announced its plans to enter the dating space last May, panicked investors sent market leader
stock tumbling toward its worst drop ever.
A year later, they’re not so worried.
The main competitive risk to Match’s business appears to be fading away. Facebook (ticker: FB) has yet to launch a dating product in the U.S. In markets where Facebook dating services do exist, Match (MTCH) says it hasn’t felt an impact.
The diminishing threat from the social-media giant has become a tailwind for Match. The company’s stock has already surged this year and hit an all-time high this past week following a strong earnings report. The company said that it added 384,000 subscribers to its Tinder dating app, which now counts 4.7 million paying subscribers.
Match has achieved a rare feat in the world of social-networking: persuading people to actually pay for the service. Match has discovered that folks are willing to spend up to find the right person, and they may balk at a tech giant—with its privacy issues—trying to help them find love on the cheap.
With its free dating product, Facebook is doubling down on its existing social networks. Users of a new Secret Crush tool can add friends to a private list. If two friends show up on each other’s “crush” list, Facebook will notify them of the match. It’s a “like” notification on steroids.
The problem is that Facebook has to persuade its users to provide the company with their most personal data. A data breach becomes even more worrisome when it can expose an individual’s deepest secrets. A Facebook spokesperson declined to comment on Facebook Dating’s security policies.
Match understands that it has a leg up in the trust arena. “I think people have to be very comfortable trusting Facebook with the nine people in their friend group who they have a crush on,” Match CEO Mandy Ginsberg tells Barron’s.
She adds that Match has been watching Facebook’s moves “like a hawk” in markets like Canada, Colombia, and Thailand, where the company has offered a dating service that shows suitors outside of a user’s friend group. Match says that it hasn’t seen any discernible impact from Facebook’s entry in those regions. “The privacy thing is superimportant in dating,” argues Jefferies analyst Brent Thill, who says that Facebook has shown “more bark than bite” with its dating ambitions. He adds that even if Facebook eventually gains some traction, its success could lessen the stigma around online dating in Asia, where Match’s Tinder is trying to gain ground, as well.
A win for Facebook wouldn’t necessarily be a loss for Match, Thill said. The idea is that daters want to better their odds by being on multiple apps at once, even if they all contain the same suitors.
Match sees a big opportunity in Asia, which is home to some 300 million singles deemed to be within the company’s addressable market. For context, just 8.6 million people globally pay for one of Match’s properties, including its powerhouse, Tinder, which popularized the concept of swiping through faces to find matches.
The company is making a particular effort to grow Tinder in South Korea, Japan, and India. Those countries helped Tinder reaccelerate paid subscriber growth in Match’s latest quarter. Tinder’s “Gold members” pay different amounts, but the app offered me a $15 monthly plan this week. Gold, in part, gives users the ability to see who has already liked them on the app. Tinder also has a free version, but Match hopes that improvements to its algorithm will entice more of those users to pay up.
Wall Street analysts initially questioned how many people would pay for Tinder, but the audience continues to grow. Tinder added more subscribers in the latest quarter than it did in any period last year, and the company expects an even larger increase in the June quarter.
Wall Street has become solidly bullish on Tinder, but the company’s latest results still sent shares 12% higher on Wednesday. The stock has more than made up for last year’s Facebook-induced losses, recently trading at $67.27. Jefferies’ Thill sees more room to run as the Tinder engine clicks overseas and as Match expands up-and-coming brands like Hinge, which is more focused on long-term relationships than Tinder.
Match reported revenue of $465 million and adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, of $155 million in the first quarter, up 14% and 13%, respectively.
Those profits could get a significant boost if Match were to score one more win over Big Tech, this time taking on
(GOOGL) Google by addressing app store fees, a major hurdle for app developers.
Outside of gaming, Match may be the single-biggest payer of the so-called app store tax, says Macquarie analyst Ben Schachter, referring to the 30% cut that Apple and Google take on in-app purchases.
Match Chief Financial Officer Gary Swidler said on February’s earnings call that the company is “incredibly focused” on app store fees. “To the extent there are tools that we can use, whether it’s new stores, whether it’s something else, to reduce the overall 30%, we will certainly focus and try to benefit from that,” he continued.
Apple’s fees have also caught the attention of European regulators, who are reportedly considering a formal investigation into whether the company’s app store practices create an anticompetitive landscape for rival
(SPOT), according to the Financial Times. Macquarie’s Schachter is “quite bullish” that app store fees will eventually come down, given “regulatory, legal, and competitive pressures.”
Any fee cut would effectively fall straight to Match’s bottom line, giving investors one more reason to fall in love.
Write to Emily Bary at email@example.com