While most early dating websites operated as simple platforms where users could freely browse and contact members, newer sites have made matchmaking technology an important value proposition. But are the lovelorn better served for it?
It is therefore unclear whether profit-maximizing sites would strive for the most effective matchmaking technology, or deprioritize innovation. During most of the 20th century, Americans chiefly relied on friends — and to a lesser extent family and even coworkers — to meet their significant other.
Computer-assisted matching started as early asbut the biggest shift occurred in the mids, with the birth of the first online dating websites. Of course, a platform must be online dating market time enough for customers to join it in the first place. Small employers find suitable hires too quickly, leading to a very high churn rate.
To be clear, we are not saying that using inferior technology on purpose is a widespread practice in the matchmaking business.
Nevertheless, it is worth examining the inherent dilemma at hand, as it offers potential learnings for many other industries where firms operate as intermediaries. While analyzing whether biotech firms should invest in a cure, Goldman Sachs recently came across this issue.
First, there is the fact that users have a better chance of finding a good match in a larger community. Therefore, as a firm reduces its matchmaking effectiveness, more consumers are left unmatched as time goes by.
While these users may be disappointed, their continued online dating market time on the platform benefits the newly arrived consumers. As the pool of prospects grows due to lower churnit improves the experience for all successive users. In sum, while earlier consumers suffer from suboptimal matchmaking algorithms, lesser technology can engender positive network effects for a firm.
The second impediment to technology innovation is, somewhat ironically, uncertainty over consumer patience.
Take a hypothetical user, Suzie, whose seven-year marriage recently ended. Suzie is happy paying a small fee each month to meet new people while keeping her options open.
Market online time dating
Now consider another user, Abhi, freshly returned from a long overseas assignment. The million-dollar question is: Are there more Suzies or Abhis in the market? Fortunately, our model also describes a few factors that can incentivize firms to strive for better matchmaking technology.
The first one is competition. Sufficiently intense competition tends to reduce profit margins as it pushes down subscription fees. Better technology starts to be seen in a different light — as a potential source of competitive advantage.
By contrast, in the market time of competition, the very ability of the firm to charge more also increases its reluctance to part too soon with its valuable clients. If consumers have nowhere else to go, a less effective matchmaking technology may induce them to stay longer in a relationship… with the firm.
Another way to incentivize matchmaking firms to improve their technology would be to change the subscription-based revenue model to a commission-based model, in which matchmakers charge users based on successful matches. The commission-based model can align the interests of matchmakers and consumers.
Instead, in these and other cases where commissions are impractical, matchmakers could charge a sizeable, upfront payment to cover a longer subscription period. Meanwhile, consumers asked to pay a high fee upfront would be more likely to choose the matchmaker with the best technology, most especially if they are serious about link The One.
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