Homepage / Technology / Wall Street is betting against Tinder. Here's why the company's going to succeed
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Technology

Wall Street is betting against Tinder. Here's why the company's going to succeed

Although it’s now accepted wisdom that online dating is the most popular way to meet a future mate, the industry still is perceived by many investors as prone to fads. Some new online service always seems to be ascending while yesterday’s winners are declining.

A few years ago, Tinder emerged as the hot new service. As time has gone on, the short interest on stock of Match Group, the parent of Tinder, since its IPO two years ago has increased to 46 percent of the float (according to Jefferies, meaning it would take 16 days to cover that position). Perhaps that’s an expectation that, as time goes on, the service’s popularity will wane.

I own Match’s stock because I believe there’s something fundamentally wrong with that logic.

There was a time 6 to 8 years ago in the social networking space when it wasn’t obvious that Facebook would “win.” We pointed to MySpace, Friendster, and services in other domains such as Netscape where certain online services would explode in popularity and then burn out and fade. Yet, after Facebook’s IPO and its success transitioning to mobile, there came a point when investors had to change their thesis about Facebook from fad to dominant.

I believe we’re on the path to the same thing happening with Tinder. We will soon get to a point where most young people who decide to try online dating will opt for a Tinder account. In 2013, only 10 percent of Americans between 18 and 24 had used an online dating service. By 2015, Pew found that percentage had nearly tripled, to 27 percent. And they found most of that new growth was going to Tinder.

In the most recently reported quarter, Tinder said that it is up to over 2.5 million paid subscribers to its service. And the rate of growth is accelerating quarterly. Q3’s paid members were up 476,000 from the prior quarter versus 224,000 from Q1 to Q2. That’s a 12 percent quarterly growth rate to 23 percent.

Part of the reason for the growth is that Tinder is now hitting critical mass for this demographic in the same way this occurred for Facebook: A good proportion of everybody you want to reach on the service is there.

But another reason for the increase is that Tinder has been rolling out new add-on paid services for subscribers that give its members more information. A la carte services give you more Super Likes and Boosts. The newly rolled out “Tinder Gold” lets you see others who liked your profile. These additional add-on services are being priced dynamically by Tinder to see what prices work best in which geographies.

What Tinder is doing in rolling out all these additional a la carte paid services, as well as its core subscription service, reminds me a lot of how all the big video game publishers (such as EA, Activision and Take Two) have done with selling downloadable content after selling you a core gaming title. It took a while for analysts and investors to catch on to how this change was going to significantly increase the industry’s profitability in a secular manner. However, once this started to happen, the stock prices and price targets increased quickly.

With all this happening at once — growth, critical mass, new supplemental services that further increase the service’s profitability, as well as recent successful experimentation with advertising — Tinder is poised to gain a lot of operational leverage in the next few years as it further scales out its service.

It won’t be without competition. Bumble is doing well in the United States. International growth will also face a host of local players in each market. Additionally, unlike Facebook, where its users stick around conceivably forever, Tinder has to keep attracting its next generation of users as the folks who find a mate leave the pool. But the upside for Tinder is still significant.

Some analysts believe only 5 percent of Tinder’s current users are paid subscribers. And the current users are likely only a fraction of the 500 million total addressable market around the world for online dating services.

There is another thing that could happen in 2018 to help Match’s stock price. Match’s parent, InterActive Corp, currently owns 80 percent of Match. It will likely be the case that there will be some IAC event whereby they increase the float of Match. This will allow more (and larger) investors to own the stock afterwards, which should help the stock price.

If you put it all together, Match has a number of strong tailwinds going into 2018. If the perception of Tinder changes from just another player fighting for a piece of the pie to the dominant leader riding several waves in a fast-growing market where its profitability is going to increase sharply, that should help the stock substantially.

Disclosure: Affiliates controlled by Eric Jackson have long positions in MTCH, EA, ATVI, and TTWO.

Commentary by Eric Jackson. Sign up for Eric’s monthly Tech & Media Email. You can follow Eric on Twitter @ericjackson .

Source: Tech CNBC
Wall Street is betting against Tinder. Here's why the company's going to succeed

Comments are closed.