Jacqueline Kaleel – Today’s competitive and growing economy requires startups to be extra creative when coming up with a successful business plan. Some companies, however, have formed a successful business plan without a revenue model. But how long can this last? There has to be a point in the company’s life span when profit becomes a necessity in order to continue growth. In many situations, companies will need to create a revenue model “[t]o crowd out competitors or forestall potential disruptors in its current markets, to expand into new markets, to make more efficient use of fixed assets and other resources, or to develop new income streams.” Tinder is one example of an online subsidiary that had to change its original business model in order to continue its staggering growth. Originally, Tinder founders were very vague when discussing future plans of Tinder. However, the founders are starting to discuss how Tinder plans to make money. Analyzing the process in which Tinder maintained its success and continues its success with its newly enacted revenue model may help startup lawyers and professionals to better manage the business plans of their clients. Between the launch of the brand and reaction to class action lawsuits, Tinder is one example of a brand that started with no set revenue plan but overcame criticism and implemented a revenue model years after the initial launch.
The InterActiveCorp (IAC) is an American Internet and media company, comprised of more than 150 brands and products. Tinder, the popular mobile-based dating site and one of the IAC’s [most successful] brands, founded in 2012, has become “one of the fastest growing social startups and mobile apps of all time.” Unlike traditional online-dating platforms, Tinder’s application does not include questionnaires aimed at determining relationship compatibility, or discussions about what one likes and does not like. Rather, there is a simple log-in through Facebook. Then users pick a few photos that best describe themselves and start “swiping.” Right means you “like” someone, left means you don’t. This smartphone app has exploded, receiving more than a billion “swipes” and matching more than 12 million people daily. Along with its success, Tinder has received criticism for its lack of a revenue model and its proposals for continued growth in the competitive Internet economy: Tinder’s founder, Sean Rad, announced the company’s first-ever revenue plan two years after its creation.
There were many customers who negatively reacted in response to Tinder’s initial revenue plan. On March 10, 2015, Tinder users filed a class action lawsuit over the company’s recent announcement that it will charge a certain fee per month for subscribers to participate in its premium service, Tinder Plus. Defendants argued that they would have reconsidered downloading the application had they been aware of these additional fees. Although Tinder Plus provides upgraded service options, this premium application has stirred up controversy. Users will have to pay a different monthly fee based on their age. Tinder charges its users $19.99 per month if they are over the age of 30, but only $9.99 per month for users under 30. This fee changes in different markets because Tinder wants to test multiple price points. This California based company is slowly rolling out this premium service because the company wants to make sure the pricing is correct. Because of the class action lawsuit based on the launch of Tinder Plus, Tinder has become a debated company. However, amid the disputes, Tinder has proven that a business can have short-term success without a revenue model. The implementation of Tinder Plus allows for Tinder to continue to grow rather than be stifled by its lack of a revenue-model.
In addition, Tinder has opened the door for other online businesses that have become more successful with an increase in users. Specifically, Tinder is known for enhancing the “Dating Apocalypse.” Dating apps are causing changes in human mating rituals on a magnitude comparable to those that occurred with the advent of marriage. It involves having flings with multiple people with a focus on quantity rather than quality. This forward-thinking creativity has allowed Tinder to create an entirely new trend while redefining “dating”. Although Tinder-dating may seem untraditional or aggressive, one user remarked, “everyone is doing it and it’s not like this hot little secret anymore.” Tinder is the leading site in the 21st century dating world. And now Tinder is changing the dating scene once again. With Tinder’s new revenue business model, some argue that Tinder Plus may reverse the “Dating Apocalypse” because the new model encourages users to be more selective in choosing whom to converse with. It focuses more on the quality of individuals—a reflection of “old school” dating. The fact that Tinder had such a significant impact on the future of dating with its original, non-revenue business model shows how successful a company can be without an original revenue plan. Unfortunately, a company with no revenue plan may only last for a short amount of time because a new idea will hit the market, or the business will need to find a way to increase profit.
Tinder is likely to flourish with the creation of Tinder Plus and an active revenue model. Nonetheless, Tinder should be concerned about the creation of similar websites and applications with free subscriptions. If Tinder stops its free service and focuses purely on the revenue model of Tinder Plus, users are likely to look elsewhere for a free service. But the option to participate in Tinder Plus in addition to Tinder’s free service allows the brand to make a profit while upholding customer satisfaction. Although it grew exponentially in its first two years, it reached a point where growth with cease without a revue-based model. Revenue-based business models are necessary in order to be proactive with future growth and opportunity for online businesses. Today, Tinder has survived much of the criticism. However, it is still a young company, and its future rests in the hands of those with creative ideas to defeat competition and execute a successful revenue-based business model.