Love is in the air, and despite Facebook's batting its eyes at daters with the release of Facebook Dating, my crush is still on Match Group (NASDAQ:MTCH). While the 12% drop in its stock in the first week following the Sept. 5 launch of Facebook Dating isn't ideal, I'm still a fan and here's why.
Leadership changes aim to fuel global expansion
In April, the company announced several key changes in leadership positions, particularly in Asian markets. Promoting from within, Match Group is in some cases taking proven performers in smaller markets and calling them up to the big leagues.
- Junya Ishibashi is the new general manager of Match Group Japan and Taiwan. Ishibashi previously served as the CEO of Match Group's Eureka business in Japan, a Tokyo-based dating app start-up acquired by Match Group in 2015.
- Lyla Seo is now the general manager of Match Group South Korea and Southeast Asia. Seo previously held the position of regional director of East Asia for Tinder. The company noted that Seo was responsible for Tinder's first-ever TV ad campaign in Korea, where downloads soared between 2016 and 2018.
While piggybacking on proven success is a solid move, there's a bigger takeaway here. Match Group clearly understands the importance of global expansion in this industry and is committed to taking bold moves to get there. The company says nearly half of its revenue comes from places outside the U.S. and Canada and it's aiming for a quarter of revenue to come from Asia in five years. The new executive appointments show there is no complacency in Match Group's efforts to gain market share internationally.
Q2 numbers can't be ignored
Match Group's second-quarter financials included several favorable metrics. Revenue increased 18% from the year-ago quarter. Remove foreign exchange effects and this number increases to 22%. The average number of subscribers grew 1.4 million, an increase of 18%.
Most of this success is driven by growth in the Tinder brand. Match Group saw revenue from users of Tinder grow 46% year over year in the second quarter. Additionally, the average number of Tinder subscribers increased over half a million from the first quarter to the second. The company said this is the second-highest-ever sequential swipe-up in the average number of subscribers.
While these numbers are impressive, the most appealing to me were year-over-year increases in international traction.
- Tinder downloads in Japan were up 60%, to just under 400,000. Tinder is a photo-driven dating app that looks to match singles without the need for in-depth profiles or a significant time investment from the user.
- Pairs Engage downloads in Japan were up 33%, to just north of 400,000. Pairs Engage is an app for those seeking marriage, with an in-depth verification system for users and advice available around the clock.
- OkCupid quarterly app downloads in India increased to roughly 700,000. This ranks the app among the five most-downloaded apps in the country. OkCupid is an online dating service profiting from paid upgrades and advertisements. The company says its first-ever brand campaign in India is "focused on young Indians who want to take charge of their lives, including finding their future partner."
- Hinge global downloads more than tripled year over year. Hinge is an online matchmaking app that the company says is used by people "looking for serious relationships and to ultimately get off dating apps." It's been using the slogan "Designed to be Deleted."
Coupling these numbers with the targeted leadership restructuring, you've made a believer out of me that the international expansion will succeed.
Why does this matter so much? According to Allied Market Research, the online dating services market will grow to $9.2 billion by 2025 from its 2018 mark of $6.69 billion, that's a compound annual growth rate of 4.7%. The fastest-growing region mentioned was the Asia-Pacific region, with a CAGR of 5.6%. Statista research shows revenue in the Indian online dating market will grow from $54 million to $76 million between 2019 and 2023. In Japan, the market is expected to grow at a CAGR of 6.5% to $61 million by 2023.
In other words, there are a lot of lonely people out there around the world looking for digital help finding love.
Match Group has a recipe for success internationally and a current foothold that will be challenging to upend. I expect continued growth over the next few years as the company continues to focus internationally. Facebook Dating will have an impact, but I don't expect it to be as impactful as others might think.