Seeking Alpha analyst Joseph Kowaleski has published some thoughts on how low levels of user retention might impact Match Group in the future.
The piece opens by referencing the Stanford relationship data released earlier in 2019. It shows that the most common way for new couples to meet is via online platforms.
A recent report from Tyro Partners suggested that many of the couples in that study claiming to have met in bars and restaurants may, in fact, have met online. If true, the percentage of new relationships beginning after an online connection could be as high as 75%.
Kowaleski writes: “While the data that chronicles the rise of online dating is breathtaking, the underlying business model of Match is flawed.
“On the surface level, Match has characteristics of a quality market-dominating business. Strong network effects on Match’s platforms are evidence that the company indeed has a strong moat.
“However, the underlying economics of online dating are unfavorable, thus monetizing the user base is a challenge.”
He argues that because serious dating products like Hinge lose subscribers when they are successful, key metrics like ARPU (lifetime) will always suffer.
Casual apps, meanwhile, have a better chance at retention but tend to charge less. Tinder is cheaper than Hinge, and likely has a higher proportion of free vs paid users.
Sites are, therefore, caught between charging a high price point for high churn, or a low price point for slightly lower churn. Neither case makes Match Group attractive as an investment vis-à-vis Facebook, Twitter or Momo.
Read more here.