Something has gone terribly wrong with dating apps

Going out with somebody and realizing they aren’t looking for the same thing you are is one of the classic perils of dating. Fixing that problem has become a make-or-break issue for dating apps. 

It’s been a tough stretch for most mainstream dating-app companies. Match Group (which owns Tinder and Hinge) and Bumble have found it hard to meet investors’ expectations, and their stocks have taken a beating. Match got yet another reminder that it’s under pressure Monday as the Wall Street Journal reported that activist hedge fund Starboard Value has built up a 6.5% stake in the company and wants it to improve its growth and cut costs. If it can’t succeed, Starboard wants it to explore going private. 

Grindr, which caters to gay men, is seeing its stock rise, but it’s also having to rethink its identity to keep up momentum. Grindr has some advantages, like that it doesn't have to worry about the gender ratio of its users and that its primary demographic has more disposable income than others. But as it has grown, it has attracted users who are there for different experiences, which has made room for competitors. It’s now working to keep more people on its platform. 

Launched in 2009, Grindr has amassed a certain reputation: seeing the yellow mask icon or hearing its distinct notification sound is like a Bat Signal in the gay community. 

“If you were on Grindr, everyone knew you were there for a hookup,” George Arison, CEO of Grindr, said. “Over time, as more people joined us, those intentions got mixed up with other things.”

Grindr had its first-ever investor day last month, where it said it expected revenue to grow 20 to 25% each year for at least four years. In its most recent quarter, it grew revenue by 35% year over year. During the same period, Match Group grew revenue by 9% and Bumble’s grew by 10%.

A key way Grindr plans to achieve that growth is by helping users find others who are looking for the same type of relationship they are. It means making it easier for users to find more than a hookup. 

“Grindr’s bread and butter has been and always will be the casual relationship,” Arison said. But he added that young people — the largest opportunity consumer for any dating app — appear to be increasingly interested in long-term relationships. “Given those factors,” he said, “it is incumbent on us to serve those needs as well.” 

As Grindr works to address the misaligned intentions frustrating some users, other platforms that are more explicit about intentions have emerged. 

At the Wells Fargo TMT Summit in 2022, Gary Swidler, CFO of Match Group, was asked about the success of Grindr, which at the time had just gone public. “That demographic clearly is willing to spend money and does look pretty resilient,” he said. “So, it didn’t escape our notice, let’s put it that way… I do think there's room for more competitors in that market.”

By 2023, Match Group launched its own gay dating app, Archer. It lets users choose between “dating mode” and “hookup mode” and has had 700,000 downloads since it launched a year ago, the company reported in its most recent earnings report in May. For comparison, Grindr has about 13 million monthly active users. 

Archer appears to be directly targeting disgruntled Grindr users with marketing telling them to “break the grid in a tap” and TikTok ads noting the frustration of receiving requests for nudes from faceless profiles.

When Archer was in its early stages of development in 2022, Match Group realized users were fed up with the anonymity of the existing gay dating apps, said Michael Kaye, director of brand marketing and communications at Archer. 

“To me it really reinforced that queer love and connection should remain hidden and secretive,” Kaye said. “We wanted to be the complete opposite of that.”

Prioritizing meaningful relationships over casual ones has also worked well for Hinge, which has become the fastest-growing product in Match’s portfolio. The app is for people of all sexual orientations looking for serious relationships (it bills itself as "designed to be deleted”). Revenue from the app has grown 50% in the past year to $124 million, compared with 9% revenue growth to $481 million at sister brand Tinder.

Unlike Tinder, Hinge requires users to upload six photos and answer prompts, in the hope of weeding out those unwilling to invest the time to fill out a profile. “That whole experience is resonating in the current environment,” Swidler told analysts in May. 

And then there’s Sniffies. 

The map-based service, which caters to gay and bisexual men, has seen 40% user growth on the platform in the past year, a company rep said. Unlike Grindr, which has to abide by Apple’s App Store rules, privately held Sniffies is a website and can offer a raunchier experience. Users can make their profile photos explicit images, and it allows wider anonymity.

“Unlike other apps where the intent is often unclear — whether it's for dating, making friends, finding roommates, or socializing — Sniffies has a clear purpose: it's a place to explore your sexuality and fulfill your kinks and fantasies,” Eli Martin, CMO of Sniffies, said. “We aren't afraid to help our cruisers find what they want: sexual connections on demand.”

A Grindr user looking for a relationship may look to Hinge or Archer after receiving one too many unsolicited nudes, while a user looking explicitly for casual encounters may be able to cut to the chase more easily on Sniffies. Grindr wants to keep both on their platform.

Wall Street fell in love with dating apps a decade ago after Tinder introduced the swipe feature and it became a staple on many young people's smartphones. Match Group went public in 2015, followed by Bumble in 2021 and Grindr in 2022. 

It turns out the dating-app business isn’t so easy. Match Group’s and Bumble’s stock prices are each down about 80% since Bumble’s February 2021 IPO.  

Selling ads isn't a major part of any of their business models. The swipe dynamic on apps like Tinder and Bumble doesn’t appeal much to advertisers because users can swipe right through them, analysts say. It accounts for 2% of Match Group’s revenue, and Bumble does not specify it in its reports, saying it is “not a significant part of our business.” Grindr, which is a grid format, also doesn’t make much on ads because it shares minimal information with advertisers, so the targeting is weak, Grindr’s Arison said. 

To make money, they need to persuade enough users to pay, which all of them struggle to do. The companies need to maintain a free version to keep enough people on it for it to even work. Then they have to convince enough users to buy a premium version even though they can’t promise they’ll find what they’re looking for. Finding a partner requires time and effort, no matter how much you pay. 

And if the app succeeds in finding someone the love of their life, what happens next? They’ll likely delete the app. 

“Dating was never easy,” said Kathryn Coduto, a Boston University professor who studies online dating. “There have been other ways to date. None of these things were consistently perfect. If they were, we wouldn't need dating apps in the first place.”

Meanwhile, the app companies’ management teams are going through an upheaval. 

Activist investor Elliott Management took a $1 billion stake in Match Group late last year, according to FactSet data. By March, Match Group announced that it had signed an agreement with Elliott and added two new directors, Instacart CMO Laura Jones and Zillow cofounder Spencer Rascoff. Now the company is under pressure from Starboard, too.

Match Group’s CEO, Bernard Kim, took over in 2022 after serving as president of Zynga, the mobile-gaming company.

Bumble’s chief executive, Lidiane Jones, joined the company in January after leading Slack. She took over from founder Whitney Wolfe Herd. Jones led the relaunch of Bumble’s app this year, which includes badges that indicate the users’ intentions. 

Jones told analysts in May: “We've changed so you don't have to.”