Unlike Match Group (NASDAQ:MTCH), which owns a portfolio of several dating apps, Bumble (NASDAQ:BMBL) is most known for its namesake app. However, many investors would be surprised to learn that Bumble also owns the Badoo app, which is popular outside of the U.S. and actually has more active users than the Bumble app.
In this video from the Industry Focus podcast recorded on Feb. 17, Motley Fool contributor Luis Sanchez and Industry Focus host Nick Sciple discuss Match Group, Bumble, and the online dating industry.
Nick Sciple: One thing we haven’t talked about that I think is worth mentioning is Bumble is the leading app of this company, dominant in North America, really driving significant portions of the revenue, which maybe we can talk about that. But there is this other part of the business, Badoo, which is more internationally focused, actually larger and it comes on a monthly active user basis. What should we know about where Badoo fits into the overall Bumble story, Luis?
Luis Sanchez: Yes. As you mentioned, Badoo is more of a European and Latin America-focused dating app. It doesn’t really have much traction in the U.S. Surprisingly, we hear a lot about Bumble, obviously the company is named Bumble, but Badoo actually has more users than Bumble. In fact, Badoo had, according to the S-1, 28 million monthly active users, whereas Bumble only had 12 million monthly active users, so more than double. Interestingly though, if you look at the underlying financials, Bumble users are actually monetized better. The Bumble app still represents a majority of the company’s revenue despite having less users. The Bumble user base and Bumble revenue base is growing 10 times the growth rate compared to the Badoo business. It’s interesting to see that dynamic, and if you have to take a look at the assets and you have to think about where the value is, it’s pretty clear that the real value in this business is Bumble and the future growth of Bumble. Although, Badoo is a nice balancing asset to have because it does give the company some exposure to international markets and potentially some other demographics that they’re not going to hit but Bumble. One of the interesting things going back to the story is actually that there is some synergy between the two apps. They do share some common back office, like overhead and technology expenses. In fact, I read that Bumble, in a lot of ways, it scaled off of that Badoo infrastructure. Having that Badoo asset definitely helped in contributing to Bumble’s very rapid rate of growth.
Nick Sciple: Yeah, certainly. You talked about Bumble culturally. There’s big focus on women, this big focus on safety. They call out a lot of safety features on the platform. Badoo has been around a lot longer, different founder, different history. Now that Badoo is under this umbrella with Bumble, there is some potential for Bumble to inculcate some of their culture into what’s going on at Badoo, bring it some of the safety features, things like that, clean up what’s going on on that platform. So there is some room for expansion, but very much the story being driven by Bumble today. When you look at performance of the business, obviously there’s been this impact from the pandemic. What are we seeing as far as performance of the business over the past year or so during the pandemic?
Luis Sanchez: Yeah, absolutely. From 2018-2019, the overall Bumble business grew about 35%. Digging into that a little bit, the Bumble app itself grew 70% and the Badoo app only grew 7%, so referencing how Bumble’s growing a lot faster than Badoo. But in 2020, the pandemic did not help online dating apps and revenue growth significantly slowed. We have the data for the first 3/4 of 2020 and the overall revenue growth went down to about 15%, so it halved from 35% to 15%. Bumble slowed from a 70% growth rate in 2019 to 25% growth rate for the first three months of 2020. Logically it makes sense. If people are being cautious around meeting new people, they’re going to probably be spending less time and less money on online dating apps. It does make sense that revenue growth slowed. In a sense, this could actually be an interesting reopening play as we look to what happens after the pandemic.
Nick Sciple: Yeah. I think that’s one of the interesting dynamics of these online dating platforms. To your point, Luis, maybe there’s not an incentive to accelerate your rate of matches in a time where, listen, I’m not going to go meet anybody who I match with because it’s during a pandemic. But there is an incentive to have a presence on these online platforms, so maybe I will have a date whenever the world at some point returns to normal, whether that’s on Bumble or one of these other platforms, which I am sure we will talk about.
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