Facebook’s getting into dating? Should investors be concerned?
Online dating expert Match.com’s share price plunged last week thanks to an unexpected announcement: social media giant Facebook is getting into the internet romance industry. That’s a sign that at least some investors are worried – but should they be?
Year to date, Match’s share price was up by more than 50% – after Facebook’s announcement last week, it’s up by 13%
Source: Yahoo Finance
Forgetting that a 13% increase in share price so far this year is still nothing to sneeze at, what does Facebook’s announcement mean for Match’s longer-term future?
Dominion’s Ecommerce Fund Manager, Fred Baccanello, says that Facebook represents a “competitive threat” given its “extensive user base and financial clout.” However, the reaction to Facebook’s announcement “misunderstands a key element of online dating services: non-exclusivity.” According to Mr. Baccanello, very few online daters are signed up to a single service: hence, the announcement of one more does not suggest that existing services will lose users.
He explains: “a large portion of Tinder’s estimated 95 million users use its competitor Bumble and other dating services. So Facebook’s move may affect time spent on Tinder but it is unlikely to kill it.”
He also notes that Tinder – which is widely regarded as Match’s growth engine – has a younger demographic than Facebook users. These young Tinder members are looking for “casual” relationships. In contrast, Facebook is looking to facilitate “meaningful relationships”. That means Facebook Dating (even assuming it is successful – remember Facebook marketplace?) may not even be a direct competitor with Tinder.
If any of Match Group’s businesses are under threat, it may be the legacy brands. Yet Match seems unconcerned by the prospect of a new entrant into the market. The company’s CEO made the following statement to TechCrunch last week:
“We’re flattered that Facebook is coming into our space – and sees the global opportunity that we do – as Tinder continues to skyrocket. We’re surprised at the timing given the amount of personal and sensitive data that comes with this territory. Regardless, we’re going to continue to delight our users through product innovation and relentless focus on relationship success. We understand this category better than anyone. Facebook’s entry will only be invigorating to all of us.”
Expect this story to continue over the week, as Match releases quarterly figures today. We’ll be back in a few days to discuss them and see where the story goes.