The path of true love was not smooth, as Shakespeare once said. The fact that there are more than 8000 dating sites in the world dedicated to bringing people together is a testament to the fact that – even in 2021, using the most advanced matching algorithms – it is not easy to find a partner.
But while users of dating apps are often looking for that special someone, the top marketers of these apps need to attract millions of people. And like many networking companies, dating sites must face a dilemma: grow the network or increase revenue? Network business needs to succeed, of course, but to attract new users, dating sites often trade in revenue to grow their membership by exchanging access to premium features as a kind of commission for a conversion.
Unfortunately, the value of these referrals is not always clear. Although the algorithms of dating apps are good enough that in 2019, 39% of all US couples said they met online and in 2020, 270 million adults worldwide signed up for a dating site (almost double the number five years ago). ), most sites do. You don’t have a clear idea of how your profitable referred clients compare to the friends they invited to join the site. Ironically, given the data-driven nature of the business, dating app marketers generally have to guess whether new members recruited by friends who already belong to the site will be less active on the site and less interested in paying for premium features.
But this may change. As a dating site for young professionals, we’ve often encountered this trade-off too – and decided to approach it in an authentic, data-driven way that takes the guesswork out of balancing revenue and reach.
Freemium defect fix
Like many network companies, the site operates on a freemium model – free use of basic features, backed by users who pay for premium packages. But to encourage growth, the site has also encouraged users to introduce friends to the site in exchange for free access to those special features that ultimately aim to be the site’s profit center.
This creates a dilemma for most dating sites. Offering a social referral results in some referrals from users who have not paid for the premium features, effectively increasing the number of users in the platform at a low cost. It also attracts referrals from users who would have paid but if given the option would rather work for their subscription, resulting in more referrals but fewer paying users. Furthermore, the number of conversions that users are required to make before they can access premium features (called referral limit) can have important effects on users’ behavior. For example, if a referral ends up inviting people who are less likely to sign up for premium features, adding them to the platform could hurt community value in the long run.
We wanted to see if referral programs could be designed so that they could balance growth without reducing the profitability of their user base.