There was a lot to like when Match Group (NASDAQ:MTCH) reported its second-quarter financial results on Aug. 7. The company generated revenue of $421 million, up 36% year over year, while operating income jumped 81% compared to the prior-year quarter. Diluted earnings per share of $0.45 soared 165% year over year, as subscriber growth of 27% drove its users past 7.7 million.
Tinder was the biggest contributor to its fabulous results, with revenue that increased 136% compared to the year-ago quarter, driven by 81% year-over-year growth in subscribers and average revenue per user (ARPU) that increased 33% compared to the prior-year quarter.
While the financial metrics were the highlight, there was a wealth of additional information available to investors on the conference call to discuss the results with analysts. Match's management had plenty to say about product developments, the staggering opportunity in international markets, and Tinder's foray back to its college roots.
Making the right Match
One of the keys for a successful dating app, ultimately, is ensuring that users not only find a date but find one with someone who's compatible. According to Mandy Ginsberg, Match's CEO, the company has been employing artificial intelligence (AI) algorithms to ensure better matches. "AI-driven enhancements to the recommendation engine have resulted in marked improvements in the experience of new users globally, which led to real strength in retention and subscriber conversions," Ginsberg said.
The company is also introducing a number of new features designed to give users more reasons to use Tinder and use it more frequently.
One example is Picks, which will provide users with 4 to 10 curated picks daily, employing "tags such as foodie, military, scholar and traveler" from the users' profile information to better match them with other members. Match execs believe that this added benefit to Tinder Gold will help increase conversion rates while driving up the ARPU.
Love makes the world go round
When Match began more than two decades ago, internet dating carried a certain stigma that had to be overcome in order for the company to achieve the success it enjoys today. While online dating is now widespread in the U.S., it "has been slower to catch on" in places like Japan. Pairs is the company's dating app in the Japanese, Korean, and Taiwanese markets. Despite the slow start, Ginsberg said, "the Japanese market is now growing quickly" and Pairs "has become the number one dating product in Japan." The population in Asia meets all the criteria for dating apps to succeed, like a large economy and high per-capita income, so Match sees great potential in that as well as several other international markets.
Tinder goes (back) to school
Ginsberg recounted how Tinder got its start on college campuses about five years ago, when the app spread like wildfire via word of mouth from friends. The company is taking Tinder back to its roots with Tinder U, "a student-focused experience inside the Tinder app." Since college students are "building a social life from scratch, making new friends and starting new relationships," creating features focused on their unique situation is a natural extension of the Tinder brand.
The company will be rolling out a major marketing campaign in the U.S. to support its endeavors. Match wants to keep Tinder "fresh and exciting for the 20 million students on U.S. college campuses plus millions more globally." To that end, users will be able to see fellow students not only at their own school but at nearby institutions as well. The feature will encourage "college students to interact on a daily and weekly basis, centered around going out and meeting up, which should really enhance college social life."
Investors should swipe right on Match
If there's a common thread among these discussions, it is the large and growing opportunity that Match still has in front of it. It's important to remember that the company didn't seek to monetize Tinder until a couple of years after it was launched, and it now has become the company's greatest source of growth.
Match believes that by focusing on product innovation and international markets while continuing to improve its flagship dating app, the company will uncover its next great growth engine. This will result in success not only for the company but for investors as well.