Seeking Alpha editors Mike Taylor and Daniel Shvartsman have assessed the advantages of Match Group stock in a Behind The Idea podcast episode.
The hosts start by unpacking the subscription model, and considering its durability. Tinder “reduces the pain” of search with its premium features, and this “makes a lot of sense”, says Taylor.
ARPU growth and revenues are both healthy, but Shvartsman says retention may be a concern. He likens dating apps to medical technology – the successful app should solve the problem of singledom and cause the user to leave.
Taylor is not so concerned about churn, so long as acquisition costs remain low. He feels many under 30s are not looking for “permanent companionship”, so users may stay on the app for several years.
He also says that as many people download the app, more and more uses will emerge. Filtering between users with different motivations (a feature recently introduced by Bumble) may be an avenue for further monetisation.
Match Group seems to have survived the initial impact of Facebook Dating, Shvartsman notes, and the PR problems at the social media giant are likely to prevent any major disruption in the near future.
The recent $2 per share special dividend is described as unique, but the balance sheet and relative size of liquid assets suggest the company is in a position to execute such a transaction. One reading of the dividend is that Match sees limited growth ahead of it, but this is unlikely given the potential for greater international and domestic penetration.
On the business concern of dating app fatigue, the hosts felt there was a low risk of the apps disappearing anytime soon. Dating apps are “entrenched” – younger cohorts grow up comfortable with Tinder and other Match products. Competition and major landscape shifts may be more of a worry – Snapchat is brought up as an example of an app that is losing a young user base for these reasons.
Find the episode here.