Pricing Online Dating Subscriptions

Abstract

Online dating is the most common way in the US for new couples to meet, with more than three in ten Americans having used dating apps, and with revenues from dating apps surpassing three billion dollars annually. Most of these dating apps generate revenue through subscription-based pricing, where subscriptions for a fixed period of app access are sold at recurring prices. Subscription-based pricing is a common monetization strategy, but in the context of online dating, different subscription period lengths can lead to very different outcomes for the app and its users. 

In this study we analyze the performance of different length subscription pricing strategies for online dating apps. We develop a novel model for the operation and monetization of a dating app. By analyzing our model we find that long subscription periods maximize both profit and the steady-state market-size of the userbase. However, while long subscriptions are optimal, they require a large upfront commitment from users and thus are often supplemented with shorter subscription period options. For short subscription periods, we show they still always achieve at least $\frac{1}{1+e} \approx$ 26.9\% of the optimal mixed objective. Finally, we extend our model to study size two menus of subscription options. By leveraging our analysis we prove that the two-option menu consisting of a short and long option always earns at least 57.7\% of the optimal menu.

Keywords: online dating, matchmaking, subscription, contract, pricing

JEL Classification: D02, D40