Market theory

Let's geek out on economic theory for a moment ...

Online dating — at least, the heterosexual kind — is what's known as a two-sided market.

In these markets you're trying to match two groups of people, Group A and Group B. They might be buyers and sellers, drivers and passengers, or men and women.

The usual dynamic of a two-sided market is that people in Group A will join the platform with the most members of Group B, and people in Group B will join the platform with most members of Group A. Because that's where they have the best chances of finding someone suitable.

This causes a positive feedback loop, where growing numbers make it even more popular, which is known in the venture capital world as a flywheel. Usually it results in a winner-takes-all market, with one dominant player, plus a handful of minnows serving niches.

A broken flywheel

At least, that's the way it's supposed to work.

In the world of online dating, however, the flywheel is broken. Instead of there being one dominant dating app that everyone uses, there's a constantly-changing mix of a half dozen or so.

People end up signing up for multiple apps -- and keep jumping from one app to another -- because no single app does the job effectively. There are a number of reasons for this, which I'll discuss in later posts, but it does point to a big opportunity:

An online dating app that gives users what they want can win the whole market.

And it's a multi-billion dollar market.

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