The Capital Markets of Love: An Overview
"With a good leg and a good foot, uncle, and money enough in his purse, such a man would win any woman in the world, if a' could get her good-will." (Beatrice, Much Ado About Nothing, Act 2 Scene 1)
Much Ado About Nothing is a revered, legendary piece of literature that remains immortal to time, enjoyed by more audiences worldwide than Shakespeare himself would have ever imagined. Some may understandably assume purity and adolescent naïvety in the Bard’s depictions of love from comparably optimistic plays like Romeo and Juliet. However, Beatrice's line above in the first scene of Act II sheds light on a historical (albeit fictional) character's internal calculations of the financial ramifications of being with someone—a fascinating past intersection between love and money, which is traceable back to the very beginnings of humanity's commodity markets.
The Due Dilligence
One could reasonably claim that dating is a market constructed on the foundations of the key pillars of human attraction—its currency. After all, the term 'dating market' exists, and the term 'being on the market' describing romantic availability has been used for generations and is an official part of the English lexicon. From this perspective, dating is inherently a form of economic activity in which the players (the interchangeable suppliers and producers) search for maximum utility through matching with one another, determined through attempts (equivalent to dates) to showcase and 'sell' qualities or attributes that the other party may be looking for. While the optimal qualities and attributes players search for may change through generational shifts in the landscape and redefinitions of aesthetics, the core principles of the dating market where supply and demand (both parties in a relationship) interact have remained firmly constant over millennia.
There have been various changes in the social paradigms regarding relationships. While women did not see much freedom and agency at all in their relationships throughout ancient times, the Middle Ages saw levels of improvement. Acts of dating rose in prominence through cultural promotions of romance, and the men began attempts to impress and fight for desired women through acts like jousting, perhaps indicating a shift in power dynamics. However, the market in the 1600s and 1700s took a different approach; more people began to consider how marriage could be used to leverage money and power by merging families. Although becoming less prominent through time, this idea stayed throughout the ages and contributed to forming the traditional construct of a 'conventional' family in the early 20th century. Despite this, the 1960s opened up society to a sexual revolution amongst a societal push for women's and civil rights. This enabled individual freedom and set the scene for a looser, more relaxed dating landscape in the late 20th century that built the foundations for the contemporary dating market.
During the turbulent era of the 1970s that saw monumental shifts in Western society—specially with society emerging from the Civil Rights Movement and seeing internal social progressive movements grow—the Nobel Prize laureate Gary Becker created one of the first frameworks that explored and organized marriage and love using economic principles. Becker used various economic tools and algebra to illustrate how production is maximized through an optimal pair in marriage and how a couple can allocate time—a scarce resource—to increase their satisfaction from both market earnings (tangible, financially purchasable goods) and non-market earnings (intangible happiness from quality time, etc.). Through further studies into the subject matter, such as a hypothetical 'marriage market equilibrium' and an optimal division of household labour considering marginal productivities, Becker is remembered as one of the first economists that extended the domain of economics for use in comprehending complex, nuanced social behaviour.
Love Ain’t Free No More
In retrospect, Becker's work is perhaps possible as modern dating is "situated the process of finding love within the realm of commerce—making it possible for economic concepts to seep in," according to economist Moira Weigel. And indeed, the realm of commerce is ever so present, especially through examining modern dating app companies. From the first computer-based matchmaking service in 1965, titled Operation Match at Harvard, the dating app space has since grown to profit off of a US $7.5 billion dating industry, with a compounded annual growth rate (CAGR) of 5.5 per cent until 2030. This is driven by the strong performances of key players in the industry, such as Tinder, Bumble, and Hinge. Online dating apps have seen revenues of US $2.86 billion in 2022, with more than 366.6 million users, with a 4.8 per cent user penetration rate worldwide but a staggering 17.2 per cent in the United States. These statistics illustrate how profitable, and perhaps lucrative, the dating market can be.
Like many successful smartphone games, the apps depend on a 'freemium' business model that provides its basic services for free but with various limitations that encourage users to pay for unlocking enticing features. This has proven to be widely successful in the industry, enabling giants like Match Group—the owner of top services like Tinder, Match.com and Hinge—to earn more than US $810 million in revenue, even increasing 100,000 in users to its services during the heightened economic turmoil of the quarter ended September 30, 2022. This stability was also present through the COVID-19 pandemic, which was actually very favourable for the apps as users stayed inside and online more than ever. It opened many new consumers to the virtual dating market, especially as they felt isolated and more lonely due to the pandemic lockdown.
However, dating apps did not see initial success due to consumer skepticism of digital matchmaking and its efficacy. Despite this, the Pew Research Centre found that over time this stigma has been largely eliminated in the United States, where it all began. This is interesting to note as the apps' matchmaking algorithms are again based on mathematics and economics, indicating that such objective, empirical principles can effectively predict abstract, subjective human attraction.
Although companies remain tight-lipped about specific systems used, each service's interworkings of matchmaking can differ. Tinder has used a version of the Elo rating system in the past, the same method found in games such as chess. Rankings are assigned through accumulating likes on the platform, but these likes were weighted; the more likes your admirer had on the platform, the more significance the Tinder algorithm placed on such likes, thus pushing you up higher up the relative rankings. Similar Elo users would then be paired with each other on the swiping deck. Some users suspect that elements of the Gale-Shapley algorithm are used at Hinge, an economic algorithm that was actually created in 1962 to prove that a random pool of people can marry amongst themselves and still have a satisfying marriage. As one of the first economic explorations into human relationships, it aims to find an optimized, "stable" match between two equal-sized sets of people that theoretically do not prefer other people over their current match within given constraints. This is done through regular matching through initial preferences and observing user interactions following the matches.
Nothing But Loose Ends?
As a digital social service that scrapes user information to use the aforementioned Gale-Shapley algorithm—compounded on top of dependence on in-app purchases and advertisements for cash flow—user data is of utmost importance to the companies. However, data collection and third-party sharing of such data by the apps have recently been subject to controversy. An investigation by The Guardian found that more than 800 pages of data can be generated from a user that included tracked interactions with various social media platforms, comprehensive demographic data, and detailed specifics of romantic interests. Many users were unaware of the extent of such data collection or even if their data were being collected at all, according to a 2017 study. The Norwegian Consumer Council also filed a complaint after it found in 2020 that Tinder, OkCupid, and Grindr were sharing their users' sensitive information; the organization claimed this included GPS, demographics, device identifiers and sexual preferences or orientation, although not all apps shared all of those data.
The security of such data also cannot be guaranteed. Note that the controversial company Ashley Madison—providing dating services to married individuals, enabling affairs—had 37 million users' account and credit card data stolen by a group of hackers that threatened to release the data if the service was not shut down. The perpetrators made good on their threat after Ashley Madison refused, exposing names, usernames, addresses, phone numbers, credit card numbers, and even sexual preferences for some users. Since the successful attack, critics have questioned the trustworthiness of dating sites and their integrity towards privacy, especially since Ashley Madison is a business highly dependent on user trust.
The issue of moderation on dating platforms also lingers, as the Pew Research Center found that 60 per cent of female users between the ages of 18 to 34 have reported experiences of harassment. About half of reported users also believe active scam profiles are prevalent on the platforms; 47 percent also said receiving indecent photos or media they did not ask for. Experts have also criticized that online dating has created less civil environments and a lack of accountability for malicious behaviour, which contributes to the reasons that the 46 per cent of respondents do not feel not too or not at all safe about meeting people from the platform.
Despite this, it is undeniable that the dating industry has been fundamentally shaken to its core through the advent of dating apps, which have streamlined and digitized relationships to an unmatched degree across recorded human history. Through the utilization of game theory and other applicable principles of economics, the matchmaking services have enabled a marketplace that has seen substantial numbers of relationships, couples and friends that many of its users value. This is especially the case for those in the LGBTQ+ community that are twice as likely to use the apps than heterosexual individuals—perhaps a testament to the societal progress necessary for LGBTQ+ individuals to find comfort in seeking relationships without barriers.
Observers must expect turbulence in the industry, but firms must make internal efforts to address skepticism around data and platform moderation to reduce or eliminate such shakiness if the firms want to see continued profits. As more users join online dating through the influx of younger, digitally comfortable digital generations, dating apps must ensure their experience and privacy is its utmost priority, above all.
Economics and metrics may reduce the business to enabling supply and demand in zero-sum games, but it is important to be cognizant of the sheer humanity under it all; the modern-day Beatrice and Benedick are likely swiping today.