Facebook Dating will Fail!
The recently announced Facebook Dating service stands little chance of succeeding.
In February, I wrote a post titled Facebook’s Next Big Thing, in which I talked about how Facebook should focus on connecting people with people they SHOULD know (including for dating).
On May 1st, during F8, Mark Zuckerberg announced that Facebook would launch a dating service. I guess I called that one.
As an immediate instinctual response, Match Group’s stock (MTCH) dropped 26%.
However, despite all its advantages, I believe that this sell-off was premature because Facebook Dating will fail.
I. Single App Policy
Facebook has announced that it will incorporate its dating service into its flagship app. I think this is a huge mistake. A separate app focused on dating would be the correct approach. Here is why:
Everything we do, we do within a certain context. When we browse LinkedIn we are in a “Work/Professional” context, when we browse through the Facebook app, we are in a “Social/what are my friends or family up to” context, when we play Fortnite, we are in a “Competitive” context, and when we are using a dating app, we are in a “Fun/Entertainment/Optimistic” context.
While we are quite good at context switching, it nevertheless, is still switching. Multiple contexts in the same app experience will prove challenging, if not impossible.
Millennials & Generation Z, who are prime targets for a dating service don’t use Facebook (yes, I know this is a generalization). They do use Instagram, so it would make more sense to embed it there, however this is not compatible with my previous point, Context. Incorporating the dating functionality into an app they don’t use is the antithesis of what Facebook should be doing. Instead, they should use this opportunity to launch a new app specifically targeting these demographics. They are currently spending an enormous amount of time on apps like Tinder and Bumble.Here is an opportunity to attract this highly sought-after audience, and provide it with an engaging experience — why would Facebook give up this opportunity?
It would look somewhat off to have other Facebook assets (e.g. Instagram, WhatsApp, etc.) promote the main Facebook app, and given the different demographics, would probably not be very effective. However, it is conceivable that Facebook could uses these assets to promote FBDate (Trademark Amit Shafrir)
“Check out this hot dating app called Facebook,” said no one since 2004. A great dating app should have a natural buzz to it. It should be fun and cool and something that someone would want to share with their friends. That is not Facebook.
A user searching for a dating app on the Apple App Store or Google Play store — would NOT see Facebook as a result when searching for “Dating”. They would get suggestions for purpose-built dating apps. FBDate could be one of those. Facebook would not.
Facebook is a media company whose main business model is generating revenue via ads. The best way to monetize a successful dating service is via direct payment from users. Subscriptions, one-off payments, etc.
Monetization is simply not in Facebook’s DNA. It never has been, and they have no experience in it.
Successfully monetizing a dating service is mostly about understanding human psychology. Knowing WHAT to offer to WHOM and at WHAT time. There is an art and a science to successful monetization.
III. Thinking Small
My sense is that Facebook is not treating this opportunity with the gravitas that its potential merits. It is limiting itself to a small subset of its vast userbase of over 2 Billion, and to a subset of potential functionality.
It is not clear why Facebook is not seeing this for the opportunity it is.
Here’s a small back of the envelope calculation: If Facebook gets just 10% of its user base, that is, 200 Million users to use this service, and if it is able to extract an ARPU of $2/month (doable in my opinion) — that would generate $4.8 Billion of incremental revenues. Given that Facebook would not have to incur any costs of acquisition, it’s likely that a clear majority of this revenue would be translated into EBITDA-say 80%=$3.84 Billion. With a current multiple of 29, that adds $111 Billion to its market cap of $571 Billion, an increase of 20%!
Unless something radically changes, I predict that Facebook’s efforts on the dating front will fail, and that is saddening. Done right, FBDate could be the ultimate dating service out there.