Match and Bumble dominate online dating: which is a better investment?

Match and Bumble dominate online dating: which is a better investment?

Bumble is one of the fastest growing dating apps. Remove the spray

With Valentine’s Day fast approaching, it’s time to talk about whether you’re getting your money’s worth when it comes to dating apps, many of which charge a monthly fee to use and have publicly traded shares. . If you’re lucky, the hours spent swiping on Tinder will pay off in the form of a soul mate, but we’re not just talking romantic dividends.

Online dating is the most popular way that couples meet, according to a 2019 study by Stanford sociologist Michael Rosenfeld. With more than 300 million people using dating apps worldwide, the left and right swiping business is expected to grow rapidly and reach 14.42 billion dollars in income by 2030. The two biggest players in the dating app market today are Match Group and Bumble (BMBL). Match, which owns, Tinder, Hinge and several other dating apps, is just about 30 percent of the market.

While publicly traded dating apps have lagged behind Dow Jones and S&P 500 indexes during the last years and Silicon Valley investors are reluctant to bet in general in this category, the biggest dating app companies actually perform quite well financially. Match, for example, has seen its revenue and profits grow in recent years. In 2022, the myriad of dating apps brought in $3.1 billion in revenue, 62 percent of which came from subscriptions.

During the third quarter of 2023, the most recent time period for which financial information is available, Match’s revenue rose 9 percent year over year to $882 million with an operating profit of $244 million, giving it a profit margin of almost 20 percent.

One worrying point in Match’s financial report, however, is the decline in the number of paying users. Subscribers across all Match-owned apps fell 5 percent in the September quarter year-on-year to about 15.7 million, with Tinder feeling the brunt of the loss as a result of a 50 percent price hike last year. Tinder now charges $24.99 per month for its platinum membership, coming closer to Bumble’s $39.99 monthly plan, one of the most expensive on the market.

Also read: Match Group CEO Mandy Ginsberg deciphers the business of love

After the pandemic prompted the busiest online dating year in Tinder’s history, the app looked at what attracted Gen Z users, observing that younger generations value authenticity, boundaries, and fluidity when looking for a relationship. In a call with analysts in November 2023, Match CFO Gary Swidler said the company has adapted to the preferences of Gen Z users in the form of weekly subscription. “What management is trying to do there is create an app refresh and change the product to give the Gen Z audience more of what they’re looking for, which is to be more self-expressive,” Ygal Arounian, a analyst with Citigroup, told the Observer.

Meanwhile, Hinge remains a standout in Match’s dating app portfolio. With user numbers exploding in recent quarters, the relationship-focused app is on pace to reach $400 million in sales this year, according to Match’s latest quarterly earnings report.

Match’s main competitor, Bumble, burst onto the online dating scene in 2014 offering a female-focused experience. While a newer company, Bumble’s site has allowed for steady income and user growth. The company’s total revenue rose 18.4 percent to $275.5 million in the third quarter of 2023 from a year earlier. Paying users also grew to 3.8 million from 3.3 million year over year.

While these are impressive numbers, dating apps do make money “designed to be deleted” it has proved to be a challenge. Most dating apps use a “freemium” model where the service and platform are free, but users can pay to enhance their experience. Match, Tinder, Hinge, and Bumble each offer tiered membership plans with prices ranging from $9.99 to $500 per month. According to a Morgan Stanley analysis, about 32 percent of the US single population use online dating, and of those, just over a quarter pay.

“It’s a balance,” Arounian said. “Both Match and Bumble are trying to convert free users to paying users, but they need to maintain the quality of the experience by being careful about putting too much behind a paywall and hurting the experience.”

While the Match family of dating apps remains the largest on the market, Bumble is growing rapidly, on track to capture 20 percent of US dating app users, according to Country of the investor. However, recent leadership changes could mean uncertainty down the road. In November 2023, Lidiane Jones, the former CEO of Slack, took over as CEO of Bumble, replacing the app’s founder Whitney Wolfe Herd.

As for Match, the company may face shareholder activism in the coming months. Activist hedge fund firm Elliott Management has slowly increased its stake in the company to $1 billion to become its third-largest shareholder, suggesting a push for some sort of governance or strategic change.

Match and Bumble dominate online dating.  But do they make good investments?

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