10/11/2004

A Substitute Product for Online Dates

Dating services are second only to the porn industry for paid Web content. Until this year, revenues for some of the largest dating services were doubling each year. But all of that is starting to change. Growth has slowed dramatically, and workers are being laid off. The question is why? Isn't the demand for meeting people the same? Are people going back to the old fashioned way of dating? According to the article in the link above, part of the reason is because the novelty has worn off. In economic terms one could say that the marginal utility of using online dating services for some customers has reached 0 (or less). But the change is also due to substitute products. Mobile devices are taking the place of online dating services. Text-messaging services have sprouted up in San Francisco as well as cell phone services that alert a user when a "friend" from the service is in close proximity. The newer services are also doing a better job of matching people with similar interests in chat rooms. I guess you could say the marginal utility for using the new services is higher for some customers for using the new services than it is for the using older online dating services.

7 comments:

Bryce Larkin said...

Dating services have never been my cup of tea, but I know tons of people who use the chat rooms and the other substitutes. I think there have always been substitutes for dating services. I believe that it has just been a fad and now it is over and back to the normal ways.

peter_parker said...

Question: Is this a result in a decrease in marginal utitility or a change in preference? It seems to me that as preferences change, the demand for the online service shifts to the left. If it is a case of cross-price elasticity, then the price of substitutes will also cause a shift in demand.

John West said...

Maybe the dating services have been too successful in matching persons together. They will simply have to wait for these new couples to get divorced, at which time the process can start all over again. No seriously, I think that it was a fad that sort of lost its novelty. However, I think that there are enough desperate people in this world to at least make the stronger firms in the industry, profitable.

Bryce Larkin said...

I really liked what John West said about waiting for people to get a divorce. Sadly, I can see this happening. It is a fad but like most fads, it will come back. This might be because of the divorces.

Janet said...

It could be another fad or it could just be the fact that it wasn't working for people. Online dating is something that helps you "meet your match" faster and easier. Instead I think it just like a bar online. Not many people really read what the person's profile is but just hope they have a picture and that they are good looking. There are new ways to find that special someone. If the online dating wasn't working for someone, they figure they should try the new way because it couldn't hurt.

Maudi said...

I think these dating services are a rediculous way to meet people. Just as the porn industry has gotten a grip on people lives so has the chat and dating industry. people become so consumed that they forget things like going to work taking care of their families and on and on. I think that these dating sights are ruining peoples lives.

Dr. Tufte said...

I think this is just an industry that has gone very quickly to zero profits. The reason is that the services are claiming to offer a differentiated product, but I think that differentiation is very weak. Monopolistally competitive firms only make profits to the extent that they can continue to differentiate their product.

What is their differentiation weak? I think it is because the quality of dates is broadly similar in that most of them don't work out. The only people who recognize that a dating service has actually connected them with someone really worthwhile - and therefore might recognize that service as differentiable from the next one - are the people who hook up with someone for long enough to drop out of that market.