In this episode of Industry Focus: Consumer Goods, join Motley Fool analysts Asit Sharma and Emily Flippen as they take a look at the online dating industry, including dating trends coming out of the coronavirus pandemic as well as two of the biggest competitors: Match Group (NASDAQ:MTCH) and Bumble (NASDAQ:BMBL).
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This video was recorded on July 6, 2021.
Emily Flippen: Welcome to Industry Focus. Today is Tuesday, July 6th, and I’m the host of this episode, Emily Flippen. Today, I am joined by Motley Fool Senior Analyst Asit Sharma, to revisit the online dating industry and talk about two key players, of course, Match Group and Bumble. Asit, thanks for joining.
Asit Sharma: Emily, thank you for having me and I hope we don’t bumble through this podcast, and I hope we can find a match for prospective investors who are looking for a good investment in this space.
Flippen: I wish I was as quick […] as you, Asit. I have zero puns planned throughout this episode, so today you’re setting the expectation high.
Sharma: Zero puns are better than a lot of bad puns, so I think you’re one step ahead already.
Flippen: Well, we can agree to disagree there. I’m a pun enthusiast myself. But before we’re getting into taping this episode you said, I’m from a generation that didn’t really use online dating, so I had to spend a lot of time getting up to speed on this industry. I chuckled to myself, because I’m from a generation that uses online dating, but I myself have never used any of these apps. I think I’m in the minority of millennials here who have never used Tinder, for instance, which is owned by Match Group. I’m in the same boat as you, in a sense. I’m approaching this from a truly naive perspective.
Sharma: Well, that’s really cool to hear, Emily. I should say that one of the things investing has taught me is to leave my preconceptions at the door and it has a funny way of taking back full-circle, so I could have this […] view of online dating and say, I remember when I was dating my wife, I was writing physical letters. But how different is that than using another platform to communicate with someone? It’s funny, in looking at an investment, it helps me become a better person, not such a grumpy person as I see technology change. I can actually participate and realize, even the printing press was a major technology in its time, right?
Flippen: Well, you’re already less senile that I am. I know when I am older I’m going to be the grumpiest investor that has ever existed. That being said, I was intrigued by some of the trends that we’ve seen with online dating over the past year, in particular because I can distinctly remember having conversations with coworkers, again, coworkers that know the industry better than myself just from being users of the products, back, and I think it was probably February or March in 2020, right when the pandemic was kicking off. There was this really interesting question mark about what would happen to the online dating industry. Would it completely die during a pandemic? Will it thrive because we had nowhere else to go? Nobody really knew. I think that the answer was “yes” to both of those things, which again, it’s completely unique. But when you think about a broad category of online dating, as you look out over the next 5+ years, how do you feel about it?
Sharma: I’m feeling positive about it. Prepping for this podcast, you were curious as to what was going to happen right after the pandemic. Is engagement online going to fall off as people start going back to the places in real life that they meet, and that organic interaction increases, and I do think people have a hunger for that, or will some of this remain as normal? I think that we’re going to see both things happening at the same time. I think you’ll see much more social interaction. People have a hunger to be back together and see each other face-to-face, but at the same time, we’ve discovered the beauty of interactions online in a way we didn’t experience them before. I think that while it’s easy to see the next one or two years as a reaction to the pandemic, with some things having changed, I think what’s harder to parse out is over time, are we still in the early stages of online engagement? Will there come a time, let’s think outside five years, where people just have a hunger to dispense with scrolling through feeds and swiping, and just want to be more spontaneous? Will life return to the unpredictability of meeting someone on chance, on luck? I’ve got some thoughts about that. We could, maybe at the end of the show, discuss a little bit about that.
Flippen: Well, as an introvert, the idea of having to meet someone organically actually sounds like a nightmare to me. I love the arm’s-length relationships that you could establish via apps like Tinder and Bumble. But I think what stands out to me when I think about the industry five years from now, and about the audience that has been curated during the pandemic, I do think it maybe will skew older. I think about all the people in my life who were maybe reluctant to adopt technology, that were then forced to do so during the pandemic, things like Zoom, video chatting. I think to an extent, we’ve seen that with an older demographic with dating apps as well. You couldn’t leave. You couldn’t meet people organically in most places last year. Therefore, they were forced to either sit at home with their loneliness, which nobody likes, or maybe download an app and see if you can just talk to someone new. In my mind, I think that maybe it has encouraged a slightly older audience to engage with apps that could be a real tailwind five years from now.
Sharma: It’s very interesting and I believe you’ve got some insight there. I’m just personally remembering during the pandemic, my parents talking about getting on a Zoom call to meet with the group of older folks that they normally meet with. They have picnics together, they socialize, and these are people now who are 20-30 years older than me. I was surprised that my parents actually took the leap and were avid Zoomers. Then of course, we had some Zoom calls, etc, but if you look around, that is everywhere. Now, this facility, with the technology, what does it mean for those who may be, let’s not call them older, just because of my gray hairs, let’s call them wiser, more mature.
But this age group that’s beyond, let’s say, the 18-year-olds, I think in the near-term, also, the pandemic had this effect of making all of us reassess where we were in our lives. You see this in so many white-collar jobs where folks just aren’t eager to jump back into a car and commute 30 minutes each way to work. You see it also even in entry-level jobs in our society, where I think about the restaurant industry, which you and I both follow, they’re having such trouble filling jobs, because it’s such a hard industry to work in. People really want more meaningful work time regardless of the income they’re making. You could translate this into just how everyone is taking stock of their lives, regardless of their age. I definitely see that and believe that older people are thinking both about what they want to do with the rest of their lives and how to get the most fruitful timeout of that, but also, they’ve got the comfort with the platforms now. There is a potential revenue growth that we’ve never really thought about before the pandemic, for companies like Match Group and Bumble.
Flippen: The last, I would say it’s a question, conversation piece I want to pose to us before moving on to talk about some of these businesses, is about the penetration in the online dating community. One of the numbers that Match Group broke out was that 50% of North Americans at one point have tried online dating. I thought to myself, going back and forth on this number a lot, it was the question of is this a glass half full or a glass half empty? Because in my mind, 50%, at least it immediately struck me as a very large number of people, and I know that online dating is the most popular way for people to meet their partners in today’s day and age, but 50% struck me as really saturated. Now, the management team at Match Group talked about it like an opportunity, which just took me by surprise and I found myself going back and forth. Maybe it has to do with the number of apps that that 50% are engaging with. It’s more than just one. It’s typically in the range of three to four, so maybe just monetizing that 50% is better. But I can’t imagine you get more saturated than 50% when it comes to online dating, right?
Sharma: Yeah, and I’m slowly understanding about this business model, that it favors companies which have multiple apps, because no one is satisfied with just one app. You try an app, and if the experience isn’t good, then you can confide in a friend. What is that friend going to tell you, Emily? Look, download this other app, because this is actually more appropriate for you. It takes three to four before you hit on one that you have some success with. I like that about the model. As for using that to get past the 50%, I don’t know, maybe it’s going to be hard. Now, of course, management is going to sell it to them. That’s all 50% white-space. The Match CFO, Gary Swidler, recently discussed this at an investors conference and said, “Look, there’s no reason why dating apps can’t be like Uber or Lyft. Nearly everyone has tried to use some type of car service.” That struck me as odd right off the bat, because I don’t think they’re at 100% penetration between Uber and Lyft, but maybe he was including the realm of people who have flagged the taxi down with two fingers. Maybe he was concluding that group in there. But basically, his point was it comes down to safety and comfort with the approach. So, all that 50% that still hasn’t tried a dating app, they’re worried about the vulnerability of putting themselves out there. There’s personal safety, especially, I think, if you are an introvert, which Emily, you always say that, but you don’t strike me as much of an introvert, but we’ll save that for another podcast. But there is some barrier that you have to overcome in that sense. He also said the idea, the approach of these apps, which are mostly one-to-one, it’s one person trying to hit another person on both sides. They’re not group apps.
One of the solutions that Swidler talked about was increasing investment in a space called social discovery, which we’ll talk about in just a bit. But picture apps, which are aimed at groups and not necessarily for dating. This sounds like a lot of other social media and platforms that we’ve been looking at for years, but there are some differences which we’ll talk about. In their opinion, in management’s opinion, that is all opportunity. With you, Emily, I remain a little skeptical. I think maybe they get to 52%, 55%, 60%, and then it’s about monetizing what they’ve already got, the people or the average users.
Flippen: And bringing that internationally, of course, which is a good segue to Match Group, obviously, quoting their CFO there prior. When I was prepping for today’s episode, thinking about comparing Match Group and Bumble, in my mind, I thought to myself, well, if this is going to be a really quantitative discussion. It’s all about active users. It’s all about how well they monetize their users. I found myself going down this very qualitative rabbit hole. In particular, looking at this future updating reports that Match Group had issued back, and I believe it was March of this year. It somehow went straight under my radar, but it has some really interesting stats regarding Tinder, in particular, which is its most popular dating platform, and how it performed during the pandemic. I apologize for everybody who is asking for more quantitative data here for these businesses. We’ll get to it.
First, I really do want to sift through some of your thoughts about this report here, because it was interesting. Before we get into it, for people who aren’t familiar with Tinder, it is their most popular app, but it’s also aimed at mainly Gen-Z customers. These are 18 to 25-year-olds. It has a younger audience, so don’t extrapolate these numbers to be all of Match’s platforms like OkCupid, Plenty of Fish, Match, namesake dating platforms, this is just Tinder specific. What did you think about this report?
Sharma: Some of it was really great and informative in terms of looking at the near future platforms. I also thought that the report was something of a story we’ve heard before. The title is The Future of Dating is Fluid, and I thought to myself, the past of dating is also fluid. Right now on the side, I’m reading a book called All Creatures, Great and Small. For those of you who watch a lot of series, this was a Netflix series. It’s based on a veterinarian from the 20th century, James Harriet, and it describes his experiences as a small-town veterinarian in the English countryside in the 1930s-1950s. Part of the book he’s always examining animals and then part of the book he’s talking about this woman he has a crush on, this really smart and attractive young farmer’s daughter, who’s also sophisticated. Courting her, simultaneously, he lives with the person who owns the veterinary practice. With the owner’s younger brother Tristan, he often goes out to bars and pubs and has experience as they date nurses, and so all very comical and fun. But it doesn’t look a lot different than online dating today, because if you are in a totally virtual environment, you still have those crazy experiences. You see someone’s profile who looks really interesting, and then you realize that, well, that was a very weird person. At least these are the stories that I hear from people who use these apps a lot.
When you break down the conclusions they came up with, some of these are pandemic influenced. But some of them, I think, reflect the cyclical nature of human relationships. Let’s go to one of the big observations that we’ll see less predictable courtship, there will be more fluidity in terms of expectations, more honesty about emotions, and more focus on experiences. That one to me, Emily, is interesting because I think it reflects what happened over the past year. I think we’ve all learned to become a little bit more honest about what we’re going through, because we’ve had this mass therapy session in trying to get through COVID. I know I am, and I will say a quick picture for those of you who are Motley Fool subscribers and can view live. We have a session every Wednesday, The Mindset Session with Tim Beyers and Brian Stoffel. I will say our colleague Tim Beyers is unflinchingly honest about his emotional makeup. I think over the last year, I’ve learned to be a little bit more open about what I’m going through. But this is not just one episode of Motley Fool Live, I think it’s our society as a whole. We’re having more conversations about mental health, about where we are. This struck me as something predictable.
Also, there’s some stats from the report, 60% of new Tinder users over the last year came on because they felt lonely. 43% of the users said the app made them feel less lonely. They’ve got some other statistics as well that are pandemic related, about conversations being longer, more messages being sent, things that you would expect. Now, to me, one of the big takeaways is that 50% of Tinder users had a video chat with the match during the pandemic, and 40% plan to continue to do that even post-pandemic. I think these video conversations are here to stay, Emily. I think regardless of what happens in real life, even if we go back to mostly the way we were with commuting into work, having in-person meetings, I think there’s something that’s happened in our society, which is that we are all much more receptive now if we can’t make it in person, it’s no big deal to video chat. I see this as a plus for these platforms. I see it as a plus for Tinder, for we talked about the big predictions in the report. What are your thoughts about this report?
Flippen: The video chatting gave me a little bit of a chuckle, honestly, a little bit of a pause. My boyfriend and I started dating when I was in college. I went to college in China and he was not in China. We did a decent amount of video chatting in the early stages of our relationship. I remember the anxiety that was headed into our first video chat. I literally made a notebook of topics to talk about. There were no awkward silences, and I remember being so nervous about that conversation. The idea of jumping on a social media platform and literally video chatting with a complete stranger to me is so strange. Seeing what a large percentage of people were willing to do, presumably because so many people flock to the platform from loneliness really struck me by surprise. But what also struck me by surprise and maybe I’m jumping the gun here, but one of Tinder’s eight predictions for the next decade of dating was that people will always want to date someone close by. It was this mix between people who love video chatting, presumably, digital dates will remain part of the new normal. I think that was their fourth prediction, while also matching that with the desire to date somebody who is physically close to you. In my mind, I guess those two things are always counterintuitive. Why video chat with somebody if you could see them in person? But I do think that there is more fluidity, I guess, with how we perceive dating or I should say, how Tinder app users perceive dating.
Sharma: That is a lot to unpack there, Emily. But I will say that I give you a lot of points for being so prepared for that first videotape.
Flippen: I didn’t even notice, by the way, there’s a pointless exercise.
Sharma: After like a minute or two, like anything else, you went with the flow. But this is reflective of something else. We’ll talk about it later I think in the bumble section of this Podcast. What happens when you have a lot of risk in a conversation? Or maybe you feel that it might not go well, but not to give too much away. I find that very amusing, but also in a very, I think, charming way, and I see that there is something that we can all relate to. I will say that one of their predictions stuck out to me. More people want to see where things go. I’m confused by that one. This prediction, isn’t that what online dating is supposed to facilitate? Let’s see where things go because you don’t realize you’re taking all the risk. You’re meeting at a cafe, you’re spending time, you can leave the date all of a sudden, we’ve all seen that on sitcoms. You find a clever way, or you have a friend who calls you because you’ve sent them a signal under the table via text to get you out of the date. I thought online dating was about the ability to take some risk out and to see where things went. But maybe within that context, people are willing to spend more time. This is only good for platforms which are trying to monetize users. That has an extension in average revenue per user, let’s say for Match Group, because what it means is that after a while, you’re going to have to go from Tinder, the premium version, which is the version you start out with to one of their levels. I think there’s gold and the other one I think is Plus, correct?
Sharma: Platinum, sorry. Yeah, you’re going to want to upgrade and that’s good. If there’s more uncertainty in our society, the pandemic has made people more willing to take more time. I thought that was interesting. Here’s another one, again maybe an age thing. Unpack this one for me; small touches will have a big impact. There was a 23% increase in cuddle needs on Tinder. Can you unpack what that means? Also, what do you think about small touches that will have a big impact?
Flippen: This was by far out of the eight predictions that Tinder had for the next decade, the one that left me scratching my head the most because they seem to extrapolate this point based on the usage of the word cuddle in bios. Presumably, that was in part probably a lot of loneliness that people were experiencing, especially single people who lived by themselves or with a roommate, and they just wanted that little cuddle. The connection that they hadn’t had. I’m not sure this stays post-pandemic. If I’m honest with you, I’m not sure if I extrapolate the need for cuddles out for the next decade at a higher rate than the cuddle needs were for in 2019. But to your point, I’m not sure it matters for Tinder or for Match Group because a lot of these predictions, including more transparency, more authenticity, more focus on activities. All of these things are pointing toward Tinder being less of a platform where you meet your spouse and more of a platform where you meet lots of different people who have different needs and desires and maybe you do meet your spouse. Maybe your spouse is one of those people. But maybe you meet people you just date for a couple of weeks, maybe meet friends, maybe meet groups. A lot of that focus has been maybe shifted away from the spouse and they are very clear courtship that you expect when meeting somebody on Tinder. Well, some people expect when meeting somebody on Tinder and more toward a fluid option, do whatever you want, but you are right, the cuddle thing would leave me scratching my head.
Sharma: I think that’s a really good explanation. Again, apologies to those who are looking for something more quantitative out of this. But actually, this is a very important issue about the platform because I think this idea of always the need for cuddles is expressing relevant to the performance of the platform. Also, it’s relevant to society, so we are getting more comfortable as a group expressing our need to be close to other people. Again, that doesn’t mean that you want to cuddle with a partner. I think what I take out of that is there is an increase in people wanting to be connected and the easy thing for someone my age is to say, well, that means that it’s not great for the platform. People want to get together in real life and feel the warmth of a human touch but I think really what we can extrapolate out of this is that the platform provides that virtual cuddle. Just by expressing that thought and having someone reciprocate that in their profile, you see someone else’s profile who also mentions the need for cuddling. There’s some connection there. I will be looking at this if they put out the report next year to see what happens with those mentioned. If they do and if I happen to remember, it will be of interest to me.
Flippen: Well, for the sake of adding something quantitative to this discussion, before we move on to the conversation around Bumble, which is a really interesting conversation, maybe let’s do a little comparison of pandemic and recent performance for Match Group. Some of the numbers that I pulled from the pandemic, just for a brief overview as they saw a huge increase in usage from the app itself, so there’s a 42% increase in matches and an 11% increase in swipes, all during the pandemic, and that led to decent revenue growth, 12% year-over-year. But their average revenue per user recently struggled because a lot of these little add-ons, these a la carte purchases, super-likes on the Tinder platform, lost value when you were actually meeting up with the person. They weren’t able to monetize the platform as well, despite it being more popular. What I really like to see in their most recent quarter, that they’ve retained a lot of their popularity, while also increasing the monetization of their platform.They still have had amazing, I think, close to 23% revenue growth in thor most recent quarter, 12% subscriber growth, but more importantly, that average revenue per subscriber was up nearly 10%, I think it was $0.64 on average per subscriber, which did rise across every single brand in Match Group’s collection of dating apps. Looking at these numbers, I got really excited about this business all over again.
Sharma: Yeah, that revenue growth, interesting, 18% of it from Tinder and 30% of it from non-Tinder platforms, so you mentioned Hinge, OkCupid, […], Match Group is a portfolio of businesses, so we tend to incorporate Tinder with Match Group just because it is the biggest driver, but I wanted to point out or call out Hinge here because that is a really fast-growing app with millennial and younger generations. So far, they are basically a North American app, although we’ve got some exposure in the U.K. When we look at international expansion, that is a candidate for future growth, they’ve got apps like Pairs, which is pretty well-known in Taiwan, South Korea, they have one called Plenty of Fish, which I’ve never heard of, Emily.
Flippen: You haven’t seen the ads for Plenty of Fish?
Sharma: No, and I don’t know what I’m watching, but I don’t see ads for Plenty of Fish, I tend to watch some obscure things, maybe that’s why. Do you know what this is or can you tell from the commercials, what is it?
Flippen: I think, and I solely base this off of the TV commercials I saw when I was in middle school or high school, I think it’s a dating site aimed at older users. Apologies to anybody who uses it if I horribly and incorrectly misrepresented that platform. But I believe that’s what Plenty of Fish is.
Sharma: Okay, well, we’ll give you the picture though, right? This is a company that has multiple apps, because as we said before, that’s how you win in this game, is by being a portfolio company and getting the users, having them have three or four other apps which are in your own branded portfolio and then monetizing that. And I must say, Emily, I hadn’t looked at these financials in a while, I was really impressed just looking at the financial statements. The company had operating income in the most recent quarter of $189 million, that’s on $667 million in revenue in one quarter. So, a solidly profitable company with pretty decent cash flows. They do have a fair amount of debt on the balance sheet, I think you probably know this better than me. I’m guessing that this came up with the spin-offs last year. They took some debt with them as a public company. But not too difficult a debt burden, it is $3.8 billion of debt on the books versus current assets of $1.2 billion. While that doesn’t look great in terms of the ability to pay something like that off very quickly, cash-flow is solid. I can definitely see some refinancing in the future, paying down the senior notes. The debt here isn’t that much of an issue.
Now, for me, I’m looking at these tools and thinking about market share, because I have always tended to think of Match as a one-to-one company. It’s providing apps that are connecting singles and that’s how it’s going to grow. But increasingly, that’s not where the company is headed, at least in terms of making their total addressable market bigger. That actually is going to come from things like this Hyperconnect acquisition that the company made earlier this year that we briefly mentioned or alluded to above. Hyperconnect is a South Korean company. Match acquired them for about $1.7 billion earlier this year and it specializes in something called social discovery. Social discovery, we have to get to the bottom of this. This may sound like just another social platform, for example Facebook or Twitter, but social discovery is about connecting disparate people and Hyperconnect’s big calling card is its ability to connect people in real-time across languages. So, you can communicate in real-time with someone in South Korea and you can be speaking English, they can be speaking South Korean, and it will help you have this real-time interaction. The company has two apps, Azar and Hakuna Live. Azar lets you have one-to-one interaction and Hakuna Live is sort of like a live video broadcast platform. The big thing here is that these platforms really aren’t dating platforms. They are just more about connecting people together. Some thoughts on this, Emily, because part of this balance sheet that has grown so big is this acquisition, which was the biggest in Match Group’s history. You’re looking at the future, it’s not all about one-to-one connecting singles.
Flippen: I love these acquisitions. I will admit that I think they’re a bold bet. This is a company that has been solely focused on that one-to-one experience. So, expanding into things like live video broadcasting can scare off lots of people and I do think it makes me a bit nervous, but I also think we have to recognize that dating and connections look differently depending on where you are in the world and understanding your background and culture. I like the boldness of the move and I like the idea that Match Group is not going to be this, in particular, North American dating powerhouse, but rather a platform of platforms that are focused on connecting people across the globe. I like that idea. I will say, becoming increasingly international does have its own risks, and in the most recent quarter, they did call out the really low vaccination rates in Japan as a potential risk for them, right? That means lower monetization potential and Japan’s a big market for them with Pairs in particular. As we look at this increasingly international business, it’s harder to just look at the trends that we see here in the United States or North America broadly and say, OK, well, if this works here, we’re going to port it over to Japan or South Korea or Taiwan. In reality, I think it needs to be acquired because it’s so unique.
Sharma: I totally see the caution around there. But I also want to just imagine something as well. I think there is a need for a super app in South Korea, Japan, and China. These are three really big industrialized companies with youth populations which are in decline versus previous years declining birth rates. Not so much India, Vietnam, and some other countries in Asia, but at least these three big ones. There is a place for an app to connect disenchanted youth who have been locked out of the real estate market because it’s so expensive to buy your own home, who have rebelled against getting married early as the cultures promote and now are on the back side of that demographic equation. That’s an economic problem that all three countries face. I think South Korea most severely, but China is not far behind with all the missteps they had with their one-child policy over the past few decades and Japan, increasingly, the youth are again, not getting married at the rates they used to. Not that you need marriage in a society, we can debate that all day long, but I do think there is a place for disenchanted youth to connect that’s still to be created in a virtual space or mediverse type space and it strikes me that Match Group, with its big balance sheet, its inclination to acquire good apps and put their own integrated platforms behind. I think there is some room here in the future for them to concentrate on Asia as a really, not a booming market in the way we tend to think of Asia, but a market where there are some hidden revenue streams. But this is just a thought for management. If you’re listening, give it a shot. Just a fraction of your R&D budget.
Flippen: I love that. As we run out of time here, let’s not forget to talk about probably the newest, biggest competitor to Match Group, at least in the United States, that recently went public, and that’s Bumble. I’m kicking myself because I can’t remember off the top of my head, Asit, if we’ve talked about Bumble on Industry Focus before. I will say, it’s one that I’m not as excited about as Match Group for a collection of reasons. I think maybe that’s why I’ve been hesitant to cover it, but it’s a women first dating app. You can think about it in the same vein as Tinder, but women have to make the first move. Theoretically, it’s more attractive for a male audience, because you’re the one who is catalyzing or getting a conversation catalyzed to yourself, and it’s female first in the sense that it empowers women to make the first move and to maybe feel safe and comfortable in starting those conversations. I think in practice, it ends up being a little strange just based on conversations I’ve had with people who use it, but I’m curious what your thoughts are about Bumble in this space.
Sharma: I think Bumble is an idea that’s still in its early stages. They are, ostensibly from the numbers, doing pretty well. They saw a 43% increase in year-over-year revenue. The app itself grew 61%, so there’s definitely uptake of the idea, but the question is, over time, is Bumble’s unique selling proposition all that much more powerful than any one of the Match Group apps? I think there is something that is comforting. Let’s say that your issue is safety. As earlier we mentioned, the CFO of Match Group pointed out a stumbling block for such apps. Then, I think Bumble is attractive and I’m not sure which it’s more attractive to. I can see both sides, as you mentioned, I think it does put the ball in men’s court, and that’s great. So there is, I think for some men, a real attraction to that, that here’s where you can start the conversation and you get to present yourself in a bit more of a holistic way than say, one of Match Group’s apps.
I think from the other side, this will appeal and does appeal to women who want to feel empowered. The question becomes, what is women’s empowerment? Maybe it’s just the ability to use any app that you select, and what is a safe conversation anyway? We’ll talk about that in just a minute, but I’m not as familiar with Bumble. We haven’t talked about it on Industry Focus, and I think part of the reason is that maybe the growth rates have to be a little in excess of what they are to catch our eye. Now, I know that sounds crazy. They are growing at a 43% clip year-over-year, what more do you want? I think as a number two challenger, you have to have something extremely persuasive. I can think of so many companies in the tech industry that are small challengers but have growth rates that are so much in excess of the leaders that you can’t help but look at them. I think the fact that we haven’t discussed Bumble or it’s not top-of-mind for you, Emily, and I know you have thought a lot about Match Group. You said something as well that it’s a stock that you want to keep your eye on, but there’s something inherently dubious about the business model for the long term. At least that seems to be the expression of a lot of investors that I’ve just chatted with really briefly since it was growing as a private company. It’s just a recent IPO. But you also mentioned, Emily, when we were prepping for this episode that you had some concerns outside of the business proposition about the company.
Flippen: It’s funny, I have concerns. They have substantial debt, they’re not profitable. They also only break down average revenue per paying user, as opposed to Match Group, which does average revenue per user, and I think that doesn’t give quite a clear picture about their monetization potential. All of that being said, I love how you framed up the conversation around Bumble, Asit, by saying, “Is it something that you have to look at?” I have never had that conversation because despite following and investing in Match Group, I’ve never felt threatened by Bumble. I’ve never thought, oh, I have to look at Bumble, until last week, when I saw this article on my desk that said they’re testing this thing called a safe space dating spot, a physical location where people and app users can meet up and it got me thinking. I was like, “Is this the thing that sets Bumble apart from Tinder or Hinge? Is this the thing that catalyzes engagement and monetization?” It certainly made me turn my head.
Sharma: Right. Very interesting. So, you sent me this article, this was in Bloomberg on July 24th. They’re going to open a cafe and wine bar for daters, networkers, and friends. It’s been in the works for a while, it’s going to be called Bumble Brew. This will be opened, I believe, in New York City. I think that it’s an interesting idea as an extension of the business model, but it brings up the same questions. What is a safe cafe or a cafe that’s dedicated for daters and networkers? It reminds me of those start-ups in Silicon Valley from a few years ago that recreated the municipal bus. What this company is going to do is we figured out that if you take a large vehicle and you have it at a certain predictable route and people pay when they get on, you can make a ton of money doing this and we want to raise hundreds of millions of dollars in capital for this idea. Congratulations, you just created the bus route. There were several companies like that and these are weird ideas that don’t sound like it’s going to translate well, IRL, in real life, because that’s exactly what restaurants and cafes are for. They are for people who are dating, for people who are networking, and for people who are friends. That’s where you go to meet and you call the shots when you decide to meet at a restaurant with a date. If it’s a first date, yeah, you might pick a space that to you is a safe space. It’s a place you are a regular at or you know it’s got an easy exit if you want that friend to text you or call you when you’re having a really bad date. There are ways you can set up a safe space on your own terms. I’m not sure that we need a dedicated restaurant for people to feel that safety.
However, I do get that in the society we live in today we need spaces that people feel safe in. Whether this is to have conversations about politics or religion, or perhaps in the dating sphere, we always need spaces where we feel we can meet with fellow people and at least have substantial relationships and arguments. That’s just part of today’s society. It’s a more risk averse society from when I was younger, but some parts of it I like. I know this may not sound like it to those of you who watch the news, but our society is striving to be more inclusive on several fronts, so I totally get the sentiment behind this. I don’t think it really is going to make much of a dent in their financials. I don’t think it’s meant to be. What it will do for Bumble’s brand, I don’t know. Maybe it makes them more visible in a place like New York City where you’ve got part of your addressable market and it’s such a dense place, but what are your thoughts about this, Emily? Does this lessen your confusion around the concept or make you more interested in buying or does it clarify anything for you?
Flippen: It confused me even more, because we talk about these apps in a digital world and now dating is going digital then this big investment in physical space. I think there is, of course, physical space when it comes to dating. It’s impossible to not have it, but I think in order for this to mean something financially for Bumble, it would require a huge amount of investment, at least in the United States, potentially across the globe in a way that I don’t think it’s actually going to be meaningful for them, but I will say, I got a chuckle myself just imagining if I was single, living in New York City, popping myself down on a Saturday morning in the Bumble cafe and then organizing my 30-minute dates one right after the other and thinking to myself, well, wouldn’t that be wonderfully convenient? But I’m not sure if anyone wants to approach dating like a business meeting, so I will see if this is successful. I certainly think it’s good for their brand. Having big spaces, having that big sign, that awareness in a really visible area, I think, certainly does something to keep Bumble a part of the conversation. But I agree, Asit, with your takeaway that probably doesn’t change much.
Sharma: Well, if there’s one place where it works, if you are going to run your romantic life as a business, I guess New York would be the place. So I think they got the location right.
Flippen: It’s a problem that I’ve never had in my life, having too many dates, but somebody out there, I imagine, will use the Bumble cafe for exactly that.
Flippen: Well, Asit, I’d continue to have this conversation, but I think my next date has arrived, so I’m going to shuffle you out of the cafe and express the next guest in. No, I’m joking, but thank you for joining.
Sharma: Yeah, sounds great, Emily. I leave having learned a lot. I will take notes as I prepare for my next date so I can do better next time. But this was a blast, as always.
Flippen: It’s always fun. Fools, thanks for playing along with us for this episode. It was a fun conversation to have. I love when we have these qualitative discussions. Yeah, that does it for this episode of Industry Focus. If you have any questions or just want to reach out, don’t be afraid to email us as always at [email protected] But as always, people on the program may own companies discussed on the show and The Motley Fool may have formal recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what we say. Thanks to Tim Sparks for his work behind the screen today. For Asit Sharma, I’m Emily Flippen. Thanks for listening, and Fool on.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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