an imbalance where a lot of men are unfortunately unable to show any kind of progress because they're not top 10% or top 20% men. And women are all waiting around to match with a few high-value, you know, high-in-demand men. And so again, this exacerbates— and this gender imbalance exacerbates a lot of the ideas of online dating, creating even more frustration with the customer base. And eventually that catches up to an app like Tinder. Today, 79% of people report being totally frustrated with dating apps. And anecdotally, like, I go talk to people and you see posts on social media and stuff like that, people are like, I'm done with the apps, I'm not doing these anymore because they suck. Turns out it's a pretty crappy way to find a mate. But wait, it gets worse. We talked about how Tinder came along at a perfect time for millennials to be there. Well, it turns out Gen Z is very different than millennials. They have very different priorities than millennials. By and large, a lot of them don't want to do some of the things that dating apps are really good for. One of those in particular is hookup culture. You know, I talk to a lot of people in their teens and early 20s now. The idea of basically having hookup culture facilitated by an app, something that was pretty prevalent and permitted and to somewhat even accepted by the Tinder kind of generation, they want to have nothing to do with that. I had one young person express to me the other day how they felt like that was kind of yucky. They didn't want to be part of that. And Gen Z, like, basically is coming up in a way where they're totally disinterested in the things that Tinder can offer and totally disinterested in the idea of dating or meeting somebody by an app. And there's another thing with Gen Z. They are a pretty anxious group of people, and they're not super trusting of things they see online. And horror stories of people having bad interactions or, you know, kind of dangerous people being connected to on the apps, doesn't help either. Uh, less than half of people feel like online dating is super safe at this point, and that trend is only getting worse. So combine all this together and suddenly you've got a disaster for Tinder. Revenue has stopped growing, and a once high-flying app, you know, isn't doing the same level of growth as it was before. And in 2022, Tinder actually lost 600,000 users in one of its important markets in the UK. Kind of an insane turnaround and reversal of fortune. And look, when management's companies stop seeing growth, a lot of times they start thrashing around trying to figure out how to solve for it. And Tinder was no exception to this rule. They started to go through and do things like crypto promotions and metaverses and all this kind of stuff that just kind of went away from not understanding the core problem of why the app has stopped growing, which is the world has changed underneath Tinder and Tinder still acts like it's 2012 and it's not. And similarly, the core of what the business was and the founders and all that kind of stuff, there was a lot of squabbling. You remember Whitney, who we talked about before? Well, she had complained and sued and settled for a payment. And the founders of Tinder, Sean and those guys, they sued Match as well to try to recover money for themselves and eventually settling with them for $441 million to kind of help them all get paid off in terms of the lawsuit that they had. And by 2022, the Match stock basically reflected kind of this underperformance. The stock dropped over 70% in 2022. And like most things that go wrong, what killed Tinder and what has made it struggle wasn't one thing. It was fundamentally a bunch of things together. One of those, not paying attention to what's going on with your audience and the world changing around you. Number 2, not having a stable team. Number 3, when things do change, thrashing around and kind of just doing crazy stuff like cryptocurrencies and NFTs to try to create growth and on and on. And ultimately those things together caused Tinder to just basically be something that missed the change and has struggled ever since they made those mistakes. But ultimately all kind of date back to the original decisions they made at the very beginning back in 2012. So the biggest sign of things going really wrong is that the head of the Match Group, the CEO, had to personally step in and is taking over the turnaround at Tinder with the idea of seeing if they can fix it. And ultimately we'll have to see. But again, this is all just kind of a lesson of when we have the same kind of challenges that I've detailed in this video, you either get to make the right decisions in face of those, or, well, you can make the wrong ones and end up kind of where Tinder has. All right. That's the story of Tinder. Lessons learned from that. Thanks for being here. What do you think? Let me know in the comments below if Tinder can make it or not. Also, if you've used it, let me know what you think of it because it's a fascinating thing. Back in my day, we just walked up to people and asked them out on dates. And then felt bad when they said no, or they gave us a fake number? Let me know what you think in the comments below. Thanks for being here. Talk to you next time. Oh, and I forgot to tell you why I recorded this video in front of the school. If you go back in history, before online dating, school was actually the number 2 way that people would meet their potential mates. They'd meet them at school. Number 1 was via friends. Just a different planet of how online dating's changed everything. They also met them at church and, uh, just as neighbors. So To some extent, it was an inefficient market. It was hard to find your mate, but it worked because, well, there's still another generation out there. So that's why.