When a dating app changes owners, look at what it charges for

On Oct. 13, Bumble announced it had agreed to be acquired by Ithaca Holdings in an all-cash deal that values the company at $1.3 billion. When it closes, Bumble will become a privately held company, and Ithaca's co-CEOs, Ravi Gupta and John Hegeman, will become Bumble's co-CEOs. Founder Whitney Wolfe Herd will stay involved.

The deal still needs regulatory approval, according to the company's filing with the Securities and Exchange Commission. The announcement does not describe any change to the app, its prices or its paid features, and nobody outside the two companies knows yet what will change. What is known is how ownership changes have played out for customers in other industries, and that research points at one question worth asking about any dating app.

What going private changes

A public company reports to thousands of shareholders every quarter. A private one answers to its owners. The announcement already shows one small difference: Bumble said it will not hold an earnings call or issue an earnings release for the third quarter, though it will still file its quarterly report.

That is a change in who the company answers to. Whether it changes what you get for your subscription depends on something else.

What research on new owners found

Economists have studied what happens to customers after a company is bought, mostly in buyouts by private equity firms. Two of those studies point in opposite directions, and the difference between them is the useful part.

Cesare Fracassi, Alessandro Previtero and Albert Sheen looked at consumer-goods companies, the kind whose products sit on a store shelf next to competitors. After a buyout, those companies grew their sales much faster than similar companies, mostly by launching new products and selling in more places. Prices on existing products rose only slightly.

Eaton, Howell and Yannelis looked at 88 deals covering 994 for-profit colleges. There, the picture flipped. After buyouts, tuition and student debt went up, and graduation rates and graduates' earnings went down. The authors point to two features of that market: students cannot easily judge quality before they enroll, and government aid pays a large share of the bill. In their words, "in a subsidized industry, maximizing value may not improve consumer outcomes."

What happened to customers depended on the market more than on the deal.

Where a dating app sits

A dating app shares one feature with the second market, not both: it is hard to judge before you pay. There is no government aid in the picture. You cannot see in advance whether an app works for people like you, and most of the evidence you get is your own inbox. Its money usually comes from subscriptions and features bought while you are still searching, not from whether you find someone.

That was true before this deal, and it stays true after it as long as the model stays the same. It is also why the useful thing to watch is not the press release. It is the paid tier.

Look at what an app charges for. If the paid features are about seeing who already likes you, being shown to more people, or unlocking filters, the app earns more while you are still looking. If a change makes those features more prominent or more expensive, that tells you which way the incentive is pointing, whoever owns the company. We wrote about how one version of that gate works in what "invite a friend to unlock" does to your matches.

We wrote about what we charge for, and what we do not, in the dating app that makes money when your relationship works.

What this does not show

The research covers buyouts by private equity firms of US consumer-goods makers and for-profit colleges, not dating apps, and Ithaca describes itself as a long-term holding company rather than a private equity firm. Neither study can say what any particular new owner will do. The deal had not closed when this was written, and the companies have not said what, if anything, will change for members.