True love is not a smooth process, as Shakespeare said. That there are more than 8,000 dating sites in the world dedicated to bringing people together is a testament to the fact that — even in 2021, with the most advanced matching algorithms — finding a partner is not easy.
While users of dating apps often seek out one person, chief marketing officers of these apps must attract millions of people. Dating sites face a dilemma like other network businesses: how do you grow your network? Or increase revenue? Network businesses must succeed. Dating sites can trade revenue to increase their user base by offering premium features in exchange for a referral commission.
Unfortunately, these referrals are not always worth the effort. Although dating app algorithms are good enough that in 2019, 39% of all couples in the U.S. said they met online and in 2020, 270 million adults worldwide subscribed to a dating site (almost double the number from five years ago), most sites do not have a clear idea of how profitable referred customers are compared to the friends who invited them to join the site. Ironically, because dating apps are data-driven, marketers have to guess if new members will be more active on the site or less interested in premium features.
But this may be changing. This is a dilemma that we have often encountered as a dating site for young professionals. We decided to tackle it in a unique, data-driven manner that eliminated the guesswork and achieved a balance between reach and revenue.
Fixing freemium’s flaw
The site was a freemium business model. Users who purchase premium packages get subsidized access to the basic features. To encourage growth, users were encouraged to refer friends to the site to get access to special features that will ultimately be the site’s profit centre.
This creates problems for many dating sites. Social referral offers generate referrals from users who wouldn’t have paid for premium features. This increases the number of users on the platform at a low cost. It attracts referrals from users willing to pay but who, given the choice, would rather work for their subscription. This results in more referrals, but fewer paying customers. The referral threshold, which is the minimum number of successful referrals required before users can access premium features, can have significant effects on users’ behavior. Referrers who end up inviting people less likely to subscribe could damage the community’s long-term value.
We wanted to see if it was possible to create referral programs that balance growth and profitability without reducing their user base.
Working closely with the platform executives we conducted a large scale randomized field experiment over two years to determine if increasing the number of members required to access premium features increased the level of engagement.
What the evidence said
Referral-driven growth often comes at a price: the greater the number of users referred, the lower their engagement rate. This could be because people who join dating platforms will first associate with their friends. When their referrer leaves, turnover on dating sites tends is high. They lose some of their initial interest. Another possible explanation