Back in February, I compared Bumble (BMBL 0.52%) to its larger online dating rival Match Group (MTCH -1.02%). At the time, I believed Bumble's simpler business model, female-friendly approach, and lower valuation made it a better investment.
However, Bumble's stock subsequently tumbled more than 30% while Match's stock dipped nearly 15%. Did I overestimate Bumble's appeal, or will it still outperform Match as the pandemic passes?
The key differences between Bumble and Match
Bumble and Match have a complicated relationship. Bumble was founded by Whitney Wolfe Herd, who co-founded Match's flagship app Tinder with Sean Rad, Justin Mateen and Jonathan Badeen. However, Wolfe Herd was stripped of her title at Tinder amid a conflict with her co-founders, and subsequently sued Tinder for sexual harassment and discrimination.
Wolfe Herd founded Bumble in 2014 after partnering with Andrey Andreev, the Russian founder of another dating app called Badoo. Bumble still owns Badoo, which is more popular in Europe and Latin America, but its namesake app hosts most of its users and generates most of its revenue.
Bumble only lets women make the first move on its main platform. Like other dating apps, it operates a freemium model that provides additional perks for paid users. Bumble's platform also includes two non-dating features: BFF for platonic friendships and Bizz for business connections.
Match has a much broader portfolio of apps. Tinder is the company's core growth engine, but it also owns other apps like Hinge, Plenty of Fish, Meetic, Our Time, OKCupid, Pairs, Chispa, and BLK. Match's core strength is its diversification -- its platforms provide dating services for a much wider range of demographics and geographies than Bumble's two main apps.
Which company is growing faster?
Bumble's revenue increased 19% to $582.2 million in 2020. It expects its revenue to rise 29%-31% this year as more businesses reopen and people start going out again.
Its total number of paying users rose 20% year-over-year to 2.9 million in the second quarter of 2021. Bumble's paying users rose 36% to 1.47 million, while Badoo's paying users grew 7% to 1.45 million.
Bumble's average revenue per paying user (ARPPU) grew 13% to $28.81, while Badoo's ARPPU rose 4% to $12.85. Bumble's robust growth will likely gradually reduce its overall dependence on Badoo.
Match's revenue rose 17% to $2.4 billion in 2020, and analysts expect 26% growth this year.
Match's number of paying users rose 15% year-over-year to 15 million -- including 9.6 million Tinder payers -- in the second quarter of 2021. Its total RPP (revenue per payer) increased 10% year-over-year to $15.46, with its portfolio of "emerging" apps generating stronger RPP growth than Tinder.
Which company has more growth opportunities?
Bumble is smaller than Match, but its share of the U.S. online dating market expanded from 10% in 2017 to 19% in 2020, according to Sensor Tower. That puts it in second place behind Tinder's 40% share.
Bumble also has plenty of room to expand overseas: Its number of monthly active users (MAUs) jumped 60% year-over-year in India in the second quarter alone, even as the country grappled with widespread pandemic-related lockdowns. It could also eventually expand BFF and Bizz, which haven't been monetized yet, into the foundations of a new social networking platform.
Match has already acquired a long list of overseas platforms, but it still has room to grow. Tinder's engagement rates are still rising, and it continues to expand its ecosystem with new features like Explore, which helps users meet members with shared interests.
Match's recent acquisition of Hyperconnect in South Korea also adds two new social networking apps, Azar and Hakuna Live, to its overseas portfolio, and it plans to integrate their video, audio, and AI technologies into its other dating apps.
Which company is the better online dating stock?
Bumble and Match both trade at 13 times this year's sales. Match is more profitable than Bumble and has higher adjusted EBITDA margins, but its business is also more mature and has less room to grow.
Since both stocks are trading at similar price-to-sales ratios, it makes more sense to buy the smaller company that generates stronger growth. Therefore, I'm picking Bumble as the better dating stock again, since I believe it still has the potential to outperform Match over the long term.