Match Group’s Long Term Sustainable Competitive Advantage

IDEA – Apr 25 – I came across this great article on sustainable competitive advantage by the V.C. company Greylock Partners. It got me thinking about Match Group. They’re the clear leader in the dating industry now, of course. But what aspects of their business are contributing to their long term sustainable competitive advantage?

Let’s look down the list that Greylock Partner’s article lists…

1. Network Effects – NOT PRESENT 
I don’t see how Match Group has any kind of network effect. A user on Match/Tinder/POF doesn’t improve the utility of the service by inviting more members. On Facebook yes, on Match no. The utility just doesn’t go up. With Facebook, or a fax machine, or email, you need to invite people into the service for it to be useful. Not so with Match or any dating site really. In some ways, the utility goes down when friends are on a dating site. Presumably, if a users contacts are in the ‘friends camp,’ they’re usually out of the ‘I-want-to-date-them’ camp. If they’re interested in dating a particular friend, they’d be foolish to invite them into a dating service where they’d then have to compete with a thousand other members approaching them.

I guess the exception would be with the friends-as-matchmakers dating sites. The sites where users are invited to invite their friends to matchmake them with their friends. But I’ve yet to see one of these sites really take off. Engage.com came and went, years ago. Jess Meet Ken looked like it could do well, but that didn’t get traction either. So, no go on network effects.

If there’s one thing Match Group’s portfolio of dating sites has, it’s scale. With Match, Meetic, POF, and the behemoth Tinder, and more, they’ve captured the lions share of the Internet dating market, are riveted into the lexicon, and are here to stay. But how did they get to scale? The Greylock Partners article lists a few strategies and here’s my thoughts on Match Group’s use of these strategies.

(i) Negotiated Leverage – YES 
They effectively nixed Yahoo Personals, for example. Remember that move? They did similar with MSN and AOL. They had the scale to negotiate ad channel exclusivity and pick off massive distribution deals. But they went so far as to nix major competitors by simply making it not worth their while to compete. i.e. Yahoo Personals, and Love at AOL.

(ii) Amortization of Fixed Costs – YES 
For example, the cost of specialists, like security/privacy/GDPR professionals, is spread over far more of a revenue base. Infrastructure costs are amortized over a far larger base. They certainly enjoy using this advantage.

(iii) Product Density – YES, VERY SUBSTANTIALLY YES 
Although Match Group doesn’t enjoy network effects, they very much enjoy density effects. Their products are clearly superior to competitors because of their scale, and the density of members in different geographic areas and even niches, in the case of their People Media properties.

3. Brand – YES
When groups of singles sit around a dinner table and the topic of Internet dating comes up, you can be sure Match Group brands will be in the mix. Privacy and trust are very important in this delicate and emotion-driven industry, and so brand leadership is especially important. Match Group have numerous clear brand winners in their portfolio, and I think they’ve build trust, great brand equity and word-of-mouth as a consequence.

4. Non-Network Switching Costs – YES
Switching to another dating site is not that easy or fun to do. Its a pain to have to sign up for a profile on another site. So Match Group sites also enjoy some enduring competitive effects here as well. Users also build habits around their favorite dating sites so they’re less likely to switch out to competitors.

5. Regulatory – NO
I don’t think Match Group has any special advantage here, although they have better legal representation and lobbying capability.

6. Technical Advantage – YES
They can attract and pay for upper echelon technical staff, for sure.

7. Cornered Access to Limited Supply – NO
Not sure on this. I don’t think they’ve cornered access to singles quite yet. What do you think?

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