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Match Group (MTCH) has its eyes on the vastly addressable social discovery market

For the second quarter of 2021, total revenue is expected to grow 22-24% YoY to $680-690 million

Shares of Match Group Inc. (NASDAQ: MTCH) were up over 5% on Wednesday. The company delivered better-than-expected results for the first quarter of 2021 and remains optimistic that its services will see increased demand going forward as the COVID-19 pandemic starts to subside. It is also working on expanding its services beyond dating and is looking to take advantage of the opportunities that it sees in the broader social discovery space.

Quarterly performance

Total revenue grew 23% year-over-year to $668 million in Q1. Net income attributable to Match Group amounted to $174 million, or $0.57 per share. Both numbers surpassed estimates. Average subscribers rose 12% to 11.1 million. Average revenue per user grew 9% to $0.64.

Landscape and opportunities

In its letter to shareholders, Match Group stated that according to a study by Stanford University, 40% of all heterosexual marriages in the US are now starting online. The Tinder parent believes its brands play an important role in facilitating relationships both inside and outside the US and sees significant opportunity for continued growth.

In Q1 2021, direct revenue from Tinder grew 18% year-over-year while revenue from non-Tinder brands gained 30%. Match Group’s subscriber growth has fluctuated over the past year. At the outset of the COVID-19 pandemic during the first quarter of last year, the company saw its first-time subscriber levels drop sequentially.

New subscriber growth stabilized in the second quarter and saw a pickup in the third. With a resurgence in the pandemic, the levels fell again during the fourth quarter. 2021 started on a positive note with subscriber levels improving and stabilizing and as vaccines are rolled out and things normalize, the company remains optimistic about the growth path ahead.

Tinder has the largest exposure across geographies and a vast portion of its revenue comes from non-recurring a la carte revenue. Engagement on Tinder remains well above pre-pandemic levels with daily average Swipe activity up 15%. By region, Match Group has seen the major portion of a la carte revenue come from North America and parts of Western Europe. Match Group expects other countries to see a pickup once the pandemic subsides.  

Another promising brand is Hinge, which became the third most downloaded dating app in the US last year. The brand tripled its revenue last year and is on track to double its top line in 2021 while delivering margin expansion.

Match Group sees vast opportunity in the social discovery space where users can make new friends and engage with people who share common interests with them, with or without the possibility of ever meeting in person.

According to data from Pew Research, shared by Match Group in its shareholder letter, the number of adults who spend a large amount of time online has almost doubled over the past five years in the US. The pandemic and the resultant isolation drove a rapid growth in online interaction. Match Group expects more social connections to happen online and as social discovery services extend beyond dating and span across geographies and demographics, the company sees vast opportunity in this space.

Outlook

For the second quarter of 2021, total revenue is expected to grow 22-24% YoY to $680-690 million. The Tinder and non-Tinder businesses are expected to contribute growth of over 20% in Q2 as the company expects to see recovery across its portfolio compared to last year.

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