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Online Dating: Fad, Farce, or Fabulous?

Okay, let’s engage in a hypothetical:It’s a Friday night and you’re in a bar. It’s crowded. Very, very crowded. So crowded and noisy in fact that any attempt you’ve made at conversation has dissolved into a screaming match. By this point you’ve lost your voice and you’re at the brink of losing your sanity. So you leave. Alone. Well that’s depressing.

Hoping to maximize your chances of securing a date, hook up, or long-term committed relationship (seriously in a bar? In that bar?), you begin to realize that maybe the bar scene – while undoubtedly beneficial in a lot of truly meaningful ways – might not be cutting it. A friend tells you about a girl he met online. You begin to wonder.. Does online dating work? Is it a better option? Should I give it a shot?

From stigma to now socially acceptable, online dating platforms have undergone a perception overhaul in the past few years. Once considered to be the avenue pursued by the less fortunate (read: desperate divorcé), online dating sites are now part of our societal makeup and have attracted a wide and diverse customer base. And boy have we become entrenched: more than 1,000 online dating/lifestyle sites exist with the majority of power and market share still concentrated in the hands of a few mammoth players. With Professor Mikolaj Piskorski’s Competing with Social Networks class studying the eHarmony case this week, The Bachelor about to choose a bride, and Valentine’s Day just around the corner, what perfect timing to learn more about this thing called love and its future online sustainability.

To gain a better understanding of the online dating markets, I conducted interviews with HBS faculty and friends. How will this dating game evolve as we continue to find ourselves emailing, texting, messaging, and tweeting before having any semblance of an actual meeting with a potential date? I’m not sure. but it seems like we might have to become content with falling in love at first write.

Top 20 Quotes from Polled HBS Students
(in no particular order)

What advantages do you see in online dating versus offline dating? (admittedly a somewhat one-sided question)

– Less homogeneity – HBS students are great, but sometimes it’s better to date outside the bubble.
– Lets you vet potential partners without having to strike up long conversations.
– Weeds out people who are computer illiterate (deal breaker)
– Meet in a sober environment and get to know each other a bit better before meeting in-person.
– Relative anonymity. If you don’t like them, you don’t have to see them again and vice versa.
– Getting your swerve on, yo!
– It’s cost effective (you meet many people, without having to spend any time in clubs or in cooking class)
-You can pick up 24/7, it connects you to people while you are doing more important stuff.
– It is easier to hit up multiple leads simultaneously, diversifying your investment of time.
– Efficiency. Info symmetry. Low-stakes screening.
– Easier to be funny.
– Cheaper than getting your Spanx on and making it to a bar.
– Online worked for me when I was consulting and spending 5 days a week in tiny cities in rural America.
– You are in a community that is equally as socially inept as you are. Answer changes if I own an online dating site: then it’s the greatest thing ever.
– You can get stats on someone (hometown, profession, salary, lifestyle, religion, etc.) without having to go on multiple dates to find out.
– Less pretentious. Everyone knows the deal and can get to business.
– Access to a greater and diverse set – quick introductions and multiple ‘threads’ in parallel.

People are looking for a relationship, rather than just a hookup.
– If you have a ‘checklist’ before you date someone, you can go through it faster.
– Higher variety of people, safe environment to meet.
– Quality is much better- more people with decent intentions and a greater chance of finding comparability.

Hanna Halaburda is an Assistant Professor in the Strategy Unit at Harvard Business School.ÿIn her current research, she uses game theory to study two-sided markets with network effects, like video game platforms, labor markets and online matchmakers.

Please note: the focus of this Q & A is to illustrate the two-sided nature of heterosexual dating platforms. As such, the homosexual market was not a focus of this specific research.

What is a two-sided matching market and how do dating markets fit this concept?
In a two-sided market, a business (also known as two-sided platform) has to attract two sets of customers who are complimentary. Such a market cannot work unless both sides are present. In heterosexual dating markets, you need to attract both men and women. Each woman wants to match with one man and each man wants to match with one woman (well, usually.). This market falls into the category of one-to-one matching. Two-sided markets in general do not need to be restricted in this way. For example, matching students and colleges is another example of a two-sided matching market where each college is “matched” with many students.

What decision criteria do the players use when deciding to enter the online dating market?
In economic analysis, we assume (usually) that people make rational decisions. Online dating requires time spent on the internet and very often a monetary fee. But for people who join such a market, those costs are outweighed by the expected benefits (expected happiness?) from doing so.

However, offline dating also bears costs. These can include the cost (time and money) of going to the bar or dinner-date, as well as the cost of working up the courage to initiate dialogue with an unknown person. Striking up a conversation is easier online for some people. In that circumstance, the costs of “making the first move” are lower online. Additionally, if you are not accepted immediately, rejected, or there is no response, then it is a private matter online versus the public humiliation and peer pressure that accompanies an offline setting. But this all depends on the person. Cost-point wise it might be cheaper to go to a bar or to pay online, depends on how much you drink!ÿ But it is important to note that from an economics point of view the non-monetary costs are equally as important as the monetary ones.

What are the benefits of online dating that make it a strong substitute to offline dating?
This is actually the core of our research and we are still working on this answer. Online dating offers a suite of options to the existing offline market that changes the dynamics of the dating game. Economics literature would say that it’s all about the cost-benefit analysis. Online dating is an attractive option because it offers access to more people. However, a higher number doesn’t necessarily mean better quality. So if someone has access to a greater number of people but those people have a perceived lower quality then one’s expected benefit is lower. But of course, the quality of the people you meet online does not have to be lower. In fact, more than 30% of the poll respondents disagreed or strongly disagreed with the statement that the quality of people available on-line is lower than those found off-line. An additional value proposition of online dating is that it’s more time efficient.

How do online and offline dating markets attract their members?
For heterosexual online dating to function, it needs to attract both sides to the market. But each individual decides on his or her own. The tricky issue is how to attract both men and women at the same time. Otherwise, women do not find the site worthwhile if there are no men, and vice versa. One solution used by two-sided platforms is subsidizing one side through asymmetric pricing. An offline example of this is ladies night in bars when females are incentivized to come because they don’t have to pay the cover charge. The bar might offer this subsidy to one side (women) to make it worthwhile for the other side (men) to also engage. Online subsidies might include discounts to women who register. But this of course raises gender price discrimination issues (in a two-sided market defined by two players with different genders). Political and legal issues are then introduced which further influence which pricing tools are legally available for online sites.

How are the two dating platforms similar?
Both online and offline dating platforms aim to solve the coordination issue. The offline bar provides a common meeting place. Everyone knows where to go at the same time and in this capacity the bar serves as the facilitating middle man.ÿ Similarly, online dating offers a common platform of communication and thus serves as a concentrated area where you know your success rate of finding someone with similar interests is maximized. ÿ

What are the key differences and similarities between eHarmony versus Match.com?
Match.com operates under the assumption that people want access to a wide range of people, not necessarily for a long-term relation.ÿeHarmony, on the other hand, advertises itself as the market to meet your spouse. It takes the view that people are more intent on looking for people who are very similar to them with the goal of starting a serious long term relationship, even if this pool of potential partners is smaller.ÿ Those who want to start a serious relationship might venture to eHarmony whereas those who are looking to expand their social reach, without an emphasis on commitment, will go to Match.com.

Both Match.com and eHarmony are better alternatives for people looking to meet others and haven’t found the right people offline or have high costs associated with their offline searches. But each of the platforms satisfies different needs.

How would you describe the ideal consumer that eHarmony is looking for?
This is actually very tricky because a satisfied customer is a customer that does not come back. Because eHarmony is in the business of matching people for marriage, and has a high success rate, it is likely that the majority are not going to come back. So how is that sustainable? Well they want their customers to find relationships that culminate in marriages so that these success stories become examples for their friends. In turn, these friends will be more inclined to follow suit and go online to find their potential spouse. There is still some social stigma associated with online dating (much lower than in the past, though). Social acceptance and the social spread of news via word of mouth is very important in this market, maybe even more important and powerful than any TV campaign. Although the TV campaign doesn’t hurt! eHarmony therefore relies very heavily on their customers to share their successful matchmaking stories with friends and family to sustain their business model.

How should we begin to take the theoretical principles we’re learning in STRAT and apply them to our lives, or should we not try to be so strategic when it comes to dating?!
First of all, the goal is to find a person to whom you connect on an emotional level. I would not try to rationalize this! But it may be worthwhile to consider, rationally, where is the best place to find such a person. The first question to ask is what prevents someone from finding this special person. For many people such a hurdle is shyness or lack of time to meet new people. Then online dating may be the place to look, rationally.

Wings: A different type of online dating
Bio: Sunil Nagaraj serves as CEO of Triangulate.ÿ Sunil earned his M.B.A. from the Harvard Business School in 2009.

What is Wings? What is its business model and value proposition to customers?
Wings (www.usewings.com) is social dating done right – online dating can be incredibly awkward and time-consuming.ÿ Instead, why not get your closest friends to brag for you and even suggest potential matches online.ÿ Underneath the hood, we have patent-pending matching technology that uses who your friends are and what you really do to find you better matches.

Why did you found the company?
I’ve always been frustrated with the fact that self-reported information causes so many people problems.ÿ Not only is it tough to write about yourself, but it’s also plagued with integrity problems when you’re reviewing others’ information – think about the skepticism with which you view a new candidate’s resume or a new dater’s online profile.ÿ We want to “triangulate” on who people really are, rather than them having to tell us.

Why do you think sites like Match.com and eHarmony have been so successful?
It’s harder than ever to meet people.ÿ With our nomadic lifestyle through our 20’s and often 30’s, people want an easier way to meet and engage with great people in a safe and welcoming environment.ÿ Match and eHarmony have great brands that continue to draw users with the allure of finding that special someone.ÿ Unfortunately, users are signed up for 3-6 months (paying $30-$60), but the vast majority fail to find successful matches.

What differentiates Wings from these other online dating sites?
Wings is the first dating site that is social from the ground up.ÿ Your entire experience hinges on getting your closest friends involved.ÿ By serving as wings, they help determine your matches, and in turn, you can learn more about your match’s wings and what they say about him or her.ÿ

What do you think the future of online dating is?
The trend is toward more natural/less awkward online dating that requires less effort.ÿ The days of flipping through thousands of hand-written profiles are coming to an end.ÿ The industry is on the verge of a massive disruption driven by web 2.0 and social media.

Student Spotlight Quote
“Three of my good friends met their significant others online: one is married, the other is engaged and the last is in the process of proposing. All three had made their rounds in the offline dating scene post-college and had become disillusioned. The two women in particular had reached a point where they were just fed up with the caliber of available men at bars. So after a few years they decided to give Match.com and eHarmony a shot and the rest is history.” Asha Haji, Section E (RC)

A Student’s Perspective:
Rob McKeon, Section E (RC)

Do you think online dating offers unseen benefits that offline dating doesn’t? If so, what are they? If not, why not?
I guess online dating makes everything less personal, which is a good and a bad thing. For example, you can avoid giving the awkward “Letting you down easy because I’m not that into you” talks that face-to-face interactions require. Mostly, though, I don’t really trust what people can do when they can unilaterally craft their public image. ÿ

Is there a trend towards online versus offline? Where do you see this “industry” heading?
I’m guessing that internet dating is here to stay, but I don’t think it’ll ever replace the offline. I’m guessing that internet dating is going to keep trending younger. It felt like a few years ago, it was for the middle-aged divorced set. Now, there’s no stigma for people our age to try it out.

Still, fortunately for me, personal charisma and gravitas is always going to be critical.

Why do you think online dating sites have gained so much popularity?
Honestly, I don’t know. Clearly, I’ve never used one. To totally nerd out, I’m guessing it’s because they created an easier, prescreened, simpler marketplace of self-selecting people looking for relationships.

February 8, 2010
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