Is Match Group Inc A Match For Your Portfolio?
The history of dating has come a long way. At the beginning of the 20th century, this term replaced a quite unemotional affair that took place at homes and had both of a young woman’s parents present. Soon, such meetings became unsupervised, but still involved a complicated and important code of manners. So technically, the modern history of dating began in 1920-s, when inviting someone out to things like movie theatres and restaurants became a norm. In the next 100 years, we saw a shift in gender roles, the sexual revolution of the 1960s, and a growing popularity of communication tools such as phone and then an Internet. The latter being arguably one of the most groundbreaking shifts the dating culture has ever experienced.
It feels like that the adoption of Internet dating had been slow until it one day became a standard. Not too long ago the concept of meeting a person knowing only his online profile sounded strange, to say the least. Some people actually preferred to lie about how they met their partner just to save their face. But now, online dating has lost much of its stigma. The majority of my friends met either through social media or one of the dating apps. Hell, some of these relationships resulted in marriages! Online dating has reached a tipping point, and today over a third of marriages start from meeting online.
Match Group Inc is the behemoth of this growing industry of online dating. Its portfolio of websites/applications includes Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, and Pairs. These brands appeal to different demographics and geographic locations around the world to increase the effectiveness of apps and the number of users. The most recognizable from the list is Tinder. Launched in 2012, Tinder has become the world’s leading online dating app. Currently, it has users in more than 190 countries around the world. According to their website, “Each day, 1.6 billion matches are made on Tinder with more than 20 billion matches made to date.”
There are two main sources of income of Match Group Inc. The first one is quite self-explanatory — paid services of the listed websites/apps. For example, paid feature Tinder Gold lets you see who liked your profile before you like theirs (such function is very handful in cities with a large number of users). It also lets you “Super Like” a number of people daily (make a connection without the other person’s “like”). There are a few other perks such as a manual change of geographic location (which is perfect if you frequently travel), but let’s focus on the company as a whole. The second source of income that has been growing recently and is showing a great potential is Ads. The company has been gathering their users’ personal preferences and at this point can offer quite an effective platform for advertisements. This amount of data along with machine learning can simplify the process of finding people you will like, and I’m sure that Tinder is going to use it more and more. They have recently launched a feature called “Super Likable” that takes advantage of AI:
Super Likeable is a new artificial intelligence-powered experience that aims to delight and surprise with a simple and fun new format to introduce you to people we think will be of special interest to you. When a user comes across the Super Likeable feature, they’ll receive a free Super Like they can send to one of the four people we’ve presented to you. (Source: blog.tinder.com)
The addressable market keeps expanding as the number of singles turning to online dating has been growing. Such a high number of users can help them streamline some of the operations and leverage the best practices among other brands in their portfolio, creating an even tougher competition in the online dating field. At this point, it seems like the most important problem Match Group Inc is facing is Facebook’s intention to enter the dating scene. Some might say that Facebook knows you better than your friends do, and they are not far from the truth. With two of the most important social media platforms under their wing, they might give Match Group Inc a run for their money. Even though, we don’t know what this service is going to look like once it’s launched, we can check out screenshots by Facebook employees that are currently testing the app.
Match Group Inc’s stock is not exactly cheap with the P/E of 28. However, the revenue has been on a rise. According to Q2, revenue climbed 36% compared to the same quarter in 2017, reaching $421.2 million. The number of Tinder subscribers, it’s biggest asset, grew by 81% year-over-year. In terms of online dating, USA has been the pioneer of the space, so similar trends are coming to fruition internationally. It’s safe to say that soon the majority of the profits are going to come from outside the U.S. At that point, Facebook’s dating app will most likely be live. We can’t really speculate whether it will be a success or not. The only thing we can do is to make assumptions about the state of the industry in the future, and evaluate the moats of the company of our research. So far it looks quite well-positioned and it won’t give up market share that easy. Nevertheless, it’s crucial to always be on top of the developments in this field. I guess I’m back to s̶w̶i̶p̶i̶n̶g̶ researching!
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Helpful links:
Match Group Inc’s Investor Relations Page
Dating Comes to Facebook — Video From F8 Conference
How I used Artificial Intelligence to automate Tinder — Building an AI to Land More Matches
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What do you think about the stock? Would love to see your feedback in the comments!
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