BREAKINGVIEWS-Dating apps give investors few cues to swipe right

By Jennifer Johnson

LONDON, Aug 5 (Reuters Breakingviews) - Investors’ love for dating apps is under strain. Dissatisfied younger users are hitting the revenues of companies like Tinder owner Match Group MTCH.O. But some apps, like $3.5 billion Grindr GRND.N, show it’s possible to keep a user base growing – provided you meet them where they are.

Match’s share price woes are down to an exodus from Tinder – which lets users swipe right (for yes) or left (for no) on each other’s picture-based profiles. Paying users peaked at nearly 11 million in 2022, before dropping more than 10% to 9.7 million last year. Unlike ad-dependent social media platforms, matchmaking apps have monetised themselves by asking users to pay for premium features, like a boost to their profile’s visibility. These extras are offered via tiered subscriptions, with this model driving the majority of revenue at Match and its competitors.

The problem now facing the likes of Match Group, and its smaller rival $800 million Bumble BMBL.O, is that younger people are simply less interested in looking for love online. One 2023 survey of nearly 1,000 U.S. college students by Axios found that some 80% did not use a dating app at least once a month.

With dark clouds gathering, Match and Bumble have acted to cut costs and preserve margins. In June, the latter slashed 240 employees, close to one-third of its global workforce. Meanwhile, Tinder’s parent laid off 13% of its staff in May. Valuations reflect this uncertainty. As of Monday’s close, Match and Bumble trade on 14 and 8 times their respective forward earnings, according to an LSEG poll of analysts. That’s a huge drop from the 20 times and 50 times multiples they commanded just two years ago. And they may have further to fall. Tinder’s annual revenue is expected to stagnate at around $1.8 billion until 2029, according to analyst forecasts compiled by Visible Alpha.

Should these forecasts pan out, it could be tempting to proclaim that we’ve reached peak online dating. But that may not be entirely true. Hinge, a Match app geared towards building serious relationships, saw paying users reach 1.5 million in 2024 – a 23% year-on-year increase. Grindr, a dating app aimed at gay men, trades on 33 times forward earnings and analysts expect its paying user base to nearly double by 2028.

Of course, neither Hinge nor Grindr can match the sheer scale of Tinder or Bumble. But perhaps that’s the point: mass-market dating apps may simply require too much swiping and sifting. These are certainly among the top reasons users report dating app burnout. The “intentioned daters” using Hinge may find that apps fit in around busy working lives. Meanwhile, Grindr’s status as the go-to app for gay men guarantees its continued use in the community. Unless mass-market dating apps change, they are unlikely to find investor love.

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CONTEXT NEWS

On June 25, Bumble said it would lay off nearly one-third of its workforce as it strives to improve user experience on its dating platforms.

The company, which owns apps Bumble and Badoo, expects to save about $40 million in annual costs and plans to reinvest in product development. The redundancies come amid a challenging period for dating app developers, who are struggling to attract and retain younger users.