Dating apps have hit a wall. Can they turn things around?

When online dating became as easy as swiping a finger across your phone screen, the companies that own apps like Tinder and Bumble became Wall Street darlings. But about a decade later, these platforms are struggling to meet expectations, and investors have become frustrated and eager for something new.

Match Group and Bumble – which make up almost the entire industry in terms of market share – have lost more than $40 billion in market value since 2021. Even at a time when the apps are a staple of people’s smartphones, the two companies are laying off workers and reporting lackluster revenue growth.

Both companies recently hired leaders who have pledged to experiment with new features in hopes of delivering the growth investors crave. But they face one crucial obstacle: Not enough young people are willing to pay for dating app subscriptions — in part because younger daters are increasingly turning to platforms like Snapchat and TikTok to make connections — and it’s not clear what will change there will bring in.

Match Group and Bumble generate the bulk of their revenue — about $4.2 billion for both companies last year — by selling subscriptions, with smaller revenue streams from advertising. But they are struggling to grow that revenue. Match Group was only able to maintain turnover last year by raising prices.

As for investors, the companies need to convince more young users to pay up.

“Wall Street likes subscription models because it gives them the comfort of recurring revenue,” said Youssef Squali, an analyst at Truist Securities.

By paying, users can unlock features like unlimited swiping and the ability to see who has swiped on it. But for many people, that’s not enough: unlike other paid subscription services, like Spotify or Netflix, dating apps can’t guarantee you’ll find what you’re looking for.

“It feels very different to pay for access to people,” said Kathryn D. Coduto, a professor at Boston University who studies dating apps. “When you pay for it, it feels a little strange.”

In the United States, 30 percent of adults, and more than half of adults under 30 use dating apps, according to a Pew Research Center survey released last year. About a third of dating app users said they pay for it, with men and adults with higher incomes more likely to pay than others, the survey found.

Millennials, the country’s largest generation, were a prime dating age when Tinder was first introduced, but more and more of them have gotten married in recent years, a decision that usually leads to people leaving the apps. Now the main users come from Generation Z, a younger – and smaller – target group with a lower disposable income. This generational change poses a challenge for the dating app industry.

Mandy Wang, an 18-year-old student at New York University, said she preferred meeting people in person or through direct message on platforms like Instagram or Snapchat. Dating apps are intended for casual use, “like a game,” she said.

“People use dating apps, but I don’t know anyone who pays for it,” Ms. Wang said. She even said she would be “ick” if she heard someone paid for a subscription.

Jess Carbino, a former Tinder sociologist and now consultant and dating coach, said younger people “still feel a desire to use online dating apps, but they don’t necessarily experience a sense of urgency to find a partner. “

“I think what we’re seeing is purely a demographic shift,” said Dr. Carbino.

Match Group and Bumble declined to comment on their plans to attract more paying users, citing public statements from their executives.

Bumble CEO Lidiane Jones told analysts last month that the company would revamp the app to appeal to more users, especially younger ones, by adding “personalization and flexibility” to the experience.

Bumble’s larger competitor, Match Group, was an early player in the online dating market, starting with Match.com in 1995. The company acquired Tinder in 2017 and Hinge in 2018, beginning a period of growth that caught the attention of investors.

Tinder is the largest brand in Match Group’s portfolio and the most popular dating app in the United States. It shook up the industry landscape in 2012 when it introduced a swipe feature, which is now ubiquitous on dating apps. But the novelty of the swipe has worn off and Tinder has lost its momentum. The number of paying users of the app dropped by almost 10 percent in 2023.

Tinder’s problems, and those of the broader dating app industry, are partly due to the fact that the format is largely the same as it has been for more than a decade, says Zach Morrissey, an analyst at Wolfe Research, a financial research firm. But the way people date may have changed.

“This is a space where product innovation has been relatively subdued in recent years,” he said.

That’s starting to hurt. Bumble, which went public in 2021, initially rose in value, but after a steady decline the stock is now trading at around a quarter of its IPO price. Match Group’s share price reached a high of $169 in 2021. The price now stands at $34, about a fifth of its peak value.

Match Group and Bumble have recently made some changes to convince investors they can turn things around, but it’s unclear what will solve their problems. “There is no obvious silver bullet that they need to tackle,” Mr Morrissey said.

Both companies have undergone a number of leadership changes: In January, Ms. Jones joined Bumble, and Match Group promoted Faye Iosotaluno, Tinder’s former chief operating officer, to the app’s CEO.

Bumble announced last month that the company would lay off about a third of its workforce in the first half of this year. It also lowered its first-quarter revenue forecast, below Wall Street expectations.

“The demand for connection and love remains very strong – two billion single people around the world,” Ms Jones told analysts in February. “Yet the products that contain the set of experiences to create those connections are not serving users in the ways they want.”

Match Group CEO Bernard Kim told analysts in a Jan. 31 earnings call that Tinder this year adopted “a fast-fail mentality, a strategy that prioritizes rapid experimentation and testing.” Mr. Kim took over the company in 2022 after previously serving as president of Zynga, the maker of mobile games such as Farmville.

He said the company would attract more paying users through marketing and that it was customizing its products in several ways, including introducing new a la carte premium features.

Match Group has also expanded its offerings, including a service for LGBTQ dating called Archer and a service for Latinos called Chispa. Sales from those products decreased by 4 percent in 2023.

Mr Kim said Tinder has completely reimagined the swipe feature and would roll out new features this year. The platform is also pushing for more users to get verified, a move aimed at improving security and helping women feel more comfortable using the app.

Activist investor Elliott Management, which previously led shakeups at Salesforce and Pinterest, took a $1 billion stake in Match Group in January, a sign that Wall Street sees an opportunity for growth.

Elliott declined to comment on the discussions with Match Group. Mr. Kim told analysts that he and the company had a “collaborative dialogue.”

Despite the challenges, the dating industry isn’t going anywhere, says Ken Gawrelski, an analyst at Wells Fargo.

“Dating, in general, and love, more generally, is an essential human behavior,” he said. “So it’s hard to believe that this is materially changing. But the way we date, or the way we find matches, is a big problem in this discussion.”