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Why did Facebook enter the dating market?

business unit strategy corporatestrategy growth strategy market entry
New answer on Apr 30, 2020
8 Answers
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PK asked on Apr 03, 2020
Director of Product at PayPal. Based in SF. Worked at Twitter, Yelp, Salesforce, Houzz in the past.

I doubt FB will ever charge users for dating like tinder etc. I am assuming they did this because it aligns with their mission to bring the world closer together? What would be a good way to structure this?

(edited)

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Raj
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replied on Apr 04, 2020
FREE 15MIN CONSULTATION | #1 Strategy& / OW coach | >70 5* reviews |90% offers ⇨ prep-success.super.site | MENA, DE, UK

Many great answers here already.

If I was stepping back from the immediate question, I would suggest examining Facebook's rationale for any new product it launches.

What is the purpose? Why does it continue launching and acquiring?

Fundamentally, you can reframe Facebook's strategy to be around maintenance vs. growth, given its position on the s-curve of mass adoption. It is clear from Facebook's history of recent acquisitions, Zuckerberg is very well aware of the innovator's dilemma, and attempting to disrupt the core business and diversify at the same time.

For example, with WhatsApp (a closed P2P network), or Instagram (a separate photo sharing platform i.e. usurping what was Facebook's original raison d'etre).

Why?

What is the greatest existential threat to Facebook maintaining its scale and dominance? Losing relevance.

Any network can only remain relevant so long as it delivers value to all members on an ongoing basis. A loss of relevance occurs through 1000 cuts, not 1.

This I would imagine would be a core concern in the minds of FB's board, major shareholders and the ExecCo.

One form of relevance is maintaining a moat from network effects, but Facebook's biggest issue at present is churn and the distribution of its network skewing away from the early adoptors and cultural influencers.

Will the launch of a dating product (albeit a generic one, just on Facebook), mean it increases engagement with a highly valuable demographic for advertisers and reduces churn due to lock-up on the network? Possibly.

Are there likely to be strong data crossovers from a richer social graph if combined with dating patterns? Highly likely.

Will 18-34yo adopt Facebook dating when they've been slowly transitioning off the platform as its been unbundled over the past 3-5 years? Time will tell.

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Axel
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replied on Apr 03, 2020
Bain Consultant | Interviewer for 3 years at Bain |Passionate about coaching |I will make you a case interview Rockstar

I agree with Vlad's analysis.

It is a very complementary business that can be monetized in many different ways. They can charge directly for the service or for premium features that are rolled out over time and leverage the product to create additional advertising space.

As you say it fits in with their mission of bringing people together but these kinds of decisions are made based on profit potential. The fact that it is highly complementary to its existing product means that the likelihood of success is high.

Another interesting angle for Facebook is likely also the additional data that they can collect from the dating product. As you probably already know they already use the data you enter to create the most targeted advertising product out there today.

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PK on Apr 03, 2020

Yes, but having worked in tech companies in bay area, I know very well that FB particularly is a very mission driven company and money is secondary for them. I spoke to one my ex colleagues at FB now and it was indeed an engagement play. I was particularly looking for the best way to structure my answer, I am confident that this product decision was based on the companies mission and monetization is side benefit but not the primarily goal.

(edited)

Axel on Apr 03, 2020

Okay it is fair but then how is user engagement not tied to monetization then if looking at this from the facebook platform perspective and not a product perspective? A rough structure could then incorporate a) monetisation from increased engagement and subsequent reduced churn b) any monetisation from new user growth c) impact on company mission

(edited)

PK on Apr 03, 2020

Monetization is a side effect of product engagement, not a primary objective. A lot of FB products don't make any money - such as live, watch etc. which are operationally extremely expensive. The main reason for building them is increase user connection and ads comes in only when it doesn't diminish user engagement. If you look at FB daily active and monthly active users, it has only gone up YoY despite introducing ads product and that is because they prioritize user experience.

(edited)

Vlad
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replied on Apr 03, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

It's an additional revenue stream (a very good one if you look at the financials of the dating apps) with very low extra costs for them (since they already have the users on their platform). + they can drive engagement (that is declining overall) and new younger users (since the dating apps users are on multiple apps)

Best

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PK on Apr 03, 2020

I doubt FB will ever charge users for dating like tinder etc. I am assuming they did this because it aligns with their mission to bring the world closer together? What would be a good way to structure this?

Clara
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replied on Apr 03, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

It´s easy to analyse if it was a business case:

  • Profitability: it´s a new revenue stream that has little implementation cost. Furthermore, you already have what strategically is most important: the client base. Hence, it´s a "natural step"
  • Strategy: diversifying portofolio with new revenue streams, etc.

Hope it helps!

Cheers,

Clara

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Antonello
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replied on Apr 30, 2020
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi, I think in the discussion all the aspects have been covered. As first, always think about profits, then of course the synergies with all their related platforms are crucial

Best,
Antonello

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Anonymous replied on Apr 04, 2020

Hi

Facebook strategy is clearly to gather a highly consequent part of the online traffic.

I would go for following structure

A) Analysis of the online traffic (with a gap analysis with what Facebook did)

B) Opportunity to integrate the dating market (revenue, client experience, ...)

Best

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Anonymous replied on Apr 04, 2020

Hi

I agree with the comments of the people below. But I want to add a very important fact: Facebook did market research and found out that 52% of users of Facebook are single. That is why Facebook took the decision to enter this very lucrative business segment and make an offer to its own users.

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Daniel
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replied on Apr 03, 2020
McKinsey / ex-Interviewer at McKinsey / I will coach you to rock those interviews

Hi again,

If you are sure that they have done it because of their mission to “bring the world closer together” and that monetary aspect is always secondary for them, then dating functionality has a positive affect on 4 areas connected with that mission:

  • Creating distinct memories for users – you hardly ever forget where and how you’ve met your best hookup and or your future wife/husband, so FB will be associated with these memories
  • Establishing Facebook as platform to bring out the best in people (friendship AND love)
  • Increasing existing users engagement – FB as an ultimate platform to connect with friends, but also to find the loved ones
  • Getting younger audiences on the platform – FB is not that popular for 18-21 year olds –> this is one of the ways to fix it

I hope this is now the right focus.

Best,
Daniel

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Raj gave the best answer

Raj

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