One is the loneliest number, but people trying to partner up made Q1 fantastic across the board for Match Group (NASDAQ:MTCH). The company behind Match.com, OKCupid, and a host of other dating sites delivered impressive results across the board Wednesday.
In this segment of the Market Foolery podcast, host Chris Hill and MFAM Funds’ Bill Barker talk about the strengths of the niche leader; the different business models of its people-connecting apps; and why Tinder is its biggest profit driver (and is destined to keep that crown).
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on May 8, 2019.
Chris Hill: The stock of the day is Match Group. Match Group is the parent company, of course, of match.com, OK Cupid, chemistry.com — which is a dating site, not a science site, I actually checked that out — and Tinder. First quarter report was fantastic. Profits were up, revenue was up, subscribers were up. Shares of Match Group are up 12% and hitting an all-time high.
Bill Barker: Yeah. This is a force. It’s largely due to Tinder. They’ve got a lot of different brands but Tinder is most of the story about what is going on in terms of the massive profitability that is growing there.
Hill: Well, and you and I were talking earlier today, neither of us have used these apps. We met our wives —
Barker: Back in the old days.
Hill: — back in the old days, before there were apps. But, as you pointed out, if Match works out for you, then you’re leaving. [laughs] There are probably half a dozen or so people here at The Motley Fool who met their spouse through match.com. Tinder, however, is not so much about, “I’m looking for someone to spend the rest of my life with.” Tinder is much more, “I’m looking for someone to possibly spend the night with.”
Barker: Right. Just purely from an economics perspective, repeat customers are better than one-offs. All the other elements that they have — they have a lot of different ways that they are hooking people up, whether it’s for lifetime matches, or, they’ve got it segmented by age, there are different brands around the world, some that are targeted at racial groups. A lot of them are about finding your lifetime partner or longtime relationship. They’re categorized as higher relationship intent, is how they refer to Match or to OurTime, and things like that. Tinder is not about long relationships. Therefore it is more of a model where you can satisfy people by finding new opportunities constantly, and expanding the ways in which the company does that. All of this is to say, I think it’s a good thing that we’re talking about this today rather than during Apropos of Nothing, where we might — or you, probably — might work a little more blue on this topic.
Hill: [laughs] We don’t work blue on Apropos of Nothing!
Barker: We lace Apropos of Nothing with some alcohol.
Barker: Which tends to increase the chances of ending up in territory that’s a little bit blue.
Hill: No. This is a clean show.
Barker: Yeah, no, absolutely, this is. As well as the Apropos of Nothing, to be honest. It’s just, you’re working with kindling there.
Hill: There is a little bit more kindling in the form of some high-level alcohol. Let me go back to the actual investing for a second here. I think something that often gets overlooked with Match Group is Interactive Group, IAC. IAC, headed up by Barry Diller, who has a great track record when it comes to media entertainment, and I would throw social media in there as well, IAC owns a big chunk of Match Group. So it’s not just shares of Match Group that are hitting an all-time high today. IAC is also up. Not as much, up about 5%. But that’s also hitting an all-time high.
Barker: Yeah, they do own that. A few other things, they own Angie’s List and all that stuff.
Hill: IAC has a very big portfolio.
Barker: Although Match Group is a very large chunk of it at this point. The nice thing about Tinder is that people are likely to be customers for a fairly long time and you can get people to pay more and more and more as it becomes more successful at finding the kinds of Tinder matches that people are looking for. The economics of that are just looking extremely good, in terms of the revenue growth, the company’s compounding it over 150% over the last three years
Hill: Unlike Lyft, they’re actually profitable.
Barker: They are profitable. And that is one of the differences between this and many other software, cloud-based services where the scale involves, you’re not having to employ massively greater numbers of people to get massively greater numbers of service done. You’ve got network effects as well that are very attractive. The more people who are using Tinder, the more you want to be using it, because there are more choices for you. And then they’ve got all their super likes and boosts and things like that, which are increasing the addictive nature of the property.
Hill: One more thing I’ll just add in terms of the business is, unlike Lyft, which has a direct competitor in Uber and vice versa, I’m not really sure who the Pepsi is to Match Group’s Coke. I mean, I suppose it’s eHarmony. I don’t know how many properties eHarmony has beyond its signature one. In this industry, it feels like this is Match Group’s world and all other competitors are living in it.
Barker: Well, yes. They have most of the best known names. I think that Bumble is a reasonable competitor and is attractive to more of the female-focused generating the contact model. That has gotten off to a good start, but it’s way, way behind Tinder.
Bill Barker has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Match Group. The Motley Fool has a disclosure policy.