Match Sees Slowing Revenue Growth in Second Quarter on Virus

Match Sees Slowing Revenue Growth in Second Quarter on Virus

(Bloomberg) -- Match Group Inc. said it expects revenue growth to slow in the second quarter from the first, suggesting that singletons forced to shelter in place won’t be willing to pay for extra features to enhance their online dating life when relationships can’t move beyond the screen.

Sales at the owner of some of the world’s most popular dating products rose 17% in the first three months of the year to $544.6 million, according to a statement Tuesday. That was in line with the average analyst’s estimate, according to data compiled by Bloomberg. Match said that year-over-year revenue growth in April was only 9% and “absent a dramatic change,” expects revenue growth in the current period to increase from a year ago, but decline a low single-digit percentage from the first quarter. The company reported a net profit of $160 million in the first quarter, or 55 cents a share. Analysts were expecting 34 cents.

“We don’t know how long the lockdowns will last in each geography or how quickly things like restaurants and bars, which are important in the dating world, will re-open,” Chief Executive Officer Shar Dubey said in a letter to shareholders. “We also don’t know if there will be a second wave of COVID-19 that could require further lockdowns.” Given the lack of vision, she said the company won’t give a forecast for the full year. The shares were little changed in extended trading after the results. They are down 2.5% this year.

The Dallas-based company runs about 45 different dating brands, including Hinge, Plenty of Fish and Tinder, its star performer that created the infamous swipe-right function to indicate approval of a potential date. Tinder global subscribers increased 28% to 6 million in the first quarter.

Dating apps typically run on a freemium model, providing basic services without charge and making money when users pay more for extra features, like unveiling people who have shown mutual interest and applying more granular filters to narrow the dating pool.

Since much of the world has been forced to shelter-in-place for at least the past seven weeks, online daters have been communicating even more than before, Dubey said, sending more messages and engaging in longer conversations. The average number of daily messages sent across all products in April was 27% higher than during the last week of February, and for users under 30 it was 35% higher. The biggest increase in usage on Tinder is coming from female users under 30, she said, noting a shift in female behavior that is “an extremely positive development.”

“Certainly with people not going out there is more time to engage with dating apps,” Ygal Arounian, an equity research analyst at Wedbush Securities, said in an interview before the results were published. “But just because you are engaging that doesn’t necessarily mean you are paying,” he said. “A subscriber who was spending $20 a month on additional features might cut back to the app’s free version until they can date again, he said.

Match’s average revenue per user increased 1 cent in the first quarter from the same period a year earlier, to 59 cents. North American average revenue per user increased primarily due to more purchases of a-la-carte features at Tinder, the company said.

Some analysts, like Brian Fitzgerald of Wells Fargo Securities, had already lowered their revenue growth forecasts for Match for 2020. “I do think dating revenue is going to slow,” Fitzgerald said in an interview before the results were published. “New subscribers are down; if you’re not able to go on a date and haven’t used the platform before, why engage it now?” he asked.

Match is in the process of spinning off from its parent company, IAC/InterActive Corp., to become a standalone entity. Match confirmed it’s still on track to close in the current quarter.

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