Online dating is big business, and Match Group (MTCH) is the biggest fish in the pond.
In this clip from the Industry Focus: Tech podcast, Dylan Lewis and Sarah Priestley talk about how Match's profits are broken up, and which areas are seeing the most growth. Also, the hosts take a look at the company's potential for monetization, and some problems they might run into if they try to integrate ads as Facebook and Instagram have.
A transcript follows the video.
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This podcast was recorded on July 8, 2016.
Dylan Lewis: Why don't we talk a little bit about the revenue breakdown and what Match's top line looks like?
Sarah Priestley: Absolutely. They had brought in $295 million in revenue last quarter, and they're a GAAP-profitable company, which is great for investors. The split between dating and non-dating, dating comprises 90% of revenue, and the Princeton Review is 10%. They see that becoming a bigger portion of their profits going forward, but at the minute, it's very small. Geographically, the split is predominantly North America. North America is 66% of direct revenue, down, actually, from 69% the first quarter last year. International is counting for 34%, up from 31%. So you can see they're shifting toward the international segment.
Lewis: Yeah. And I think, over time, you're going to continue to see that shift. We talked a little earlier about the huge market potential in China. It was at a $1.6 billion sticker figure.
Priestley: By the end of this year, yeah.
Lewis: That's obviously a market they're interested in, and I think there are also a lot of very compelling international markets aside from China. I think, when you look at this business, that's one of the huge opportunities there, getting outside the U.S. I think there's a decent runway there. Looking at some of the other big opportunities for them, management cites that they only currently use about 2% of their mobile ad inventory, and they see an opportunity for monetization there. In preparing for this show, we were talking about, yeah, there might be some opportunity there, I'm not totally sold on that. What do you think?
Priestley: I'm not sure either. I think, if they can crack that, that would be fantastic, because they have 5.1 million paid members, and a huge number of daily users. I think if they can tap into that potential, that's going to be huge for them. If you look at the success that Facebook's had, Instagram's had of integrating almost seamlessly some of these ads. My reservation, and your reservation, too, is whether they can do that as seamlessly on a dating site. As we talked about, it's not like Instagram, where you go to look at pictures of fancy food, and you may stumble across an ad for Blue Apron or something. With this, it's very much, you're going on there to find a date. The example you flippantly used was Tide Pods; you don't want to come across an ad for Tide Pods when you're looking for your next date. It's true. They're going to have to be very selective about what they choose. They're going to have to be clever in the way that they do it. And they've hired a very notable ad exec to help them do that. Potentially, they will crack it. They're resting a lot on the monetization, particularly, of Tinder. We'll see.
Lewis: Yeah. You look at Tinder -- for our listeners who aren't as familiar with it, it's a very bare-bones interface. I think part of the beauty of it is that it's super minimalistic. It's just an app with someone's picture, and you swipe right or swipe left. There isn't a lot of room for in-line ads, the way you think about content, where you can lay it in there with article text or something like that. What I expect most of those advertising opportunities would be is novelty promoted accounts. There's that movie, Mike and Dave Need Wedding Dates. I reopened my Tinder account prior to this show just to do a little market research, and I came across them advertising. What they did was created a character for the movie, and they created a Tinder profile for that character, which I thought was fun. It was an interesting novelty approach to advertising. I think that'll wear on people's patience pretty quickly.
Priestley: I agree.
Lewis: I don't know if they might do something that's more like, you need to sit through this banner ad, or something like that, in order to keep using the service every 10 swipes or something like that. There might be more of an opportunity there. But as the corporate accounts for Tinder go, I don't think it's really, would people want to be matching with and doing? It's not really in line with how people are using the service.
Priestley: No, obviously. And given the amount of competition in the industry ... they're being very cautious, and I think that's wise of how they play this, because they don't want to discriminate people.
