Momo (NASDAQ:MOMO), the top online dating company in China, is frequently compared to Match Group (NASDAQ:MTCH), which owns Tinder, OKCupid, Hinge, and other popular dating apps across the world.
I compared these two stocks last September, and concluded that Momo’s lower valuation made it a more compelling investment. Match slightly outperformed Momo since that article was published, but I still think Momo is worth buying.
Momo is often called the “Tinder of China”, but the company doesn’t use the same business strategies as Match. Today, I’ll focus on three things Momo actually does better than Match, and how Match could follow Momo’s lead, instead of the other way around.
1. Live videos
Match generates most of its revenue from paid subscriptions for its dating apps. Momo generates most of its revenue from live video streams on its namesake app.
Momo’s app was originally a social network that let users find each other based on their locations and interests. But in 2015, it started letting users broadcast live videos, and encouraged viewers to buy virtual gifts for their favorite broadcasters.
After that platform launched, Momo’s revenue surged 199% in 2015, 313% in 2016, 138% in 2017, and 51% in 2018. Momo’s growth also inspired myriad companies to launch their own live video platforms and sell virtual gifts.
Momo rebooted its app last August to categorize live streams by social activities like chat rooms, karaoke performances, and talent shows. Its smaller app, Tantan, also launched “flash chats”, a speed dating feature that lets users jump straight into video chats with strangers.
Match hasn’t launched any live video chat features for its core apps yet, but it’s taking baby steps into the market. It launched Loops, which integrate short video profiles into Tinder, in 2018. It’s also incubating a new video chat app, Ablo, which offers real-time voice translation for 2.5 million registered users.
Those strategies indicate that Match is interested in building a live streaming ecosystem, especially since Tinder’s female-oriented rival Bumble already launched in-app video chats last year.
2. Gamifying the dating experience
Tinder “gamified” the dating experience with its swiping features. However, Momo took that strategy further with its innovative Parking Lot and Farm mini games.
Its Parking Lot game lets a user park a virtual car in another user’s parking lot to get their attention. The driver can also buy a virtual car as a gift for the parking lot owner. The parking lot owner can then choose to start a conversation with the parked drivers or reject them with parking tickets.
The Farm game works with similar mechanics, and encourages users to visit other users’ virtual farms. Momo stated that 50% of its daily active users regularly played the two ice-breaking games last quarter.
Match has been dabbling with social gaming features in its apps as well. It launched its interactive Swipe Night videos for Tinder, a “choose your own adventure” scripted program, last year. Users’ choices during those viewing sessions are added to their Tinder profiles.
Match claims that its Swipe Night videos can help break the ice between potential matches, but producing full-length original videos is a more capital-intensive — and arguably less elegant — solution than Momo’s mini games.
3. Superior ARPU growth
Match’s subscriber base grew 19% annually to 9.6 million last quarter. Its average revenue per user (ARPU) — calculated by dividing its direct revenue (from subscriptions and a la carte services) by its number of subscribers, then dividing it again by the number of calendar days — rose 4% to $0.59.
Momo’s number of paying users, including Tantan, grew 7% to 13.4 million last quarter. If we divide that figure by all of Momo’s non-advertising revenue (from subscriptions and value-added services), then divide that figure again by its number of calendar days, we get an ARPU of $0.49, which marks 15% growth from the previous year.
Momo has a lower APRU than Match, but its higher growth rate indicates that it could overtake Match in the near future. Furthermore, Momo disclosed that its number of highest spending users — those who spend over 5,000 yuan ($718) each month — grew 20% annually last quarter. Momo also notably rewards high-spending users with regal titles, and it recently stated that “nobility system” convinces its users to maintain their monthly spending levels.
If Match wants to generate stronger ARPU growth and secure higher-paying customers, it can consider mimicking some of Momo’s video streaming and mini-game strategies. It will definitely need to tweak some of those ideas, since some of them are culturally specific to Chinese users, but they could help Match expand its ecosystem, widen its moat, and lock in more users.