Bumble IPO: The Business Model Behind Dating Apps And How Online Dating Became Pay-To-Play

Bumble, the dating app that allows women to make the first move, topped US$13 billion on Friday, 12 February. It offered 50 million shares at US$43 each, allowing it to raise more than US$2bn. Listed on the NASDAQ as “BMBL”, its shares shot up by 63.5% to US$70.55 on its first trading session, valuing the company at over US$7.7 billion. As of 25 February 2021, its share price is at US$63.98 giving it a market capitalisation of US$7.38 billion.

Wait — before you start to get excited about hitting that buy button on “BMBL” or think of business opportunities in the online dating scene — it pays to consider: How did Bumble become so big?

Bumble’s Business Model: A Chip Off The Old Block

Bumble has a “freemium model,” which means users can join and match for free. It earns the bulk of its revenue from in-app purchases and different subscription offerings like Bumble Boost, which starts at US$12.99 a week, and its upgraded Bumble Premium, which starts at US$17.99 a week.

The paid offerings let users do things like make their profile more prominent, see who liked their profile first or engage more users on the platform on a daily basis. These paid offerings are how Bumble makes money, beyond just advertising and partnerships.

Similar to its rivals Tinder and Hinge, which operate on a freemium business model, using the app for free may be good for a bit of fun, but to really enjoy the perks of the app (matches, swipes), you will likely be persuaded to part with cash.

According to Forbes, More than 10% of Bumble’s users pay US$9.99 for a monthly subscription to access perks like extra time to decide whether a suitor merits a message. At competitor Tinder, just about 5% of users pay for a similar service.

The company said it had 12.3 million monthly active users (MAU) according to their S1 filing as of 30 Sept 2020. Bumble CEO Whitney Wolfe has also said that the company is focusing its efforts on converting more of its user base to those paid customers by reinvesting in future monetisation features and product offerings.

Taking a closer look at their financial statements, it can be seen that Bumble Inc had a revenue (adjusted before reorganisation and IPO) of $412m between 29 January and 30 September 2020. Their operating costs and expenses totaled $419m, leaving them with a net operating loss (inc. taxes) of -$55m, but improving from their 2019 net loss of -$108m. Hence, we can see that Bumble is not quite profitable yet, even from an EBITA perspective.

Part of the reason why Wolfe wants to take the company public is also to raise more funds in order to scale even faster; this means global expansion, hiring talent and rolling out more features that are in line with its long-term strategy. By taking the company public, the core team and early-stage investors can then offload some of that operational risk to the public.

What Differentiates Bumble From Its Competitors?

The core value proposition of Bumble is that women make the first move on the app. In a heterosexual match, the man cannot initiate a conversation with a woman until she makes the first move. The match will last 24 hours before disappearing if the woman does not respond, ‘like Cinderella, the pumpkin and the carriage’, according to founder and CEO Whitney Wolfe.

This was one of the differentiating features that made an impression on an initial audience of women who were tired of being harassed with lewd messages or (unwarranted) obscene photos by American men.

Bumble offers several special features that can enhance your experience on the app, including SuperSwipe and Spotlight. ‘SuperSwiping’ on someone’s profile lets them know that you’re particularly interested in them.

The ‘Spotlight’ feature allows you to put your profile at the top of the stack of profiles, so more people will view it that instant.

Users also have the option to extend a match by 24 hours, on top of the default 24 hours. This feature signifies that you’re especially interested in the other person. Non-Bumble Boost members can only buy this feature once per day, and no users can extend the same match more than once.

Bumble Coins can be used to purchase any of these features, either for one or multiple uses. Alternatively, you can gain access to these features through a Bumble Boost subscription.

A Foray Into Non-Dating Interactions: An American Social Experiment?

Having seemingly conquered the dating world overnight with brand messaging of female empowerment and the COVID-19 pandemic accelerating the rise of online dating, Bumble is also making plays into non-dating social and even business interactions. While this may work with an American audience, time will tell if its long-term strategy works in other countries as well.

#1 Bumble Date

Bumble Date is the primary component of Bumble: its dating platform. This is where users match with potential romantic partners in the hopes of going on a date, and where women make the first move.

#2 Bumble BFF

Bumble BFF is Bumble’s platform for finding and matching with other users in their area to become friends with. This mode was created for people who are new in the area or are simply finding difficulty meeting new people and making friends. In Bumble BFF, there are no rules about who approaches who first.

#3 Bumble Bizz

Finally, the Bumble Bizz component of the app allows people to network for business purposes, such as finding mentors within their field, chatting with potential interns, and kickstarting new career opportunities.

Keeping (Unwanted) Male Advances Out Of The Inner Sanctum Of Sexual Selection

Humans, unlike chimpanzees, have evolved over the years based on female sexual selection. This means that women generally make the call on whom to choose as a sexual partner. With financial independence offered to women today, the (online) dating scene may look skewed in the future, with an over-abundance of men joining dating apps only to be rejected or excluded from the dating pool unless they make in-app purchases.

According to Statista, the distribution of Tinder users (ratio of male to female) is heavily skewed towards male users, with over 72% of users on Tinder in the US being men versus 28% of women. Not only that, but there is also a massive perceived difference in motivations in using the app, with a disproportionate amount of men in a recent study seeking sex compared to women, who look more for relationships on dating apps.

This means that Bumble’s business model may help women select men whom they deem are appropriate or desirable. However, this could also mean that men who are already attention-starved on these platforms might find it increasingly difficult to get any “air time” at all without actually paying for “premium” features. This Darwinian approach may increase the quality of matches and top-line revenue for the company.

As a business, online dating is a growth area that knows no bounds. It is recession-proof and appeals to people the world over from all walks of life and age groups. It can also be highly lucrative. Bumble has carved out a safe space for women in the dating scene for a gentler and more respectful way to date, which may be lacking in other competitors. As for downloading and using the app… that’s left for the user to decide whether you want to be part of the paywall.

Read Also: 11 Businesses That Were Mentioned by DPM Heng in Budget 2021 (And What They Do)

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