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Match Group Under Public Scrutiny

Posted on Tuesday, Dec 6th 2016

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Over the past decade, online dating has grown to become a multi-billion industry with millions of customers across the world. It is estimated to be worth $2.5 billion in the US alone. Match Group (NASDAQ: MTCH), the frontrunner in the highly fragmented industry, went public a year ago and is currently worth more than $4 billion. 

Match Group’s Financials

For the third quarter of the year, Match.com saw revenues grow 18% to $316.4 million, missing analyst estimates of $318 million. Adjusted net income increased 32% to $62 million. Adjusted EPS fell 15% to $0.23 but beat analyst estimates of $0.19 per share.

By segment, dating revenues jumped 22% to $287.5 million, driven by strong contribution from Tinder, Pairs, and PlentyOfFish. Non-dating revenues, which includes revenues from educational websites Princeton Review and Tutor.com, declined 15% to $28.9 million.

Among operating metrics, average paid member count grew 33% to 5.5 million, with strong contribution from Tinder, Meetic, Paris, and PlentyOfFish. Average revenue per paying user declined 8% to $0.54 primarily due to the comparatively low revenue rates for Tinder and PlentyOfFish.

Tinder’s strong subscriber growth continued with member count exceeding 1.5 million at the end of the quarter.

Match Group expects revenue growth of 15% to 20% next year. Earlier in the year, Match Group had forecast dating revenues of $1.1 billion-$1.4 billion with an adjusted EBITDA of $410 million-$425 million for the current year.

Match Group’s Competition

Online dating is a very competitive and fragmented industry. New players and free services keep cropping up, making it tough for older players like J-Date parent Spark Networks and Snap Interactive. Both these stocks are trading 90% below their peak.

Match Group also includes eHarmony as a chief competitor. But it is the new players that it needs to look out for. The biggest threat among them is Bumble, which was founded by a former Tinder co-founder Whitney Wolfe in 2014. Bumble is more female-oriented than Tinder and reached 7 million members in July 2016.

Match Group is known to favour acquisitions to counter competition. Since January 2009, it has invested about $1.3 billion to acquire 25 brands for its dating portfolio, including OkCupid, Meetic, Twoo, and PlentyOfFish. Currently, its portfolio consists of 45 brands. Even though its portfolio seems diversified, analysts are concerned over its dependence on Tinder.

Its stock is currently trading at $17.56 with a market cap of $4.47 billion. Its 52-week range is $8.41 to $19.74. Overall, Match Group has done well under public scrutiny, but it needs to look out for competition.

Photo Credit: Carlos ZGZ/Flickr.com

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