Finances

Dating app Hinge started out with some stiff competition against Tinder. Since its debut in 2012, several other new dating apps have launched and attracted a growing user base as well as media attention, including female-centric dating app Bumble. Meanwhile, after steady growth since its launch, this year Hinge has seen its numbers declining.

Hinge’s marketing and product development have always focused on attracting more serious daters. The app is geared toward young professionals in their late twenties and thirties who are looking for long-term relationships, as opposed to the hook-up reputation that has followed Tinder since its inception. The app is billed as a “grown-up” alternative to the young users of Tinder, which at first seemed to serve the market well.

Dating app Momo, China’s answer to Tinder, has been a popular dating app among the country’s singles with a record 75 million users. But in recent weeks, Momo seems to be expanding out of the dating business and into something more lucrative.

For its latest update, Momo executives decided to supplement the app's location-based dating service that matches people through swiping and messaging. Now, the app offers a live-streaming function, catering to music lovers and even musicians themselves. The update allows users to watch their favorite musicians perform live, as well as giving them the ability to interact with the musicians.

It’s good news all around for MeetMe. The social discovery service, founded in 2005 to connect users on mobile devices, has posted better-than-anticipated financial results for the second quarter of 2016. The company also announced plans to acquire Skout, a leading global mobile network for meeting new people.

Wall Street’s initial projections predicted $15.27 million in revenue for MeetMe. Instead, revenue exceeded expectations, climbing 48% from last year and clocking in at $16.4 million. Mobile revenue rose 82% to $15.1 million year-over-year. Mobile represented more than 92% of MeetMe’s total revenue in the second quarter.

Adjusted EBITDA increased 109% year-over-year to $6.0 million, reflecting a 37% adjusted EBITDA margin. Non-GAAP net income reached $4.8 million, a 103% increase over Q2 of last year.

Match Group released first quarter 2016 financial results on May 3. The company went public last November, and in its first earnings announcement as a publicly-traded company, Match Group fell short of earnings estimates by 5.3%. This time around, things are looking up.

Match Group reported sharply higher sales and profits in Q1 2016. Last quarter, the company’s dating revenues rose 14%, driven by a 30% increase in paid members. With that momentum, Match Group continued to perform well. Highlights of the quarter include:

• Total revenue rose 21% year over year to $285 million
• Dating revenue grew 24%, led by strong contributions from Tinder and PlentyOfFish
• Adjusted EBITDA nearly doubled over the prior year to $64.6 million
• Average PMC (paid member count) grew 36% to 5.1 million
• Tinder surpassed 1 million PMC as of the end of the quarter and successfully launched its first à la carte paid feature
• Operating income was up 8%, reflecting the strong Adjusted EBITDA growth
• Adjusted Net Income increased 30% as a result of the increase in Adjusted EBITDA
• Cash Flow nearly doubled to $68.5 million, while operating cash flow increased 88% to $75.0 million

Leading the charge is Tinder. “Tinder is really killing it. The numbers are great,” said Chairman and CEO Greg Blatt in an earnings call. “We're spending a lot of time improving the core product experience, experimenting with new product experiences, and yet continuing to rollout modernization initiatives, each of which has basically exceeded our expectations at the time of rolling it out.”

Along with its successes, the quarter saw Match Group slip in a few areas. Average revenue per paying user (ARPPU) declined 10% to $0.54, mostly due to the growth of relatively low-cost services such as Tinder, as well as the continued shift to mobile platforms. Non-dating revenue was flat at $25 million as a result of lower SAT test preparation course volume at The Princeton Review.

Looking forward, Match Group management expects second quarter dating revenue to grow by between 4% and 5% compared to Q1, with EBITDA margin percentage in the low to mid-30s. For the full year, the company predicts total dating revenue between $1.1 billion and $1.14 billion and overall adjusted EBITDA between $410 million and $425 million.

"Match Group posted very strong revenue and adjusted EBITDA growth in the first quarter, driven by exceptional growth at Tinder, solid performance of Meetic and Match, and the PlentyOfFish acquisition," Blatt said in a press release. "We expect solid year over year performance throughout the balance of 2016."

The Match Group list of dating services which we have reviewed include Match, OkCupid, Tinder, and Plenty of Fish.

According to a recent article in Bloomberg News, Tinder expects its paid subscriber base will double by the end of the year.

The Tinder app is free to use, but about 1 million users are currently paying for its tiered service, which provides special features, such as the ability to “super-like” a profile. Super-like allows you to let the person know you think they are extra special, instead of just swiping right as usual. Other paid features include “Rewind” where users can return to a previous profile they swiped left on, or rejected, for the opportunity to choose differently.

Tinder announced recently that it will launch a new social feature to its app to connect groups of friends who share common interests. There is no news on whether that will be part of its free platform or a new paid feature, too.

Gary Swidler, chief financial officer of Tinder's parent company, Match Group Inc., described efforts to monetize the dating app as being "ahead of schedule."

Subscribers aren’t Tinder’s only source of income. The company originally started drawing revenue from ad sales.

Tinder’s huge database of more than 9 million daily users and its well-known brand, especially among the coveted Millennial age group, makes the app a great advertising vehicle for many companies looking to expand their brand awareness. Users of the service spend roughly 35 minutes per day on the app and swipe left or right 140 times, according to company executives. This means a captive audience, which is also appealing to marketers.

While Tinder will continue to sell advertising over its platform (one of the drawbacks of using the free app), they will also push forward with gaining more subscribers and developing more paid features. Tinder garnered criticism last year for charging more money to users over 30, but the company has not since changed its pricing policy.

Because of the growth in Tinder’s revenue, the management team told Bloomberg they feel confident in adding new features to the service and “taking some swings,” in terms of taking chances with the features. The company admitted it hasn’t made any significant changes to the app since adding the “Super-like” feature last November, though recently they were testing the social feature which links you through your Facebook friends to other friend groups and garnered criticism for its lack of privacy. (Users could see their Facebook friends’ Tinder profiles without their knowledge.)

Tinder is owned by Match Group, which also owns popular dating platforms Match, OkCupid, and Plenty of Fish.

There has been speculation that Match Group’s star performer in the online dating space – dating app Tinder – would cannibalize its other online dating companies. But so far, contrary to analysts’ reports, this hasn’t happened.

Tinder is by far the dating app industry giant, with over 25 million active users and about 1 million paid subscribers in its tiered program. Some analysts have feared that because of Tinder’s rapid growth and free platform, it would mean users would leave other popular online dating sites in Match Group (like Match, Plenty of Fish and OkCupid) to join Tinder, making them obsolete.

What they found instead was that Match Group’s overall earnings were up in the first quarter of 2016, thanks in part to the POF acquisition and Match Group’s strategy to grow and invest in Tinder’s rivals.

Overall revenue came in at $285 million in its first quarter, $3 million over expected revenues.

Greg Blatt, chairman and CEO of Match Group, said in the first quarter earnings release: "Match Group posted very strong revenue and Adjusted EBITDA growth in the first quarter, driven by exceptional growth at Tinder, solid performance of Meetic and Match, and the PlentyOfFish acquisition."

Bank of America Merrill Lynch explained that "even without Tinder, Match would have grown its core Dating subscribers by 6% (up from about 1% last quarter) and its Dating revenue by significantly more."

The POF acquisition is an important factor in the revenue numbers. The dating website grew tremendously itself over the years with 70 million registered users, and operated for many years on a shoestring budget with one employee, Markus Frind, who created the dating site and sold it to IAC (Match Group’s parent company) for $575 million in 2015.

Over time if Tinder’s popularity continues to grow, and the app itself makes improvements that resonate with its users, then there could be an impact to Match Group’s other businesses. For now, POF, Match, and OkCupid are still going strong.

One solution that has been floated in the media is for Tinder to advertise other Match Group properties on its app. (Tinder’s revenue comes mainly from paid advertising, rather than its tiered service.)

For the most part, online daters are not beholden to one site or app, preferring to join two or more at any given time. Because of Tinder’s growth, it has grown the entire online dating industry in just three short years, and made online dating a more acceptable practice. Numerous dating apps are launching every week, hoping to cash in on Tinder’s market share and success.

It seems to be a win-win for the online dating industry as a whole, even in a saturated market.