Online dating is big business. The industry brings in $1.8 billion every year in revenue – and it’s growing. In 2018, the average online dating user spends 12 hours per week, online, looking for love – roughly the equivalent of a part-time job.
Around 40 million Americans use online dating and many more around the world, with more signing up every day. Pew Research Center reports that almost 60% of people think that “online dating is a great venue for meeting people” – up from 44% in 2005. The stigma surrounding online dating just isn’t there anymore, or at least not in a big way. Most notably though, many of these people are willing to pay for dating services.
In the United States, 13% of people who date online pay for premium features while 10% do not now but would be willing to and 19% do not currently pay for such features, but have tried them. That is a huge market – and one that you can play for your portfolio.
Is Momo Stock Worth Buying?
If you haven’t heard of Momo, you should. The China-based dating services stock is up 138% since January 2017. It has been called the “Tinder of China” for its popularity as an online dating site, but it is starting to get traction across the country as a social video hub.
Momo includes a live streaming platform that allows users to monetize their broadcasts with virtual gifts. The company is also expanding. Momo recently acquired rival dating service TanTan for $800 million.
According to the Motley Fool, “TanTan directly clones Tinder’s swiping mechanisms and other features. In fact, the resemblance was so close that Tinder’s parent company Match Group sued TanTan for IP violations, and TanTan agreed to pay Match royalties and redesign its U.S. app.”
All of this is in an effort to expand Momo’s ecosystem. It has also been trying out new features like live audio chats, group video chats, and karaoke in a bid to increase user interactions and time on the app in general.
Total interactions have gone up – by 20% in 4Q17 and 30% in 1Q18 – and average user time spent on the app is up by 16% year over year.
In any case, the popularity of Momo’s video streaming and the addition of TanTan are reasons to be excited about the potential of the dating service stock.
Growth in Momo has also been strong – The number of users of its core app is growing at 18% per year while the number of paying users is up approximately 20% year over year – but investors are cautious.
“China can be pretty restrictive, something that investors in online gaming and even search have discovered over the years,” writes NASDAQ. “Momo’s spike in popularity is also tied to its live video social hub, and users can be fickle when the next hot platform emerges.” Some of this uncertainty is priced into the stock – Momo’s forward PE is under 16 – but, make no mistake, this is risky stock with high-growth potential.
Is Match Stock Worth the Investment?
Match Group (NASDAQ: MTCH) as the company includes many more dating sites than the popular Match.com. Its brand portfolio also includes OkCupid, PlentyofFish, and Tinder. Together, they dominate the online dating world in the US.
According to Statista, roughly 35% of people age 18-29 currently use one of the Match Group’s dating sites while 25% of people 30-44 are members. Shares prices in the company rose 85%in the first nine months of 2018 and they have tripled since early 2017.
Its parent company, InterActiveCorp (NASDAQ: IAC), is behind dozens of Internet media brands, including Angie’s List, Vimeo, College Humor, DailyBurn, Investopedia, and Daily Beast. Match Group spun off from IAC in November 2015 but the two companies are still involved. IAC is the majority shareholder in Match Group.
Of the dating sites Match owns, its namesake is the most popular with 23.5 million users. It is also one of the most successful in terms of long-term relationships. Tinder is the fast-growing. “There are now 1.7 million paying users on Tinder, and the premium Tinder Gold version of its app is doing well,” writes NASDAQ. “Average revenue per user may be a mere $0.57, but that metric is up 33% over the past year.”
Tinder is also responsible for more than 50% of the revenue that the Match Group brings in, which is worrisome when you are looking at a company that is priced at 41 times its earnings and 33 times its future earnings.
Remember, having all your eggs in one basket is rarely a good idea. Match.com is a strong contender but the Match Group’s brand portfolio is not. For instance, the company’s Plenty of Fish brand has a bad reputation for being a catfishing site. These risks are not well-represented in its share price. Match Group is currently trading at 36 times its future earnings.
>> Related: Check Out Match Valuation
Momo Stock Vs Match Stock: Which Is Best?
Online dating stocks present a major opportunity, but they come with significant risk.
The Internet can be very faddish and dating services are not excluded from that. A new player could come along and change everything, like Facebook (NASDAQ: FB). The company started testing Facebook Dating in Colombia in late September 2018. The service will be oriented toward helping users find lasting relationships over one-night stands – and (at least at first) the service isn’t going to cost anything or even show ads.
That’s not to say that Facebook Dating will be a success, but it could be any company that comes along with dating services that the people like better. Buyer beware.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.