Finances

Since its debut, The League has earned a somewhat elitist reputation. True to its name, the dating app screens all of its applicants according to their career and education, making it a place for singles of a certain stature to find each other online.

Recently, the company launched a new version of its dating app in Los Angeles following a soft launch in New York and San Francisco, and is now focusing on events. Potential members are still required to apply before being able to use the app (the company claims more than 100,000 are on its waiting list). But once you’ve been approved as a member, you can join or create new events based on your interests.

TechCrunch interviewed CEO Amanda Bradford about the app’s new focus, and she emphasized its potential. “The overall goal,” Bradford told the news website, is to turn The League into a “members-only club,” with “a killer singles scene.”

Business Insider was a little more skeptical about the relaunch, calling it a “do or die moment” for the company, since they need to make some cash soon. According to Business Insider, The League spent most of the last year rebuilding its app from the ground up because it wouldn’t scale properly – hence the focus on events. The company needed to see if people were just curious about the app because of the media buzz, or if it was a viable platform where its members would truly engage. Although the app is still free, Bradford did say that the plan is to offer a freemium service and start charging a tiered membership fee, similar to a members-only club. “Ads aren’t feasible for us,” Bradford told the website.

The newest version of The League is meant to encourage friendships and networking among the site’s members, and not necessarily limit connections to dating. For instance, a female user can create a “women’s wine circle” or a running group. The focus is more on the activity, event or interest, and less on meeting potential dates, which makes these events more organic and fun compared to a singles party. The League has done its own events for members, but these are limited in comparison to members taking charge and creating events themselves.

So while the company says it’s not moving away from the dating space, it seems to be focusing more on the app’s potential to create connections – whether it’s friendships, business contacts, or potential dates.  The bigger question is how soon the app will be able to grow its membership, stickiness, and eventually its revenue stream.

Having survived its first quarter as a standalone public company, Match Group Inc. has released fourth quarter 2015 results.

"Match Group had a seminal fourth quarter, completing our initial public offering, the acquisition of PlentyOfFish, and the realignment of our management structure to better reflect our increasing global scale," commented Greg Blatt, Chairman and CEO of Match Group. "At the same time, we delivered solid revenue and profit growth and we head into 2016 with increasing momentum, which we expect will continue to build throughout the year."

Highlights of Q4 2015 include:

• Total revenue increased 12%, or 16% excluding the effects of foreign exchange, driven by a 14% increase in Dating revenue attributable to 30% higher Average PMC, which grew to over 4.6 million globally.
• Excluding both deferred revenue write-offs related to acquisitions and foreign exchange impacts, total Dating revenue would have been $259.4 million, or 22% higher than in Q4 2014.
• Adjusted EBITDA for Q4 2015 was $99.3 million, an increase of 16% versus Q4 2014.
• ARPPU was $0.53 for Q4 2015, compared to $0.62 in Q4 2014, a decline of 14%. Excluding the effects of foreign exchange, which was approximately 400 basis points, and deferred revenue write-offs related to acquisitions, which was approximately 300 basis points, ARPPU declined 7%.
• The increase in Average PMC compared to Q4 2014 was driven primarily by significant growth at Tinder and the acquisition of PlentyOfFish, which closed on October 28, 2015.
• Net Income and GAAP Diluted EPS declined by 26% and 44%, respectively, in the fourth quarter of 2015 compared to Q4 2014, driven primarily by an increase in stock-based compensation expense of $14.9 million and an increase in interest expense of $16.9 million, which includes $7.3 million of debt issuance costs. Adjusted Net Income and Adjusted EPS, which exclude the impact of the stock-compensation expense, declined 2% and 26%, respectively, as a result of the increased interest expense.

Total revenue for the October-December period was $268 million, up 15% but short of the $278 million expected by Wall Street analysts polled by Thomson Reuters. The company reported a net income of $35.6 million, a 26% decrease from $48.3 million in the same quarter last year.

Tinder and Plenty Of Fish were behind the greatest growth in paid subscribers in the quarter. Tinder reported January 3 as the single busiest day in its three-year history, responsible for the highest volume of downloads and growth in active users.

Despite the existence of several major players in the dating app industry, Tinder is the clear leader. Deutsche Bank analyst Ross Sandler valued the company at $1.2 billion, and according to SEC filings from Match Group in November, Tinder boasts 9.6 million daily active users and 583,000 paid members.

Those solid numbers, along with Tinder’s commitment to regularly updating its product, mean the app is unlikely to be dethroned any time soon. Going forward into 2016, Match Group will likely continue to focus a substantial measure of its efforts into Tinder to maintain its top spot. For more information on Match Group dating services you can read our Match.com review, OkCupid review, and our Tinder dating app review.

Last month on the Canadian TV show The Disruptors, an unlikely interview took place between host Bruce Croxton and Markus Frind, the founder of popular online dating site Plenty of Fish. (Broxton was the founder of dating site Lavalife, which raked in members until POF’s free service hit the market.)

For the first time, the two former rivals were sitting down together to discuss the current state of the dating industry, and the history of their two companies.

Broxton noted the quick success of POF, which because of its free service, quickly gained a lot of users – many of whom hadn’t tried online dating previously. Typically, dating sites made their money through selling subscriptions to members, but POF tried a different model to attract a larger audience, and it worked. Instead of selling subscriptions, the site made its money by selling ad space. After all, they had an engaged audience.

At its peak and before its sale in 2004, Lavalife had over four hundred employees. Frind launched POF in 2003 and operated the service alone from his apartment for the first five years, without hiring another employee despite the service’s rapid growth. He managed to turn it into the largest dating site in the world by focusing on the US market (even though he was based in Canada), and by keeping the service free despite the naysayers.

Frind’s experience wasn’t in the dating industry when he first thought of the idea for POF. In the interview, he admitted that he just needed to learn a new programming language and the best way to do that would be through creating a dating website.

Croxton was complimentary in the interview, admitting that Frind was incredibly innovative in the dating space, despite the endless number of dating apps launched in the last few years claiming to change the online dating industry. “I find it ironic because many of the tech ideas on the show really emphasize that it’s not about the technology anymore because you can be up and running very quickly, it’s really a marketing barrier to entry. But you were pioneering that back in 2003,” Croxon said.

Frind Agreed, noting that he sold his company (for $800 million) because he was tired: “There isn’t really much innovation in the dating space; the features we have today are the same features we had five years ago. It just got kind of boring and I wanted to do something new.”

You can watch the whole interview here. To find out more about POF you can read our review on Plenty of Fish.

Gay dating app Grindr has partnered up with a Chinese gaming company for its first-ever outside investment. Beijing Kunlun Tech Co., the company that helped introduce Angry Birds to China, offered $93 million in cash for 60 percent of New Grindr LLC.

Beijing Kunlun Chairman Zhou Yahui came across the opportunity while scouting other potential investments in the U.S., said a company spokeswoman, Sophie Chen. Grindr is one of seven deals Zhou has overseen for Kunlun since April. The company hopes its newest addition will broaden its portfolio of services and create a new source of revenue. It is expected to leverage Grindr's popularity to augment income from outside China by directing users towards its games.

“Grindr is the top platform in their area and is mostly known as data-driven, as well as for their great user base,” Chen said in an e-mail to Bloomberg. “It’s essential to the Kunlun global Internet eco-sphere.”

Although the deal awaits antitrust review by the U.S. Government, Bloomberg reports that Beijing Kunlun’s shares rose by the maximum daily 10 percent limit after news of the pact went public.

The move isn't a surprise for those who have been following Grindr's maneuvers behind the scenes. The app had been exploring a sale or fundraising round for much of last year in hopes of accelerating its growth beyond the matchmaking sphere.

In the wake of Kunlun's majority investment, Grindr has been valued at $155 million and founder Joel Simkhai assured users that it would be “business as usual” for the app in an open letter posted on the company blog.

“For nearly seven years, Grindr has self-funded its growth, and in doing so, we have built the largest network for gay men in the world,” he writes. “We have taken this investment in our company to accelerate our growth, to allow us to expand our services for you, and to continue to ensure that we make Grindr the number one app and brand for our millions of users.”

Simkhai also promises “a renewed sense of purpose” and “additional resources” post-investment, as well as new features and services planned for 2016.

Grindr, founded in 2009, hosts 2 million visitors daily across 196 countries, according to a company fact sheet. Despite its runaway success, the Los Angeles-based mobile app does not list China among its top 10 markets by daily active users. The US takes the top spot, followed by the UK, Mexico, Brazil and France.

China’s attitude toward homosexuality has changed radically in the past decade, meaning the scene could finally be set for Grindr to expand within the country, although it will face stiff competition from a domestic gay social networking app (founded by a former police officer) called Blued.

The business of online dating continues to grow, as more apps enter the market and compete for funding from investors ready to cash in on the next Tinder. The latest financial news in the industry involves popular gay dating app Grindr, who just announced that Chinese online gaming titan Beijing Kunlun Tech has taken a “majority investment” in their app.

According to The New York Times, Beijing Kunlun’s stake in the company will be about 60%, with the remainder to be owned by Grindr employees and Joel Simkhai, the company's founder. The valuation of Grindr seems to be about $155 million according to the same article, although the actual amount invested was not disclosed.

Interestingly, Grindr had not raised capital from outside investors prior to their deal with Beijing Kunlun. The company was started and funded by Simkhai himself, who began with only a few thousand dollars. He grew the company and the brand: according to PC Magazine, the average user spends up to 54 minutes a day on the app – a figure that exceeds Facebook’s 42 minutes and Instagram’s 21 minutes.

According to leaked documents back in August, Grindr predicted pulling in about $38 million for 2015.

According to Financial Review, Carter McJunkin, chief operating officer of Grindr said in an interview: "We have users in every country in the world, but in order to get to the next phase of our business and grow faster, we needed a partner," McJunkin added that the relationship made sense for Grindr because of Beijing Kunlun's digital expertise, and because the company agreed to let Grindr's founders continue its operating structure and retain its current team.

Beijing Kulun saw Grindr as a good opportunity to expand beyond its core gaming focus, into more of an overall “lifestyle” brand. 

It’s interesting to note that Beijing Kunlun’s choice to purchase stake in a gay dating app seems incongruous, since homosexuality is still a taboo subject in China, and many gay people face widespread discrimination. It is not clear if Grindr intends to expand its business into the Chinese market, but there would be social stigma to overcome.

Beijing Kulun might see Grindr as a sound investment above all, despite its target market. Or perhaps they are paving the way for other Chinese investors to expand and reach out to invest in more diverse, successful brands outside of China. "We have been very impressed by Grindr's progress to date and are extremely excited about the future of the company," Yahui Zhou, chairman of Kunlun, said in a statement. "We will continue to seek out and invest in high-quality technology companies led by top-tier management across the globe.” For more information on this gay dating app you can check our our Grindr Topic.

Friends Reunited won’t be available to message, post and keep in touch anymore. The once-popular social site, founded in 2000, was left in the dust by rivals such as MySpace and later, to a larger extent, Facebook.

Friends Reunited has a turbulent history. At one point a tech darling after quickly gaining three million subscribers in 2003, it was sold to ITV in 2005 for 125 million pounds, or about $208 million US. At its peak, 23 million users were on Friends Reunited.

But what the company didn’t intend was that employers would begin to use the service to check on potential and current employees, gauging what they said on social media as opposed to how they conducted themselves at work. It led to businesses using the site as a way to spy on employees, gathering information such as whether an employee was looking for another job, what they were saying about co-workers, or what interviewees and potential employees were saying online that could be potentially harmful.

At one stage, according to UK newspaper The Telegraph, Friends Reunited was blamed for a spike in the divorce rate on the grounds it encouraged classroom sweethearts to rekindle romances.

Instead of a positive, uplifting social experience where people felt secure to engage and share, the company found its platform being used as a way to spy on people for bad behavior. Naturally, users over time stopped posting and using the service. Membership dropped, especially when Facebook entered the picture a couple of years later. While Facebook continued to gain users, Friends Reunited found itself floundering.

The company was sold yet again in 2009 to DC Thompson for only 25 million pounds, and had only a fraction of its user base still active on the site. In 2012, the company decided to do a reboot and rebrand itself “Memory Box,” hoping to take on Facebook’s rapid growth. Memory Box did not succeed.

In 2014, DC Thompson offered the platform back to the original founder of Friends Reunited Steve Pankhurst, who thought he could restart the fledgling website. But in an announcement made on self-publishing platform Medium, Pankhurst announced its closure in January.

He wrote on Medium: "The first part of our plan was to put Friends Reunited back to make it more like the original site  --  that is, listing your schools and memories of your school days." However, this didn't really happen.

Pankhurst is now working on a new social media site called Liife, which allows you to upload photos and mark and share them with friends to identify significant “moments,” like trips, awards ceremonies or graduations. He said the new site would in no way replace Friends Reunited.

The related service Friends Reunited Dating still appears to be in operation and is not affected by the closing of the social service Friends Reunited. For more information on dating site please read our review of Friends Reunited Dating.