There was a lot to like when Match Group (MTCH) reported the financial results for its just completed first quarter. Both revenue and subscriber growth surpassed expectations, but investors were focused on a recent announcement about potential competition in the space.
Match Groups revenue of $407 million grew 36% year over year, while operating income of $112 million jumped 91% compared to the prior-year quarter, producing earnings per share (EPS) of $0.33. This exceeded analysts' expectations for revenue of $385 million and EPS of $0.23.
The company reported all the numbers investors would expect in the earnings release, but Match's management provided much more color during the investor conference call to discuss the results. Read on to find out what Match executives had to say about competition from Facebook (META 1.68%), product innovations, and data privacy.
Has Facebook become a frenemy?
The elephant in the room was the announcement by Facebook that it plans to introduce dating features to its social-media platform. Match addressed the issue head-on in the company's prepared remarks, saying that online dating was "not a winner-take-all market" and that the "average user is on about three dating products." Mandy Ginsberg, Match Group's CEO, provided additional detail: "Research also says that the vast majority of singles would not want to use Facebook for dating, primarily due to concerns with data and personal privacy, but more importantly, they don't want to be contacted by strangers on a social network meant for connections with friends and family."
There is more data that bodes well for Match. Prior to last year, Tinder users could only sign up using their Facebook authentication. The company introduced an alternative sign-in option in mid-2017, and since then, about 75% of users opted for the alternate sign-up, even though they first made contact with Match on Facebook. Ginsberg said this showed "users quickly and decisively separated Facebook from their dating experience."
New features to increase user engagement
Match believes that product innovation and providing useful features to users is the key to increased customer engagement. To that end, the company has developed several new options to enhance the user experience.
Tinder recently launched Feed, a feature that helps users find out more about recent matches by providing current photos and musical choices to help kick off a conversation. During testing, Feed drove a 25% increase among older matches and a 15% increase in overall conversations.
The company also is testing Loops, "user-generated two-second looping videos" that can be included in a profile, allowing someone to "show off more of their personality than just a picture."
Lastly, Tinder Places is a location-based feature currently being tested with a small group of users in three international markets, which provides a new way to connect with matches that "enjoy the same places they do." This is the first of numerous opt-in features that will use location data to facilitate matches.
Ginsberg said, "The main focus for us is to give our customers more reasons to use Tinder and more reasons to use Tinder more frequently." The company believes these product innovations will serve that purpose, thereby increasing user engagement.
Recent far-reaching new privacy regulations were enacted by the European Union -- the General Data Protection Regulation (GDPR) -- which addresses data protection and the privacy rights of its citizens and takes effect later this month. Ginsberg said, "We are keenly aware that our customers share more intimate details than they typically share with their broader social network of friends and family."
She also said the company will not only be fully compliant by the deadline, but will be "applying GDPR standards globally ... We really want to be a leader in protecting our users' sensitive data." The company also will be adopting these standards across all businesses -- even those not subject to the GDPR.
These comments show that Match believes it's well-positioned to meet user needs, address competitive threats, and comply with government regulations. This all points to the company's strength in the marketplace and bodes well for Match's future.