• Wed. Jul 17th, 2024

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. Unsplash

With Valentine’s Day quickly approaching, it’s time to talk about whether you’re getting your bang for your buck when it comes to dating apps, many of which charge a monthly fee to use and have shares publicly traded on stock exchanges. If you’re lucky, hours spent swiping on Tinder will pay off in the form of a soulmate, but we are not just talking about dividends in romance. 

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 around the world, the business of swiping left and right is expected to grow rapidly and reach $14.42 billion in revenue by 2030. The largest two players in the dating app market today are Match Group and Bumble (BMBL). Match, which owns Match.com, Tinder, Hinge and several other dating apps, alone accounts for about 30 percent of the market

While publicly traded dating apps have lagged behind the Dow Jones and S&P 500 indexes over the past few years and Silicon Valley investors are reluctant to bet on this category altogether, the largest dating app companies actually perform fairly well financially. Match, for example, has seen its revenue and profit grow in recent years. In 2022, its host of dating apps brought in $3.1 billion in revenue, 62 percent of which came from subscription. 

During the third quarter of 2023, the most recent time period with available financial information, 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 nearly 20 percent.

One item of concern in Match’s financial report, however, is a decline in the number of paying users. Subscribers to all Match-owned apps fell 5 percent in the September quarter year-over-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, inching closer to Bumble’s $39.99 monthly plan, one of the most expensive on the market.

Read Also: Match Group CEO Mandy Ginsberg Deciphers the Business of Love

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

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

Match’s leading competitor, Bumble, came onto the online dating scene in 2014 offering a female-focused experience. While a younger company, Bumble’s niche has allowed for consistent revenue and user growth. The company’s total revenue increased 18.4 percent to $275.5 million in the third quarter of 2023 from a year prior. Paying users also increased to 3.8 million from 3.3 million year-over-year.

While these are impressive numbers, monetizing dating apps that are “designed to be deleted” has proved to be a challenge. Most dating apps utilize a “freemium” model where the service and platform are free but users can pay to improve their experience. Match, Tinder, Hinge and Bumble each offer tiered membership plans with prices ranging from $9.99 to $500 per month. According to an analysis by Morgan Stanley, about 32 percent of the U.S.’s single population use online dating and, of those, slightly more than a quarter pay. 

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

While the Match family of dating apps remain the largest in the market, Bumble is growing fast, on track to secure 20 percent of dating app users in the U.S., according to InvestorPlace. However, recent leadership changes could mean uncertainties down the road. In November 2023, Lidiane Jones, former CEO of Slack, took over as CEO of Bumble, replacing the app’s founder Whitney Wolfe Herd. 

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

Match and Bumble Dominate Online Dating. But Do They Make Good Investments?

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