Tinder: Optimizing Lifetime Value | In Practise

Tinder: Optimizing Lifetime Value

Former Director of Finance at Tinder

Why is this interview interesting?

  • How Tinder approaches monetization between subscriptions and á la carte options
  • Differences between women and men engagement, spending habits, and behavior on Tinder
  • How Tinder approach optimizing ARPU
  • Balancing new user growth, conversion, and monetization of existing users
  • New feature and product opportunities for Tinder in video and geolocation
  • How Match thinks about building a portfolio of dating brands

Executive Bio

Drew Williams

Former Director of Finance at Tinder

Drew was one of the first 30 employees of Tinder and the Former Director of Finance. In 2014, he joined Tinder from Match.com and was responsible for building and optimizing the monetization plan for the rapidly-growing product. Drew spent 5 years at Tinder and was involved in the rollout of new features and plans like Tinder Plus, Gold and Super Likes. Prior to Tinder, Drew spent two years at Match Group as a Senior Financial Analyst where he was responsible for modelling the economics and lifetime value of users for the Match.com brand. Read more

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Interview Transcript

How did user behavior surprise you when you moved to Tinder from Match?

When you look at traditional dating sites, legacy dating sites, if you will, it was more of a pay to communicate, paywall type product, where you couldn’t even message someone or send an email without paying. It was also very heavy up front. You have to answer a lot of questions. You have to fill out all of these bio sections and it takes a while to get to actually interacting with someone. The user behavior of Tinder was so different because it was easy. It was literally one click, digest your information from Facebook, and you’re swiping on people immediately. One of the things that Sean Rad, the founder of Tinder always used to say is, we want to imitate real life as much as possible. When you go to somewhere, a restaurant, a bar, wherever it is, the gym, the grocery store, you don’t walk up to someone you see and say, “Hey, how are you? How tall are you? What’s your religion? Where are you from? Do you like dogs? What’s your favorite color?” You nod your head, or you give a wink. That was what Tinder was. You actually saw that come through in the user behaviors. The initial conversations were more whimsical, were more fun, were more, what do you like this versus that. If you’re on Match, they’re very serious questions; they’re very serious-minded people.

I’m not saying that one is better or worse, just the behaviors are very different. That was within the app. Outside of the app, if you put it into a real-world context, I called Tinder, back in the early days, the under-the-table app. What I mean by that is, a lot of times you would be out with friends socializing and people would be using Tinder under the table or secretly, if you will. They were enjoying it and having fun, but they didn’t necessarily want everyone to know about it. There was a stigma. That was for Match too, that was for most dating sites. People saw it as a negative thing if they were using a dating site. Tinder really broke through that. It said, look, online dating is becoming very popular, younger users are enjoying it; they’re using it like crazy. Let’s normalize this thing. That’s ultimately what happened.

How would you measure user engagement?

There’s a lot of different metrics to look at. The most important ones are just active users. You can break down active users into monthly, weekly and daily. Within those three, if you look at daily active users versus monthly active users, that is a metric that we call stickiness. How often are people coming back?

Active is just logging in once; there’s no messaging involved.

Absolutely. We look at daily and if people are logging in once a month, not a great thing. If they’re logging in 30 to 31 days a month, that’s a positive thing. We try to keep that number around 50%. That was a really positive number for us. If someone is on the app, you also want them interacting with people. The goal of this is to meet people and, potentially, find your lifelong partner, or whatever you’re looking for. We looked at swipes, matches, messages. You can read different things in all of those. Are they swiping enough, are they having a good time just in general? Are they making matches? Are we giving the right recommendations? Are we showing you the right profiles to get you a match? If you’re swiping over and over and you’re not getting a match, that’s effectively a useless product. Once you have a match, are you sending messages? Are you actually talking? Are you actually meeting people? Or are you just matching just for the match? You can look at all of these different things. You can look at all of the ratios. Basically, to sum it down, it’s do we have people that we’re engaging on the app? Are they engaging with other users and how often are they doing it?

How did you see the different ways in which women and men engage with the product?

They do engage very differently. I’ll start with this stat and it was fairly consistent for a long time; it might be different today. If a woman swiped right on a man, there was about a 40% chance that she was going to get a match. If a man swiped right on a woman, there was about a 5% chance, or less in certain situations, that they were going to get a match. That in itself, you can understand the difference. Really, what happens is women generally tend to take a little more time. They want to look through a profile. They want to look at all of your pictures. They want to read your bio. They want to try to get as much information on your as a person and personality as they can before they take that action. These are overgeneralizations, probably, but law of averages.

If you look at men, they’re generally going to right-swipe more than left, if not 100% of the time. A lot of men just want to see who likes me and then I’ll try to make a decision after that. What we see, in general, is that men message first. An app like Bumble has started to change the way people think about messaging first but, on average, men message first.

It makes complete sense that women effectively drive the whole platform and women engagement, probably, should be one of the most important KPIs for Tinder.

That’s right. We were very successful and good at creating products that were geared not toward just men, that would make women feel comfortable, would make women feel safe. You’re absolutely right. If you can drive women to your product, the men are going to come to your product also, with a dating app. That’s just what we’ve seen.

What was the split in payment? Firstly, what is the split in the actual users and then roughly the revenue split between the two genders?

Again, I don’t want to give anything too specific, and you could break this down 100 times whether it’s regional, age difference, all of that good stuff, but let’s say that, in terms of the distribution of men and women, you’re actually looking at closer to 50/50 than you would imagine. In certain places, it could be 60/40, 55/45. In some of your heavier areas where it’s men, it could be 70/30. It is much closer to half and half than you would expect. Now, when you look at paying, it’s what you would expect there in that men pay much more often. You can tie that back to the match ratios. Women don’t necessarily need all of these fancy enhanced products when they can get a match one out of every two swipes. Guys are going to get a match about one to every 10 to 20 swipes, so they feel a need to have these enhanced products. The distribution from payers is definitely weighted more toward men.

Were you almost looking to acquire women and then let the men upsell on the app with the swipes?

Not directly. That’s not how we thought about monetization. We knew, inherently, if you brought quality women or just women in general to the site, then men would follow behind. We didn’t necessarily target men with our monetization products. Really, we did try to create products that were as equal as possible for both genders. That was something that was very center of focus for us. No, we didn’t create that. It just so happened that the way that the product ends up proving out is that men will want to pay more because they have a less likely chance to match.

I’ll say this, when we did try to influence that a little bit, it was always toward women. Let me back up and say this, when we created monetization products, it wasn’t just to make money. We were trying to give value to the user as much as possible. Again, if there was a lean, it was towards giving women value. We felt that the value for women was underrepresented in a lot of these apps. It was geared more toward men and we didn’t want to do that. We want women to feel safe, we want women to feel comfortable, and we want women to feel like they can find a match that’s right for them.

When you first joined, how did you look at a building the first framework for monetizing the product?

When I joined Tinder, we were north of 10 million users already back in mid-2014, which was multiples bigger than the biggest dating app at the time. The one thing that concerned us was, are younger people willing to pay for a dating app? They have a lot more freedom. They’re not necessarily looking to settle down in a lot of cases. That was something that we spent a lot of time on talking to users, understanding what they would get value from, what they wouldn’t get value from? We had three main options to start. We could have a subscription product. We could have a one-time transactional product. Or we could have advertising revenue. We started looking at all the pros and cons of those three. Looking at today’s more modernized world where people are paying for Netflix, for HBO, for Spotify, for all of these things that are on a subscription already, we felt like that was probably geared more toward the younger audience.

To take that on the flipside, when you’re swiping through cards and your entire phone is a profile of a person, we didn’t want to introduce a full-size advertisement and really break the flow of that. It was disruptive, it was “not cool” to show advertisements back then. That’s how we landed on subscription. The conversation quickly turned to, where do you price it? The products that were out there at the time, your Match.coms, your People Medias, your Christian Mingles, those were all $20 to $30 to $40 a month. We thought, with a fast-casual type product like we have and the audience that we have, they’re not going to pay $20 and $30 and $40 a month. We broke it down into $10 and $20 for younger and older users. We even thought going into it that $10 may be a little bit high for younger users. We also did large tests for pricing, looking at elasticity regionally, age based. We ended up settling on the lower end of the pricing. Sneak peak, that has since jumped up closer to the $30 and $40 that Match was seeing back then. Initially, we kept it at a lower price point. Even in some countries, we had some prices as low as $2.99 to start.

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Tinder: Optimizing Lifetime Value

July 29, 2020

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