Left, Right, and Click! Startup Lessons I Learnt From Swiping Away on Dating Apps
Competition becomes a second priority in growing markets. What’s the first?
I hate online dating. Do you know what else I hate? Having awesome product ideas, and not following up on any of them.
“That Ship Has Sailed”
Every time I identified a problem I wanted to work on, several others had already built a solution to monetize it. And then, I would give up immediately. After all, conventional wisdom states that you do not want to enter an overcrowded market. At best, you’ll barely survive a rat race. At worst, your startup will be dead on arrival. Still, I went against my own instincts to join a zero-revenue startup in one of the most overcrowded spaces ever — ad-tech. Not only that, but the company also started earning revenue soon enough.
How did it all come together? In order to explain, I need to get back to my love-hate relationship with online dating. Here’s my takeaway — online dating won’t help you find your soulmate, but it’s a good way to learn a few lessons about product-market fit. Want to know how? Keep reading.
Swipe Left, Swipe Right, Match!
Tinder revolutionized how people started dating each other. The idea was so disruptive, that even after 9 years, the swipe has endured. Its viral success was so powerful, that their existing competitors were compelled to adopt their style. Even more interestingly, the dating apps that came later copied their ideas, and even started bickering over who owns the swipe.
Before you get skeptical about whether or not so many apps can co-exist in the market, let’s look at some hard facts.
- The Match Group, owner of match.com, also owns almost every popular dating app today, including PlentyOfFish, OKCupid, Hinge, and Tinder.
- Whitney Wolfe Herd, who herself had played an important role behind Tinder’s success, further went on to start Bumble.
Today, all these founders have become millionaires, or more. Match Group’s stock price has risen 150% in the last two years alone. Wolfe Herd became the youngest self made woman billionaire. What did they all have in common? None of them ran for cover when Tinder turned dating upside down. None of them thought that it was all game over. Rather, they saw an opportunity in how their own product could grow. What did they all understand that others didn’t? Their market, and their user base. Rather, the fact that they are the best solution to an unsolved problem — that finding somebody to love is bloody difficult!
Multiple competitors trying to solve the same problem can co-exist in the same market, if there is still a lot of room left for the problem to be solved.
“How did you meet? We met online!”
How are these apps solving the same problem different from each other? The way they position themselves in the market. Think hookups vs long term relationships. What do they have in common? Knowing the difference between what their users think they want, and what they actually want.
Most people in the dating pool use and sometimes pay for more than one app. A user base playing the numbers game will try to score as many dates from as many apps as possible. In the end, nobody cares through which app they met their significant other. “How did you meet? We met online!”
What’s Up With Ad-Tech?
I love ad-tech. I’ve worked with different companies in the online marketing space, some just starting out. They attempted to solve the same problem — that of audience targeting. Different IP, different AI, yet the same problem. A lot of other competitors want a slice of the pie. Add to that the increasing difficulty from regulators, and established giants cutting off essential life supplies of the ad tech ecosystem. How are these small players still in business?
Our clients, most of them retailers, were interested in customer acquisition and retention — an extremely difficult problem that AI hasn’t been able to fully solve. Customer behaviour is largely noisy, and even the most robust AI solutions currently deployed have a relatively high hit and miss rate.
Our clients didn’t care as long as they maximized the ROI on marketing spend. They would rather buy from multiple data vendors and reach out to as many potential customers as possible.
Once again, we are looking at how an unsolved problem creates opportunities for multiple competitors to exploit. Semiconductor manufacturers offer another ripe example, because the amount of competition in this space is insane. Yet, the global semiconductor sales increased 6.5% to $439 billion in 2020, and is projected to rise to $726 billion by 2027 . This is because there seems to be virtually no limit to faster and smaller chips can get. Add to that, the demand for semiconductors is so pervasive — think AI, 5G, blockchain, your iPhone — that even the current pool of competitors are not able to meet the global demand.
If it’s not competition, then what is the top priority?
Get feedback from your users. Talk to them, and learn what pain points haven’t been addressed in the market yet. More likely than ever, that’s what they will be willing to pay for.
Identify gaps in existing products that your users would be willing to pay for.
The companies where I’ve had the opportunity work got this right. We invested in highly motivated sales teams who understood the product, the industry, and our users’ pain points.
For B2C companies, collecting direct user feedback can be a bigger challenge. Thankfully, FAANG companies have adopted robust metrics and practices to track user engagement with considerable success. Smaller companies can also adopt these practices to track their product traction, as Dennis Meisner has illustrated here.
I hate online dating! However, by getting sucked into using multiple apps at the same time, I did learn a valuable startup lesson. Overcrowded markets are not necessarily prohibitively competitive. How do you judge that? Talk to your potential users and learn what pain points continue to exist, that they would be willing to pay for if addressed.
This is the only way.