The most impressive part of online-dating conglomerate Match Group's (MTCH 0.96%) just-released third-quarter earnings report was hidden in an unexpected place. Hinge, a dating app Match acquired in 2019, has been leading the charge for Match's "Emerging Opportunities" category, thanks to its appeal among millennials looking for long-term relationships. Let's investigate whether Hinge could eventually become as big as sister app Tinder for its parent company. 

Person holding a phone.

Image source: Getty Images.

Setting the stage

Tinder, the hookup-enabling app known for its "swipe right" feature, dominates Match's revenue. It has grown from around zero revenue in 2014 to an estimated $1.4 billion this year, driving more than 90% of the company's top-line growth in the last five years.  

Breakdown of Match Group's revenue mix

Match Group's Q3 revenue mix. Source: Q3 earnings letter. and other legacy websites like PlentyOfFish make up around a third of sales, although it's tough to get exact figures. Match isn't required to release specific sales numbers for each of its brands. 

The smallest part of Match's current portfolio is the "emerging opportunities." It includes brands like Ablo, Pairs, and Hawaya, but is led by Hinge. 

Crossing paths with Tinder

Investors may be concerned that Hinge will eat into Tinder's dominance in the dating market, creating a zero-sum game. While that may be true to an extent, the evidence suggests that investors don"t have much to worry about.

Tinder is built for short-term relationships, and it targets 18-24-year-old college students. Hinge is "designed to be deleted," meaning it targets people in the slightly older millennial cohort looking for long-term relationships.People may switch between the two platforms depending on what they are looking for at the current moment, but they by no means are directly competing with each other. 

The numbers back this up, too. It is estimated that 63% of millennials (ages 23-39) are looking for serious relationships over casual flings. However, 72% also think there are strong benefits to being single. The combination of Hinge and Tinder allows Match Group to target both of these wants from its customers.

Hinge's explosive growth

Match doesn't disclose Hinge's nominal revenue numbers. However, the company has given investors a few indicators that the app is currently performing phenomenally.

App downloads year-to-date were up 82%, which is impressive given the fact that the number was declining prior to Match's initial investment in 2017. In fact, the company disclosed in its second-quarter report that Hinge users have grown more than tenfold since 2017, with a higher number of nominal users joining the platform each year. It hasn't gotten near the 100 million-plus Tinder downloads globally, or even reached the 6.6 million paying Tinder users, but Hinge is well on its way if growth continues at this pace.

This is an example of the power of network effects for consumer marketplaces. Every new user that joins Hinge increases the value for existing customers (more supply to choose from), creating a large barrier to entry for any competitor trying to attract the same target audience. This is how Tinder not only grew quickly on college campuses, but has also enjoyed its subsequent staying power. 

Hinge grew ARPU more than 100% year over year in the last last quarter (again, investors weren't given the exact number). Combine this with the 82% increase in downloads, and you get eye-popping 200% sales growth for the app. 

With less than 10 million downloads globally , Hinge may be on the verge of what Tinder achieved a few years ago: hitting escape velocity in its target market. The app may end up being the go-to place for millennials to find a serious relationship. If it continues to grow at this blistering pace, it could reward Match Group shareholders as richly as Tinder has.