Swipe Right on Innovation: Future of Dating Apps

Milan Kovacic, a Forbes 30 Under 30 awardee and CEO of Cosmic Latte, is deeply committed to the LGBTQ+ community and inclusivity. His unique and vital perspective in the tech world aims to craft a future where inclusivity and progress harmoniously coexist.

What trends have you noticed since you've been part of the industry?

Roughly half, or probably more since COVID of new relationships, is with couples who met online widely over indexing any other way of meeting people out there. It used to be mutual friends were the primary way how we met partners. Then the graph just changed, and now it's online.

And it is growing like crazy. If you look at young people, roughly half of the young population is using dating apps right now, and if you subtract the people who have relationships, it's virtually everyone. If you look into the LGBTQ sector, 55% of all LGBTQ people are using dating applications. Online dating has insane power. And similar to social media, this is unregulated. Let's say Tinder releases a new feature that significantly enhances the efficiency of meeting our future spouses. You will see the effect of this new feature on the natality charts of the big nations. Or if Grindr releases a new feature that promotes responsible sexual behavior, you might see this on the chart of STDs. So, these applications have crazy power and are largely unregulated.

The market is incredibly influential because it goes straight to one of our huge societal ideals: love, partnership, cornered ownership, means of starting a family, etc. So the market is growing, and it's super powerful and very impactful in society.

What is the main focus of the biggest players in the market right now?

The first world and straight people are the most significant market segment. It has a huge spending potential. What's happening here is interesting. So you had the first mover advantage by Tinder, which is part of the Match Group and has Hinge and 15 apps. Then, one of the C levels exited Tinder or Match and started her own company, Bumble, which Blackstone eventually acquired. They also acquired Badoo. Their aggressive move was to have an optimized app for women. So if you get a match, the female has to text first, and many other features promote female advocacy in dating. They took a huge part of the market share. This app is one of the reasons that Tinder has started to lose female users. Last time I checked, their share was that for each female user, there are three guys. In comparison, Bumble had a significantly more favorable share. That poses a problem, right? Because females get many matches, but many of them are irrelevant. And males can't get a match. That's one of the reasons why Tinder appointed a female CEO to deal with this challenge.

Overall, there is still a huge war in the very crowded space of straight dating. Gay dating is also quite crowded and heavily dominated by Grindr. And then there is the other dating, like, for instance, lesbian space, which is fairly free. We are acting in there, and there are strong players, but it's not as fragmented as straight dating. Then, many niche products are getting addressed or still need to be addressed. Right? For instance, transgender dating. Then you have all of these Arab dating, Hindi dating, and local players that optimize for the niche, which grew quite a lot.

Where do you sit on that market, and what does Cosmic Latte do?

Cosmic Latte is a portfolio of dating apps. The two main ones are Zoe, an LBTQ dating application. It's for non-straight people identifying as women, and Surge is a GBTQ application. That's for non-straight people identifying as men. Regarding the market distribution for both, the US is the biggest market because the spending potential is so potent that it is difficult to get any other country. But surprisingly enough, the second biggest chunk of revenue comes from rich Asian countries. So we are pretty big in the rich Asian countries and the rest. It comes from first-world countries, which favors the market position because you can charge more. The ads are better priced, and the rest is differentiated between third-world countries and Eastern Europe. Russia used to be really big before the very unfortunate war happened. And we, of course, as everyone with any sense of comradeship, exited the market or exited earning money from the market. We stayed there to support the community but are not capitalizing there.

How do you differ from competition?

So, our way of discovery is similar to Tinder. You need mutual consent. Hence, it is more focused on dating. We are betting on the niche in the LGBTQ community; sure, a significant part of the people want to have fun but eventually also want to get a relationship. So, you need to have a mutual match to be able to chat, but we are heavily optimizing it for the LGBTQ market. It means it's surreal not to be able to send pictures; for instance, if you're engaged, it's a very visual community. Cintra doesn't allow it; we do. Also, we enable you to send pictures that are disappearing. We also have an attractiveness score, which helps you easily access the most desirable users on the platform.

The other part is that many people in the community are looking for friendship in general. So it's not just like matching a person; they're exchanging phone numbers, chatting, and using WhatsApp. It's more like matching the person and keeping it as a match. They signal it once they want to go for a cup of coffee. Then, from the community of the people they collected through mutual matches, they look for people who want to grab a coffee or go to movies because they're new in town and looking to hang out. So that's the differentiation to the big players.

How do you validate and understand your target users and key assumptions?

There are multiple layers to this. Number one is this discovery work stream, which goes continuously. So, together with my Head of Product, we go around talking to people, studying the recent trends, just going out and discovering the newest trends, what the competitors are doing, and what the users want. We show them the application, we get the feedback, we show them prototypes, and we get the feedback. And based on this, like on this huge blob of information, we then deliberate and create and subsequently continuously update product strategy.

From there, we have a huge backlog of possible features and certain focuses because you can't do everything, right? We take the feature from the backlog and define the smallest thing that can still prove the concept. And this is absolutely crucial. Then we implement it, and I challenge it relentlessly, like, do we act ally need this? Is it necessary? Can we drop this down? Or, okay, we need this part of the feature because otherwise, it's untestable, or otherwise, the fundamental purpose will be lost to the user. So once we have the definition, we implement it. And then we test everything.

“If you don't iterate and just implement the whole feature, you are wasting money.”

Since I entered a company, nothing that wasn't A/B tested or, at the very least, data tested has been released. We look at how it influences revenue, retention, and our reviews in the App Store. The last part is the learning, which is super important. So this whole thing, from the A-B test, data test, whatever else, the insight feedback, to the discovery. Sometimes, we discover something really important that validates our strategy assumptions, and then we have to build a new strategy. But it's all very data-driven.

With the current hype around AI and VR, which features will dominate the market in the next one to two years?

In terms of augmented reality, it depends on the hardware and its adoption. There will be a revolution in dating, and many players will die because they will not be able to jump to the new hardware. There's this gap between what is shown when you meet someone and when you don't meet them in person. The 2D picture is a shitty way how to identify if you have chemistry with someone. But if you have a 3D scan of one minute of the person moving and talking and see how they look in reality, it closes this gap.

I think more and more of the market will move into the virtual space. We see the trend everywhere: people talk to each other less, have fewer social skills, and spend more time in the virtual environment. Naturally, they use the virtual environment to meet each other.

But I think the big part of dating will not move online for multiple reasons. First, it's very natural for the person if you're attracted to someone you want to meet them for various reasons. Certain activities are very challenging to do online. Second, if this were the truth, that this mid-step could be moved from real life to online, then video calls would already be a huge part of dating apps, and they're not. Streaming is happening, but I don't think this reality where everybody lives in Zuckerberg's Meta will happen anytime soon.

We recently deployed a tracking score, which we did like super simple MVP, as simple as it can be given like an AI algorithm, that selects the most attractive people in the base, and it's from the front loads them in the swipe. When you open the app, you have a high chance of seeing somebody very hot on some platforms. So that's the short-term goal. If you think about the long term, AI can potentially get us all out of business. ChatGPT can answer any question you ask unless the answer is after 2021. But I still have to swipe left and right in the dating world. And that's just asking for a revolution, right? So, where is my single-button solution?

If these handpicked highlights have sparked your curiosity, you won't want to miss the full conversation with Milan Kovacic on our YouTube channel or your favorite platform.