Long gone are the days when most of us found love at the local night club, dive bar, or church event. More people are finding love online than ever before; more than 60% of the under 30 crowd have or are using an online dating app or site. One in three relationships begin online and that number is growing all the time. We shop for everything else online, why not love? It’s certainly more expedient than going on date after date only to find you have nothing in common. Today, we will look at the business end of love connections and how to profit from them.
The first name that comes to mind when thinking of online dating, is Match.com. Match, owned by Match Group (Nasdaq: MTCH) has grown to a house-hold name since it’s launch in 1995. As many companies struggled to find profits during the dot com era, Match began with immediate cash flow charging those longing for love $9.95 per month. Since then it’s grown to 20 million users and is the largest player in the online dating space with over 25% market share.
Of course there are ‘competitors’ as well: Tinder, OurTime, OkCupid, PlentyofFish and Meetic (which is big across Europe). All names you’ve most likely heard of (or are using), but what might surprise you is Match Group owns them all. The number of users are staggering. Tinder has more than 50 million users, OKCupid is growing rapidly with more than 40,000 monthly users and OurTime owns the more mature 50+ market.
Along with a strong and ever changing user base, comes strong cash flow. Up nearly 20% in revenues since last year, Match Group has an impressive profit margin almost 4x the average company in the S&P 500. Not only have they done well monetizing the various relationship sites, they have put extensive thought into innovation:
- helping new couples learn more about each other post-meeting
- leveraging artificial intelligence that uses prior dating preferences to enhance future experiences
- using location based data to match people up by the things they do and places they go
Tinder, the most used application in their brand portfolio not only accounts for Match Groups largest user base at 27%, it’s also the fastest growing. The company expects the market to grow 31% thanks to growth in Eastern Europe, South Korea, Japan, and India.
Between the strong growth and diversification, we have a winner with this stock long term and suggest ‘swiping right’ and adding this to your portfolio. Look for an entry below $40, and use a 25% trailing stop.
Update May 2, 2018
Yesterday at it’s annual developer conference F8, Mark Zuckerberg announced that Facebook will soon go live with a dating feature and this sent the share price of Match Group (Nasdaq: MTCH) down 22%. We have to believe this is a complete over-reaction by Wall Street and presents us with an excellent buy-in point for this stock.
Now that our parents and grandparents are on Facebook are most people really going to share their personal dating preferences for all to see? We think not. Yes, it will undoubtably have some success, but Match Group, with it’s dominance in the dating space will continue to grow as we outlined in the main post. Finally, we had to chuckle after reading Joey Levin’s comment regarding Mark Zuckerberg’s time in Washington, D.C. “Come on in,” Levin said. “The water’s warm. Their product could be great for US/Russia relationships.” Levin is chief executive at IAC, Match Group’s parent company.