01 Sep 2015

The Business of Love

In search of the perfect dating app
Re: David Dewan (MBA 1969)
by April White


Illustrations by Istvan Banyai

By the standards of the algorithmic, instant-judgment online dating age, Jess Kushner (MBA 2008) and Ken Deckinger have a story fit for an old-fashioned romantic comedy. In 2003, Deckinger was running a speed-dating company when his friend and cofounder, Adele Tongish, posted his profile to a now-defunct website that promised online dating with a twist: Women recommended their male friends to other women.

Kushner, who had also recommended a friend of hers on the site, spotted Deckinger’s profile and emailed Tongish, asking the important questions that were rarely answered on the typical online dating site: Is he “comfortable with himself”? Can I be my “goofball self” around him? “This really is the coolest thing to be able to get an opinion from a girl!” Kushner wrote. Tongish encouraged her to email Deckinger—“he likes a goofball”—and forwarded the email exchange to Deckinger. “Holy $#!&,” Tongish wrote, “it’s your wife!”

Tongish was right. Kushner and Deckinger married in 2007, while Kushner—who now goes by Deckinger—was pursuing her MBA at HBS. Today, the couple has three young girls and a new Boston-based online dating startup, Jess, Meet Ken. Their how-we-met story is the model—and the marketing—for the company, which launched as a website in late 2014. “We know this works,” says Jess Deckinger.

Their love story is one of the differentiators that the Deckingers hope will set Jess, Meet Ken apart in the increasingly crowded, $2 billion US online dating sector, which includes Hinge, founded by Justin McLeod (MBA 2011) in 2011, and Coffee Meets Bagel, founded by Arum Kang (MBA 2011) and her two sisters in 2012. But all three alumni-run companies also have something important in common: They are taking on the online dating establishment and promising a new generation of singles a better way to date.

With the help of Facebook and smartphones, this new era of online dating entrepreneurs is trying to design women-friendly dating options.

If you squint, you can find an early prototype of the online dating phenomenon at Harvard in 1965. That’s when David Dewan (MBA 1969) launched Contact Incorporated, in fierce competition with another Harvard startup, Operation Match. Both companies sold questionnaires to students—$3 for Operation Match; $4 for Contact Incorporated—and fed the date-seekers’ answers about themselves and their perfect date into a massive computer, on punch cards. The computer spit out the most compatible pairings.

Neither company lasted long, but the computer- assisted dating model they promoted had a lot in common with the early days of the online dating sector in the mid-1990s. First came the questionnaires and the ability to sift through the answers quickly, filtering potential dates by characteristics like age or location. Later came the algorithms, which used the information provided to predict the best matches, automatically showing users the potential dates they were most likely to find attractive.

Match.com, which got its start in 1995 when only 14 percent of American adults used the Internet, began to move online dating into the mainstream. The late 1990s and early 2000s saw a boom in dating sites, such as eHarmony, launched in 2000 with a stated mission of fostering long-term relationships; OkCupid, founded in 2004, which popularized the idea that data could solve the dating dilemma; and niche sites from JDate and ChristianMingle to FarmersOnly. The number and diversity of the sites helped reduce the stigma around online dating. (In 2013 the Pew Research Center found that 59 percent of Americans believed online dating was a good way to meet people, a 15 percent increase from a 2005 survey.)

All of these online dating companies were selling similar things to different niches of the dating world. This first iteration of online dating gave singles access to a huge pool of potential dates, one much larger than their own pre-Facebook social networks. It also offered a peculiar anonymity. Users posted their profiles under pseudonyms and provided only the information they wanted to reveal. The online dating world of the late 1990s and early 2000s had the dim lighting of a first-date spot: In their online profiles, women got younger and men got taller. As the stigma of online dating faded, the idea arose that the Internet could make dating easier for everyone. Asking someone on a date via email was less of an emotional risk than doing it in person.

There’s only one problem with this hugely successful model—one that, by some estimates, can be credited for more than one-third of marriages in the United States between 2005 and 2012: The experience of online dating is often awful, especially for young, heterosexual women, the demographic most desired by online dating companies and, well, straight men.

In the offices of a Cambridge software firm, the Deckingers are discussing their vision for Jess, Meet Ken with a team of mobile app designers. Their target audience is single, heterosexual women, ages 24 to 34. The designers walk the couple through a series of inspiration boards with images ranging from playful to sexy to Brooklyn, to get a better sense of the brand Jess Deckinger describes as “warm and fuzzy,” and “a cooler way to do dating.” As the meeting ends, one designer sums up the Deckingers visual preferences succinctly: “So, what’s the exact opposite of the Match.com aesthetic?”

This second iteration of online dating is pretty much the exact opposite of Match.com. The new era of online dating entrepreneurs has heard the complaints of women overwhelmed by lewd attention on dating sites. With the help of Facebook and smartphones, they are trying to design women-friendly online dating options: not a larger dating pool but a smaller, curated one; not anonymity but transparency—real names, attached to real Facebook profiles; and, most vitally, control of a streamlined online dating experience.

The revolution started in 2012 with Tinder, now part of the Match Group that also owns Match.com. The app uses geolocation—a tactic popularized by the all-male dating app Grindr, which launched in 2009—to present potential dates who are nearby. And, most influentially, Tinder introduced the “swipe” into the dating lexicon. A smartphone user is presented with the image of a potential date, taken from Facebook. He or she swipes left on the screen to dismiss the potential date or swipes right to indicate interest. With the swipe, Tinder turned what was once a time-consuming slog through online dating résumés into an addictive game of instant judgment—and further removed the risk from dating with a double opt-in. A couple matches only if both parties swipe right. If only one person expresses interest, the other person never knows about it. Last year Tinder reported an estimated 750 million swipes—and 10 million matches—a day.

Coffee Meets Bagel has 60 percent female users and 40 percent male users, the inverse of Tinder. “Catering to women tends to enhance the experience for both parties,” says Kang.
Coffee Meets Bagel has 60 percent female users and 40 percent male users, the inverse of Tinder. “Catering to women tends to enhance the experience for both parties,” says Kang.

Hinge shares much of its DNA with Tinder—geolocation and gamification—with one important distinction: Hinge connects users only with friends of friends or third-degree connections, as arbitrated by Facebook. That social connection is key, says CEO Justin McLeod. “The type of people you are seeing on Hinge are really people who you actually want to date,” he says of the app, which matches young professionals with other young professionals and was originally seeded with McLeod’s single friends, including HBS classmates.

New York–based Hinge aims to re-create the transparency and social accountability that would come if a couple met offline through a mutual friend. The app populates a user’s dating profile with information and current photos from Facebook; recently Hinge added “relationship status” to its user profiles, also drawn from Facebook. At the time the feature was introduced, about 3.6 percent of Hinge’s users were married, engaged, or “in a relationship.” For comparison, recent research from GlobalWebIndex estimated 42 percent of Tinder users are in relationships. Of Hinge’s approach, McLeod says, “I think women appreciate the accountability, and men appreciate the transparency.”

Coffee Meets Bagel narrows the dating pool even further. Each day at noon, users receive one dating prospect—or “bagel”—selected by the company’s algorithm from within his or her extended Facebook network. Typically, the would-be daters each have 24 hours to “like” the prospect; if both opt-in, the couple is connected. There’s no browsing or searching for matches with Coffee Meets Bagel, an important differentiator for CEO Arum Kang, who describes her customer as a busy, professional woman looking for a long-term relationship. “Because most dating platforms were designed by men, they are optimized for surfacing as many choices and pictures as possible,” she says. “My goal is not to get people to just browse hot photos and connect. My goal is really to get them into a relationship.”

Kang knows the Coffee Meets Bagel concept is more popular among women than men—the name itself is designed to conjure a low-stakes dating world where women are comfortable—but in an industry where it is much more difficult to acquire female users it seems like a good problem to have. Coffee Meets Bagel has 60 percent female users and 40 percent male users, the inverse of Tinder. “Catering to women tends to enhance the experience for both parties,” says Kang. In other words, attract women and the men will follow.

That’s also the thinking behind Jess, Meet Ken, which—like the website that brought its founders together—is managed by its female customers. Women nominate their male friends for the service; men can’t peruse the women’s profiles without that endorsement. In a conference room at startup accelerator MassChallenge in Boston, Ken Deckinger is running a focus group entirely composed of women. As the startup finalizes the mobile app that will replace its web presence this fall, it’s the female perspective that’s most important.

The women in the focus group—most fellow entrepreneurs—give an enthusiastic thumbs-up to the app’s Tinder-like swipe function; women who nominate men can play the game, too, judging other women’s profiles to give advice to their male friends. To Deckinger’s surprise, though, the women pan a question-and-answer section; the lengthy profile of the earlier era of online dating has been entirely superseded by a few quick, Facebook-verified facts. What do women want to know about a potential date? “His height,” says one woman, to universal agreement. The Deckingers—Jess (5 foot 6 inches) and Ken (6 foot)—overlooked that vital piece of information in their original design.

In 2014, about two years after the launch of Coffee Meets Bagel, Arum Kang and her sisters stood on the stage of the ABC show Shark Tank. Dressed in a bright pink Coffee Meets Bagel T-shirt under a black business jacket, Kang pitched the San Francisco startup to five investors including Mark Cuban. The sisters were looking for $500,000 in financing in exchange for 5 percent equity in the company. “Sharks, I know what you are thinking,” Kang said to laughter. “It’s another online dating site.”

But VC firms have shown a great deal of interest—almost $150 million worth since early 2010—in the revitalized online dating sector, which market research company IBISWorld estimates to be a $2 billion industry in the United States with the potential to grow 5 percent per year. When Coffee Meets Bagel appeared before the “Sharks,” they had already raised $2.8 million from investors, including Match.com cofounder Peng Ong. After their appearance, the company raised another $7.8 million Series A round. Hinge has raised more than $20 million; Jess, Meet Ken currently has a seed round open.

This, despite the fact that no one is exactly sure how to make money in this new era of online dating. In online dating 1.0, most companies were subscription-only services; users paid to post a profile and contact potential dates. (And Match Group, a division of IAC/InterActive Corp, continues to grow, expected to generate $1.7 billion in revenue in 2015 and a planned IPO.) Now companies are experimenting with a freemium model. Tinder introduced its Tinder Plus in March, which gives paying users access to features such as unlimited right swipes and the ability to “rewind” to a profile they mistakenly passed by for $10 to $20 a month, depending on age. The app also began experimenting with advertising in April. Jess, Meet Ken and Hinge have not announced plans to monetize their free apps, but Coffee Meets Bagel sees a potential source of income in “coffee beans,” the in-app virtual currency that can be used to buy additional features.

When the Shark Tank episode aired in January 2015, that model earned Coffee Meets Bagel the biggest offer from an investor in the show’s six-season history. “If I offered you $30 million for the company, would you take it?” Cuban asked , before a dramatic commercial break. Kang quickly answered, “No,” taking no money from the investors. She calmly explained the ambition of Coffee Meets Bagel—and that of every startup in the new era of online dating: “We see this business growing as big as Match.com.”

Featured Alumni

Featured Alumni

Class of MBA 2008, Section G
Class of MBA 2011, Section B
Class of MBA 2011, Section F
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