Love put Match Group Inc (NASDAQ:MTCH) on the map. But friendship might be what keeps it growing for years to come.
Last month, Tinder, the crown jewel of the online dating goliath’s 45 websites and apps in 190 countries, took its first step toward “just being friends” with its ever-expanding user base. Tinder has become the biggest thing in smartphone dating, an app that allows users to form relationships by simply “swiping right” when they see a user they like.
Tinder was entirely free until last year, when it launched a subscription option that gives users more perks at a price range of between $9.99 and $19.99 a month. It already has well over a million paid subscribers, with a goal of reaching 2 million by year’s end.
Now Tinder has a new friend, and her name is Hey! Vina. It’s a friend-finding app for women that attracted 100,000 users within two weeks of its January launch. Tinder invested a “meaningful amount” in Hey! Vina as part of a $1.4 million seed round last month.
Similar to Tinder, the app matches women who have similar interests and compatible personalities, but is aimed at friend seekers rather than people looking for romance.
New Revenue Stream for MTCH Stock?
And that’s a huge distinction. Because Hey! Vina is so new, and still free to all, that it’s too early to tell what the direct financial impact of Tinder’s investment in the upstart social media company may be.
What’s more important is what Hey! Vina represents — a move by Tinder into a whole new realm, the “friends zone.”
Granted, being in a relationship has done wonders for Tinder; the app has been adding 200,000 paid subscribers per quarter since launching its Premium option, and total sales at Match Group have grown 28% during that time, or more than double the 12.7% sales growth from the previous five quarters.
Meanwhile, MTCH stock has soared since its debut on the Nasdaq last November, rising nearly 30% since its initial public offering, but more than doubling since bottoming at $9 in early February.
Eventually, however, Tinder’s world-beating growth will slow, and investments in other potential revenue streams like Hey! Vina will become the new growth areas for Match Group. Granted, Tinder is just one slice of the Match Group pie, accounting for 23% of its 5.3 million total subscribers — though that figure is up from a mere 11% a year ago.
Match.com, OkCupid and PlentyOfFish, which it bought for $575 million in July 2015, are among Match Group’s other big online dating properties, though none are growing as fast as Tinder.
Match Group doesn’t have all its eggs in the online dating basket — it currently accounts for 90% of total sales, with the remaining 10% coming from educational websites such as Princeton Review and Tutor.com, though sales of those nondating properties are on the decline.
But MTCH stock is heavily levered to the online dating business, which is why expanding its product portfolio into things like friend-finding apps is so important to its long-term sustainability.
MTCH Stock Surging
In the meantime, MTCH is certainly a short- to intermediate-term buy — even at all-time highs above $19. MTCH stock hasn’t slowed since bursting through its 50-day moving average in mid-September, when it jumped from $15 to $17, paused right there for a couple weeks and then burst to new highs last week.
If you don’t already own MTCH, you could take out a small position in the stock now, and add to it if the Nov. 2 third-quarter earnings spark another gap up.
Even if earnings miss the mark, Match Group is the dominant player in an industry that 15% of Americans now say they use, up from 11% in 2013. And in Tinder, it owns the fastest-growing property within that industry. But eventually, the online dating industry will become saturated, and Match Group will need to look elsewhere to find growth.
Tinder’s investment in Hey! Vina shows that MTCH is already looking. It may be the first of many new friends for Match Group.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
