In the classic musical Fiddler on the Roof, when it becomes clear that in a changing world, couples may start coming together solely based on mutual affection, Yente asks plaintively, "What happens to the matchmaker?" Not so long ago, when Facebook announced it was going to get into the dating game, Match Group (NASDAQ:MTCH) investors had the same question. Turns out: not much. The company behind Tinder, Match.com, OKCupid, and a host of other dating sites and apps delivered impressive first-quarter results last Wednesday.
In this segment from Motley Fool Money, host Chris Hill and senior analysts Ron Gross and Jason Moser talk about the strengths of the niche leader, the upsides of its business model, and more.
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 May 10, 2019.
Chris Hill: Shares of Match Group hitting an all-time high this week. The parent company of match.com, Tinder and other relationship sites posted really a great first quarter report, Jason. Basically everything was up.
Jason Moser: Yeah. I liken what this company is doing in its space to what companies like Wayfair and Etsy have done in theirs. Emily and I were talking about this on MarketFoolery this week. You look at companies like this, you don't worry too much about the future because they've already faced their real tests. When we think about Wayfair and Etsy, the real test was, how are they going to exist in an Amazon world? They've passed that test, clearly. Match, I think the big question was Facebook saying they wanted to get into this line of work. Match has passed that test pretty well. We saw the same dynamic play out with LinkedIn and Facebook as well. People do actually want some separation in their lives when it comes to things like this. Match has been very good to build out that family of apps that center around that premise of meeting someone. It's a very singular focus.
It's a very powerful business model. It's a subscription business model, which is nice. Tinder is the crown jewel there with about 4.5 million subscribers now. It just plays into a big market opportunity. This is always going to be something in demand. People are always going to want to meet that someone in their life. Now they're able to pull back. Ad spend is becoming a smaller percentage of revenue, which means the business is scaling very nicely. That's going to work out really well for investors, for a company that already makes a lot of money and a ton of cash.
Hill: In the competitive risks section of their SEC documents, do they list marriage as one of them? If you think about it, someone who's going on to match.com, presumably, they meet someone, they get married, they're leaving match.com. The churn has got to be much higher than something like Tinder.
Moser: That's the sword that cuts both ways. It's the risk yet it's also the competitive advantage. You're going to find that person that you want to marry.
Hill: In all seriousness, though, Match Group is one of those businesses. You mentioned Facebook, but I suppose eHarmony is a direct competitor, but they really don't have competition in the way that other businesses do.
Moser: No, it is a very fragmented industry otherwise. That speaks to how smart management was to really roll up a lot of these valuable properties quickly. Because ultimately, the biggest networks do win.
Ron Gross: Does anyone know how much a Tinder subscription costs? I'm asking for a friend.
Hill: No idea!
Moser: I won't even venture a guess because there's zero upside. Zero.