Thursday, July 14, 2011

Online Dating: the business of unhappiness.

The New Yorker has a big article on the state of affairs in $1B/year business of online dating. With what we know about the psychology of choice and happiness, the current model is bound to generate regrets about imperfect choices. And the more regrets, the more "inventory" turnover. That is, unhappy people come back for a dip into potential happiness. In some ways, the business model with a flat-rate pre-paid fee is bound to create more "purchases." We've seen this effect at work at all-you-can-eat buffets or, more recently, with Amazon introducing free or flat-fee shipping plan for their customers. That is, when the total price is fixed, people try to maximize the number of transactions, which, in turn, leads to a higher turnover, and as a result to low happiness.

Furthermore, the reward structure for service providers is not tied to happiness:

There is, as yet, a disconnect between success and profit. “The way these companies make money is not directly correlated to the utility that users get from the product,” Harj Taggar, a partner at the Silicon Valley seed fund Y Combinator, told me. “What they really should be doing is making money if they match you with people you like.”

tags: business, model, innovation, problem, psychology, control, information, market, communications, internet

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