Picture: 123RF/PETER KSINAN
Picture: 123RF/PETER KSINAN

The course of true love never did run smooth. Nor does the business of love.

The first half of the year was not good for dating apps. Living under stay-at-home orders, singletons were not spending more money on technology to help them find romance. There was little point, with many date spots — bars, restaurants and cinemas — closed.

But as the lockdowns eased over the summer, the search for love, or something like it, resumed with vigour. Match Group, the parent company of Tinder, Hinge and OkCupid, enjoyed a record $84m sales increase in the three months to end-August, as it added 1.1-million subscribers. With social-distancing measures in place, dating apps became one of the best options for meeting new people.

It augurs well for the dating giant’s prospects in the post-coronavirus era, whenever that may be.

A second wave of Covid-19  and the ensuing shelter-in-place measures will likely dampen growth for the rest of the year. After the 16% third-quarter sales increase, growth probably will not exceed 2% for the rest of the year, Match said on Wednesday. That still beats previous analyst expectations.

Perhaps with the current grim state of the pandemic in mind, Match refrained from offering any 2021 guidance.

Even as it predicts lower growth, the company is finding ways to ensure its existing subscribers keep paying for its apps. Tinder, which accounts for more than half of Match’s revenue, is rolling out a new video chat service, dubbed Face to Face, which lets would-be paramours have a virtual date. 

Match went through a break-up of its own in 2020. The firm was spun out from IAC/InterActive in July in a complicated transaction that resulted in Match transferring much of its cash to the parent company, which owned more than 80% of the stock. The deal left Match with a sizeable net debt pile representing more than four times earnings before interest, taxes, depreciation, and amortisation (ebitda), an earnings measure. That’s a lot for an internet company with relatively low growth.

Match’s ability to grow ebitda more quickly than revenue, as it did in the third quarter, should provide some relief to investors. CEO Shar Dubey seems focused on keeping homebound love-seekers paying for the premium product, and the revenue bump over the summer hints at the bonanza that might be in store once lockdowns ease again.

That might make it easier to justify the company’s generous valuation of 56 times forward earnings, which gives it a market capitalisation of $35bn.

Love in the time of plague might not be a brilliant business, but love immediately after it looks promising.

Bloomberg

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