Why Match Group Loves Millennials

Match Group (MTCH) owns a collection of dating apps that make it the leader in the online dating space. That makes it a great stock for investors who want to benefit from the rise of millennial spending.

In this segment from Industry Focus: Technology, host Dylan Lewis and Fool.com contributor Brian Feroldi discuss Match Group's competitive advantages, as well as the company's massive opportunity.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on April 26, 2019.

Dylan Lewis: The first one that I want to talk about is Match Group. Most people that are out there in the millennial dating scene are very familiar with this one.

Brian Feroldi: Yeah, this is a leading provider of online dating apps and products. They have more than 40 in their portfolio. Their crown jewel is, of course, Tinder, but they also have Match, OkCupid, and dozens of smaller brands. The big benefit for this company is, the network effect is super critical here. If you're dating, you naturally want to be on the site that has the most participants that can fit your specific needs and preferences. Being the top dog is a big deal here, and Match Group is definitely the top dog.

Lewis: The pre-digital parallel, there would be, you wouldn't go to a bar that no one else was at if you were looking to meet people. With all these platforms that they have, they have a critical mass, a lot of people, in all of these various geographies that are looking to meet other people. That really strengthens the offering. It brings more people to the platform. They've been immensely successful in either growing or acquiring all these businesses that fall into the dating space.

Feroldi: Yeah, completely. I think you brought up a good word there, which is acquiring. This is a company that is very acquisitive. If they see a niche coming up, they're very happy to go up there and make an offer, because again, they want to be the biggest. They want to have the most. They clearly do. When you look at their results, the numbers have been just great out of this company for a long time. This stock has actually smashed the market since it came public. More recently, they're reporting revenue growth above 20%. They're nicely profitable. This is a company that is really working out for investors.

Lewis: Yeah. I think there was a hiccup there at one point where Facebook had said, "We might get into this dating thing, there might be something interesting going on there." And the market took a deep breath, wondering what was going to happen with Match. They have since rallied, and I think a lot of the concerns broadly with Facebook having access to people's data, and maybe not being so judicious in their privacy efforts, have maybe made all of these designed dating apps that are all under one specific umbrella much more appealing. I think the market has looked at all that and said, "You know what, it doesn't seem like Facebook is as much of a competitor as maybe we thought they were."

Feroldi: I mean, the key takeaway for me is, don't bet against Tinder. Right?

Lewis: [laughs] Yeah.

Feroldi: There's something special about that platform that millennials just love. Even though this company is big, is the top dog, there's reason to believe that there's still ample room for this company to grow. I think 50% of millennials currently do not use any sort of online dating product. I don't know about you, I've been to numerous weddings among friends. How did the couple meet? Online dating. It's becoming totally socially normal for couples to get together on dating platforms.

When you look internationally, the numbers are even more stark. I think it's 75% of international millennials have not used a dating product. So even though this company has come a long way, there's still plenty of opportunity here.

Lewis: Yeah, that's certainly been my experience. In my pre-girlfriend D.C. days, where I was single, getting to know the city a little bit, I found that they were a really great way to meet people, either as friends, or for dates and stuff like that. I think a lot of people share that experience. I, too, have been at weddings where Tinder was the linchpin. That's what caused the relationship. I think that the stigma of online dating has really gone away. People are really leaning into it, because they realize, if I'm new to a city and I don't know anyone, it's a great way to get to know folks.

Feroldi: Completely! Not only that, but you can, of course, match up by a whole bunch of preferences that you can't necessarily get when you're randomly bumping into strangers that you hope to marry one day. I completely get the appeal of this company.