Match Group (NASDAQ:MTCH) has been attracting a lot of investor love. The company, known for online dating destinations such as Tinder, Match.com, Hinge, and OkCupid, this year saw its stock more than double in value, making it one of 2019’s most successful technology stocks.
On Thursday, however, investors swiped left on the online matchmaker when Facebook (NASDAQ:FB) announced Finally, it introduced its dating feature in the United States.
For some time, this announcement was expected, as the social media giant revealed early last year that it planned to offer a dating function. Match Group shares are being dumped now that the day has finally arrived, falling as much as 7 percent in early trading and recently down about 5 percent heading towards the close.
Tapping a massive user base
Since May 2018, Facebook has tested its dating option internationally, launching in 19 countries before its debut in the U.S. Users must be at least 18 years old to use the feature, have the latest version of Facebook, and opt-in.
Singles are then asked separately from their main Facebook page to complete a dating profile. The program would recommend prospective dating partners based on the group of others who have opted for dating preferences and interests, which will not be limited to those in the user’s friend circle.
The company also confirmed that users would incorporate their Facebook and Instagram accounts into their dating profile. Inside Facebook, the Secret Crush feature will allow users to explore matches with up to nine individuals already in their circle of friends they may have a romantic interest in. By linking their account to Facebook Dating, users will also add Instagram followers to the pool. They will be able to pull pictures and, ultimately, Instagram Stories into their dating profile.
In early 2018, CEO Mark Zuckerberg announced at Facebook’s F8 Developer Conference that the company was planning to enter the online dating space, saying the move seemed a natural fit. “There are 200 million people on Facebook that list themselves as single, so there’s something to do here,” he said.
Chasing down the incumbent
Match Group is the online dating industry pioneer and is most likely to feel the effect of Facebook’s change, which some claim would siphon off the paying subscribers of Match. The business posted impressive second-quarter results, with sales and subscribers both jumping 18% year-over-year.
Simultaneously, Tinder, the biggest moneymaker, increased direct revenue by 46% compared to the previous year, while its subscribers increased by 39%.
Not everyone is sure that the latest move by Facebook would eat into the subscriber base of Match. Instead, this idea goes, singles would use the Dating functionality instead of replacing their current online dating sites as an alternative means of looking for partners.
SunTrust analyst Youssef Squali Robinson Humphrey upgraded Match on Thursday to buy from hold and increased his price target to $106–the highest on Wall Street.
Squali wrote in a note to customers, “Positive intra-quarter app traffic and revenue trends for Match’s myriad brands across several geographies show sustained positive momentum quarter-to-date, causing us to raise our estimates and upgrade the stock,” “We expect Tinder to print once again one of its best quarterly nets adds ever, with further headroom to grow.”
A game-changer or a minor annoyance?
The Federal Trade Commission (FTC) recently hit Facebook with a record-setting $5 billion fine for failing to protect consumer data. After many well-publicized privacy errors and continued brushes in several countries with government regulators, it remains to be seen if users would entrust Facebook with anything as personal as their love lives — particularly considering its track record.
At this point, I don’t believe Match Group has anything to worry about, having proven itself to the online dating community already, and its ranks have continued to expand. And before it becomes a trusted player in space, Facebook still has plenty to prove.
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