Over the past several years, Bumble (BMBL 2.45%) carved out a niche in the online dating market with its namesake app, which let women make the first move. It's now the highest-grossing online dating app in the U.S. after Match Group's (MTCH 0.79%) Tinder, and it's aggressively expanding overseas.
Bumble is also growing faster than Match, even though both stocks are trading at similar price-to-sales ratios. But instead of focusing on those well-known facts again, let's dig deeper into three lesser-known facts about Bumble.
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1. Bumble was founded by Tinder's co-founder
Bumble was founded by Whitney Wolfe Herd, who co-founded Tinder but was stripped of her title after an acrimonious split with the company. Wolfe Herd sued her former employer for sexual harassment in 2014, settled that case for an undisclosed sum, and founded Bumble that same year.
However, Match and Bumble subsequently sued and countersued each other over patent infringement claims before finally settling all of those claims in 2020. Match even reportedly tried to buy Bumble for $450 million in 2017 -- but Bumble rejected the deal and now has an enterprise value of $3.5 billion. That rejection, along with Match's lack of a comparable female-oriented dating app in its portfolio, exposes a weak spot in the online dating leader's business model.
2. Bumble owns two other dating apps
Wolfe Herd initally partnered with the Russian entrepreneur Andrey Andreev to launch Bumble. As a result, Bumble inherited Badoo, an older dating app which Andreev launched in 2006. Badoo still serves a lot of users in Europe and Latin America, but it's growing a lot slower than Bumble and doesn't have any significant competitive advantages against Tinder.
Badoo was also hit by allegations of sexual harassment, misogyny, drug use, and tax avoidance by a Forbes report in 2019. A few months after that report, Andreev sold his entire stake in Bumble to Blackstone Group (BX -0.43%), which became the company's top investor. Blackstone kept Wolfe Herd in charge and guided Bumble through its IPO in February 2021, but Badoo's sluggish business remained on its balance sheet. Badoo became an even bigger liability for Bumble after Russia's invasion of Ukraine, which prompted it to shut down Badoo's operations in Russia and Belarus.
Bumble acquired Fruitz, a French Gen Z-oriented dating app which is more popular in Europe, a year ago to offset Badoo's ongoing decline. Yet Bumble's "Badoo and other app" revenues, which accounted for 23% of the company's top line, still declined 10% in 2022. Fortunately, Bumble's revenue from its core app rose 31% -- which offset that weakness and boosted the company's total revenue by 19% for the full year.
3. BFF could become a larger social network
Bumble promotes itself as a female-oriented dating app, but its ecosystem also houses BFF, a social platform for platonic friendships. During Bumble's latest conference call, Wolfe Herd said BFF represented the only "successful friend-finding offering" within a large-scale dating app, and that the "market opportunity around online friendship is feasible given the prevalence of loneliness," especially in the U.S. market.
Wolfe Herd didn't disclose any exact user numbers for BFF, but said its growth among male users had risen 26% year over year in the fourth quarter. She also said that to "reflect this significant opportunity, we are increasingly managing Bumble BFF as a separate brand." Over the past year, Bumble rolled out "Hives," which allow BFF members to create interest-based communities. Those networks could eventually become the foundation of a more diversified social networking platform.
Bumble could still have plenty of room to grow
Analysts expect Bumble's revenue to rise 17% this year as it returns to profitability. That's a promising outlook for a stock that trades at 4 times this year's sales. Match, which is expected to generate just 7% revenue growth this year, trades at three times that estimate.
Bumble's ability to continue to expand in Match's shadow, its ongoing expansion into new countries, and the growth potential of BFF suggest its stock could head much higher. Its near-term growth might be limited by the macro and currency headwinds, but it arguably remains one of the best long-term plays on the secular expansion of the online dating market.
