Hello, everyone. Thank you for joining. I'm David Harkin from JP Morgan, here with George Arison, the CEO of Grindr. Thank you, and welcome to the conference, all. I thought we would start with just given all of the, the kind of press recently around the dating sector, maybe just to, to cover, George, your thoughts in terms of the, you know, the evolution of Grindr and where it finds itself today against that landscape of the broader dating company landscape.
Totally. Thanks for having me, and excited to be speaking here. We have been saying this now for a while, but we also think it's really true, that Grindr isn't just a dating app, it's a dating app and a lot more. It started out as a product for a casual encounter. That was kind of the initial use case at which it excelled, and that's how it gained a lot of traction from, from users and became this ubiquitous product in the user base, where our brand recognition is, like, 85%+ in the United States. And, you know, most gay and bi men, in some fashion or form, have come in contact with Grindr at, at various points in their lives. And that's, that was kind of the beginning.
Over time, as more and more users joined Grindr, and now we're at nearly 14 million users, we've gotten people using it for many different use cases. But the product itself hasn't really evolved to support all these different use cases, so people basically hack the product for other things that they wanna do. Based on our internal research, about 1 in 4 gay relationships in the U.S. start on Grindr, but we offer no dating features, as, as an example, right? It's still just that simple: here's the grid, and you can talk to anybody you want in that kind of open architecture way. So we are used in a lot of different ways. We have a very broad range of users among many different age demographics.
And young users, and by that I mean 18+-year-olds, as they become 18 or when they finish college, actually very actively come into Grindr. So whereas other social media products kinda would normally lose that young generation to something else, right? People go from Facebook to Instagram, Instagram to Snapchat, et cetera. We've never experienced that as an issue, and young people still coming back to the app. Partly because of the community feeling that the app has and people wanting to be around more people like them, which is something you don't have in the real life if you're gay. And so that's a thing that Grindr offers to them and why they keep coming back to us.
I think that this general sense of like, "Oh, Gen Z doesn't wanna date online," is not really that accurate. I think what Gen Z wants is product innovation, and that's what they're really striving for. Innovation includes kind of connecting in real life with digital, and Grindr already does that, so I think we're very lucky in that sense.
Maybe talk a bit, just with that view in mind of kind of comparing to some of the other legacy platforms. You know, where are you focused in terms of product innovation that you think is different from some of those legacy platforms?
Totally. So we have Investor Day coming up in 5 weeks or 6 weeks, on June 26th, so everyone should come and listen to that, in New York, because we're gonna actually do a fairly detailed look into our product roadmap, probably more so than most companies would, because I think it's really important. In a bunch of product areas, I think what's really applicable to us is this analogy around copper wires and cell towers in China in the early 1990s. Where, you know, you could either choose to build, copper wires and try to build it, you know, capabilities for landlines, or you could say, "You know, I'm gonna take a risk on cell phone towers, because that's probably the future for how communication is gonna be."
So we have to make similar decisions around some of the product roadmap. For example, dating, right? We could build a dating product that is good enough for where the world was in 2023, or we could build a dating product that is AI first and what dating is probably gonna look like in 2027. And I think we need to really innovate and, and do the latter. That's probably the bet that we should make. So the way we think about product innovation is core use cases, so things that already happen inside Grindr. Obviously, dating's one clear example. Friendships and social connections is another one that Grindr is used for a lot. And then travel is another really big one. Our users travel a tremendous amount. They have high disposable income.
Most of them don't have children, so they are able to be more flexible with travel. Not surprising that they're on the road a lot. So building features for those use cases is kind of one set. And then there are adjacency use cases that are not as directly connected to the product, but make sense given the relationship that we have with our users. Our users spend about an hour in the app a day. They sent... Last year, they sent 121 billion chat messages in the app.
That's more chat messages on a per user basis than WhatsApp. And so we have this connection to them. Why not cater them with other things that they need that make sense from the perspective of what we do? You know, whether it's in healthcare or in other adjacencies, we have an opportunity to do some really interesting product innovation, and that's another area where we are spending some time.
As you think about innovation, you know, what struck me over the last year plus is the innovation, not just on the product side, but also in terms of the subscription experience for your users. Maybe talk a little bit about how you've thought about the subscription experience and where that will head over time.
Totally. So for background, we make money both through subscriptions and through ads. Roughly speaking, 85% of our revenue comes from subscriptions and add-ons, and the remainder comes from the ad business. We have two primary subscription tiers today. We call one XTRA and one's Unlimited. What they really offer you is more profiles. I mean, there's other features, but the differentiator is, is on profiles. If you're a free user, you get 100 profiles around you. If you are an XTRA subscriber, you get 500, and if you're an Unlimited subscriber, you get unlimited number of profiles. XTRA is $19.99, and Unlimited is $39.99.
When we came in, a lot of us, as the new management team, felt like $9.99 is a very high price point, as the entry point to the product, and so we wanted to experiment with a cheaper price point. So we ran various experiments and monthly cheaper product, and then also a weekly XTRA, where people pay for the XTRA product and get all the things you get in XTRA, but on a weekly basis. Users were very loud and very clear that they preferred the latter and not the former, meaning they wanted a weekly product. It's $12.99 a week, which intuitively doesn't make sense because it's a lot more than $19.99 a month if you spend it over four weeks. But for our type of an experience, it seemed to make sense.
One of the things that people like about it is the immediacy, right? There is a desire to have immediacy inside Grindr. Like, I'm traveling this week, and so I want a paid subscription this week, but then I don't need it when I'm at home, so weekly works really well for that. And what we saw is tremendous growth in people who hadn't been paying ever before, now becoming subscribers on the weeklies, and then coming back and resubscribing either immediately or several weeks later. So reactivations also increased. And the result was that we saw, you know, a significant growth in the number of total people paying on the app. And obviously, our ARPU went up as well because it's a more expensive product on a normalized monthly basis.
Cannibalization was really low on, on that from our monthly. That was also great. So last year we did XTRA weekly, and then this year, in March, we launched Unlimited weekly as well. That's obviously probably less impactful than XTRA because people who subscribe to Unlimited are wealthier, higher disposable income, probably less concerned about the monthly versus weekly pricing, but we're seeing really positive results there as well.
You know, you mentioned the company's revenue complexion being part, you know, mostly subscription and partly advertising. Can you maybe talk about the advertising product, kind of where it is today and where you see it going over the next few years?
Totally. So Grindr's always had an advertising product. Grindr's origin story is quite unusual. It's a single founder, has this idea, starts a company. He's not an engineer, so you know, he's a marketer, and the company just takes off. You know, for years, he filed taxes for Grindr on his literally personal tax return, like, that level of individual company. And so from day one, he had to be profitable, right? Because there was no way to pay for it otherwise. And so the ad business is how they initially became a profitable business, and so we've always had that as a business. And then only later did the subscriptions launch and then kind of grew a lot more.
We have two types of advertisements on Grindr: direct ads, where we partner with an advertiser to offer ads in the product, and that's about one third of our ad revenue. And then indirect ads are what you'd classify as, like, third-party ads, which come from third-party servers like Google, which are two thirds of our ad revenue. The latter is not beloved by Grindr users, would be fair to say, because they're not very relevant. And they're not relevant because we share no information about our users with third-party advertisers, and that's because privacy is such a critical piece of Grindr. You know, we have about a third of our users are discreet.
We operate in 60 countries where it's illegal to be gay, and so protecting their privacy is really important, and that's just a choice that we make on, in terms of sharing information. Our app. And then we only have, like, one type of an ad format, and we are told a lot by advertisers that they want a lot more. So we spent a lot of time last year kind of figuring out what the ad strategy should be and can this be a much bigger business than it is. At the minimum, we want it to keep up with the direct business, meaning the subscription business, in terms of growing at the same pace as the subscription business, and maybe there's upside beyond that for it to grow more.
Obviously, one of the ways to do that is to convert a lot more of our third-party ads into being direct ads, and we need to do things for that, meaning we need more ad formats, we need a sales team that's much more active in going out there and selling this opportunity to advertisers. But we also need advertisers to come along the journey with us as well, right? It's really convenient for almost every big advertiser to issue a statement in June about Pride, but they're not often going to put their money where their mouth is in actual spending, and so we need them to kind of work with us on that.
We think advertising can be a very significant contributor to our revenue growth, and obviously, it is an even bigger contributor to EBITDA because we don't have to pay the Apple Tax on that, and that's obviously really beneficial, as well. Given how underinvested it was, it makes sense to continue investing in it and see what we can do with it.
You mentioned user safety as being, you know, a core focus. Can you maybe just talk about where, you know, particularly today, where you're focused in terms of data privacy, user safety?
Yeah. So Grindr's always actually been quite good about privacy. We don't share information with advertisers, for example, that almost every other app does. We probably get no credit for that, 'cause I think users still think that we share the information, even though we don't. And then we actually don't require you to have a photo when you register an account. We don't do a verification, again, because there are users that need to be discreet, right? And it could be discreet because I'm in Egypt, and it's a really terrible place to be gay, or because I live in a place in the United States where just I'm uncomfortable people knowing that I'm on the app, even though it's-- I'm totally open about who I am, right? So both kinds of discretions are necessary.
And so, privacy is a really big focus, and obviously, security of the app is a really big focus as well, and we have a strong security team that kind of manages that. And the privacy team that is focused on ensuring that we do things in a very privacy-centric way. In most companies, privacy is kind of managing regulations. That's not what privacy is for us, right? Privacy is kind of core to our business, 'cause if we don't do that well, we could really hurt the company and hurt the brand, and so it's really, really crucial. We've started to deploy AI to help with safety and privacy as well. So we have an algorithm running, for example, now, that looks at messages in the app, and if it sees illegal behavior, right?
So if it's, you know, the most not allowed item on Grindr, like a zero tolerance policy, is anything related to minors. So if there's any minors discussion in any way, and we're able to flag that before anyone even reports it, we then ban that account, permanently, and actually report the account to the authorities. Same thing with drugs and solicitation, also not allowed, and we proactively ban those. The good thing since we've started to do this, about 2.5-3 years ago, is we've seen really big decrease in the user reports that we get for illegal activity. That's come down by about 50%. And that's really beneficial, right? Because that means that we are actually able to catch misbehavior before it happens. And that's really helpful.
Our users. Again, because we're a community, and users really perceive the product as a community, they're really big about reporting things as well. So when bad behavior happens, they usually report that to our customer service, and that's really good, but as much as we can find before it happens and kind of prevent somebody from even doing anything, that's better.
You mentioned a few different international geographies through the course of this discussion. You know, maybe highlight a few regions where you're most excited about international growth over time.
Yeah. So Grindr is a very international company. We're in 190 countries and territories. There are very few countries where we don't operate. Like we are not available in Turkey, not because we don't want to be in Turkey, but because they ban us from being able to be in Turkey, which is kind of surprising when you think about it. But, and then Indonesia is another place where we're, like, technically banned. In some of these countries where we're banned, like Turkey and Indonesia, you can get on Grindr through a VPN, and people do, but in a few others, you can't even do that. We proactively don't allow, like parts of Ukraine that are under Russian control, Iran, et cetera, but generally, we're very international.
And that's partly because of this, we are doing a service for the community, and, for example, even I've been involved in this discussion, like, do we go back to Iran or not? And local activists and NGOs really want us back. Even though they know that the police will use Grindr to try to honey trap people and, and catch them, the response still is, "That is a risk worth taking versus not having the product that we can use to communicate with." And so, that's a big reason why we choose to be in a lot of these countries, is because we're serving the community really well. We've seen tremendous growth in Latin America, and I think there's still a lot of growth to be had there. The secular trends in Latin America are really positive for us.
Brazil, for example, has the highest percentage of self-reported people in LGBT category in the world, and so there's a lot of growth opportunity all over Latin America. And then I think there's a ton of growth opportunity in Asia as well. They're probably a little bit behind, Latin America in terms of societal acceptance, but, you know, in India, it was illegal to engage in gay intercourse 10 years ago. Now they're actively talking about gay marriage in certain Indian states. And so, the change is so rapid in some of these places, that inevitably we will probably have a lot more available users to us, and so being in Asia makes a ton of sense.
Grindr's never really spent money on marketing, and we don't wanna spend money on kind of digital marketing, in a traditional way. And so building a brand in some of these places, where our brand is probably not as strong as it is in North America and Europe, is an opportunity that we should take, because over the long term, that'll drive a lot of user growth, I think.
Yeah, how do you think about that? I mean, you recently had Grindr's 15th anniversary. I think you were in Brazil, and you announced the global Gayborhood in your pocket, as part of you know, a way to think about the Grindr brand. You know, but yet, unlike some of your other peers across the category, there's been very little performance marketing or other investments. What is the you know... How do you think that that kind of you know, how will you, you kind of elegantly combine some amount of brand marketing-
Yeah
... with you know, I think keeping the current cost structure?
Yeah, totally. So, just to explain the gayborhood in your pocket, you know, gayborhoods have existed in large cities for a very long time. When I finished college, I moved to D.C., and I literally moved myself into the gayborhood on Fifteenth and O Streets, precisely with the idea of, "Hey, there's a lot of gay people here, and I wanna be around a lot of other gay people to figure out what it means to be gay." And so, a lot of us that have that flexibility to do that, we choose to do that, right? Now, not everybody does, and in many ways, Grindr replaces that in real life community feeling that a gayborhood does for people who can't live in one, on their phone.
So if you're in Des Moines, Iowa, and there is no gayborhood in Des Moines, you have one with you on the phone, and that gives you kind of that similar experience. And that's been true on Grindr forever, and we want that to be even more true in the future as we build new features. And so we felt like having a brand description that kinda is both descriptive of what we do today, but is aspiration for where we wanna go, made a ton of sense. So that was the idea behind the gayborhood in your pocket. We don't believe that we need to spend money on performance marketing to continue driving users.
What we do need to do is, be out there, taking control of our brand, not letting others define us, and really leaning into the things that make Grindr successful. People engage really actively with our social media. When I say people, like, both users and not users, meaning people in the community who are not users. And that's something we should take a lot of advantage of. They want fun and sexy things on our Instagram. They want fun and sexy things in our TikTok, et cetera, and we need to be providing that with them.
We recently hired, recently being about nine months ago, hired a new leader for our brand and communications team, and I think there's a very noticeable change in kinda how we present our story, in our social media, and we'll continue to do that a lot more. So we think for way less spend than performance marketing can have a much bigger impact, through kind of being out there, telling our story. Now, in the U.S., we don't need people to learn who we are, 'cause they already know it. In places like Europe, our brand is still very, very well known, but not as well known as it is, say, in the United States, and so there, having some brand extension of our brand kinda reach, matters. But again, we don't think that's a digital approach.
There's other things we can do to make that happen. You know, events that we can use as activations are opportunities. For example, this year, we're gonna be having a Grindr bus that will travel from San Francisco all the way to New York during the month of June, and stop at about eight Pride events across the country. It's one thing to have the bus stop locally, but we're gonna use digital channels to really activate that, kind of, worldwide. You know, next year it would make sense, if this is a successful event, to do that in Europe as well, right? And doing those types of events is way more beneficial financially, from an ROI perspective, than spending money on digital advertising. I think we are lucky, 'cause we have a very contained community, right?
Like, we're trying to go after a specific set of people that like to come together at events, and so that gives you a huge benefit in terms of how you do it.
Maybe just moving to financial topics. It may be helpful just to describe the guidance for 2024, and the key parts of, you know, particularly product and growth initiatives that support that guidance.
Absolutely. So first, on how we give guidance, and I say this as a, you know, second-time public company CEO, who we used to run a private company before, and have gone through the pain of maybe, you know, being a little too, in the private sense, overly optimistic about the future, and then, giving guidance like that, and that did not go well for me, a few years ago. And so I've been very, very, focused on when we give guidance, we need to be very predictable in what, we will achieve. That's what, investors expect, and we need to be able to provide that to them. And so when we think of guidance, we're like, "Where, what do we have visibility into now?" And that is what we guide to.
If there are things we're working on that we don't yet have visibility on, we should not include that in guidance, and we can add that to guidance later with an update once we have visibility into what's happening. So, to me, that's been really important. I think investors generally appreciate having that perspective on how guidance is given. So our guidance for this year is 40% or better EBITDA, and 23% or better revenue growth. You know, that's partly driven by weeklies kinda lapping for the full year, because they started full on at 100% in second half of Q2 of last year, as well as some of the products that we're releasing now.
So we released, Roam, which is a travel a la carte to, to a set of users already, this quarter. And then, we are in test with Right Now, which is another new feature that we're launching, that hopefully will be launched to more users as the year progresses. As well as a bunch of optimization on, kind of, free to paid, like where should the free line be, and what should be available for paying customers only, in the app? So there's a few things happening there that kinda are driving the growth there. While a lot of the investments that we're making in product are gonna be things that probably benefit us in 2025 and 2026 and 2027.
You know, I'm very much, we're not quite there yet, but in the ideal world, what shareholders should expect from us is that vast majority of the revenue that we're gonna be generating in a given year has already been tested, in the year before, and that we're spending most of our time in the year we are in working on the future, right? That's when you create a really good company that is futuristic and, and is thinking about how to be even better, longer term, rather than trying to scramble to get revenue in the year you're in.
You obviously have a very high EBITDA margin today by any measure. What do you—how do you think about balancing, you know, that, yeah, that EBITDA margin today with some of the growth investments longer term?
So far, we don't feel like we're under-investing in anything. We're investing in all the things that we need to invest in. So that feels quite good. We do need more people on the team, because we ended the year, ended March, with about 125 people. Obviously, that's not enough to do all the things that we wanna do. But the reality also is that tech companies have gotten too used to having too many people, and the approach for the last decade and a half has been, "New thing has to be done? Just add a new person." That's not great from a performance point of view. It's really hard to have a performance culture when you do that.
Maybe in a zero-interest rate environment and margins being as high as they are for tech companies, that was possible, but I don't think it's a good idea. And so we wanna build a very high-performance driven culture, in which we're able to do more with less, in part because every individual can be way more productive that way. More people means more complexity, which then slows down the entire team. So we don't feel like our product roadmap is in any way slowed down by an expectation that we have a really good EBITDA margin. Now, should it always be exactly where it has been, you know, last year, for example? TBD, right? Like, there is probably some room there in terms of investments and, and in EBITDA, but that is not the constraining factor for us in terms of what we wanna do.
... I know you have an Investor Day coming up on June 26th. It would be great to hear just, you know, any previews, maybe particularly related to some of the product adjacencies you mentioned earlier, whether it be travel or otherwise.
Totally. So what we wanna do at this investor day is really tell the story of where do we wanna take Grindr over the next 3-4 years. And a lot of it will be product focused 'cause we're a product-driven company. You know, we think of product and revenue are very interconnected because everything we build in product should then drive some revenue impact. So we will give a sense of the core business, the core product, and how we plan on extending it. So what's gonna happen with all the different features we're building and how do they come together into the product. We'll also give a kind of our view of how what is the best way to develop product and the approach that we're taking.
Then give a taste, but not a lot of detail, around some of these extraneous adjacencies that make sense, like healthcare and others. I don't think we'll go into a lot of detail of it yet, but at least give you a sense of where we're going. We wanna then interlay that with the financial plan, and kind of what in these things is including in our financial plan and what's not, and where do we expect financially to be over the next three years. We've not done that, because of the way the company went public. There was not an opportunity to kinda tell that long-term story, and so we've heard a lot from investors that they wanna know what to expect over the next three years, and so we will provide that, that view.
Great. Maybe we take any questions from the audience this time. Great, go ahead.
Oh, sorry.
Oh, we should wait for...
Do you see immersive being in your product roadmap? And if so, do you see how that can sort of help improve the Gayborhood on the app?
Do I see the what in our product roadmap?
Immersive.
You mean, like Virtual Reality?
Yeah.
Okay. I don't get asked that question a lot, at, on Investor Day, so thank you. The short answer is yes, I think, in a massive way. Look, I was, I bought the, you know, the Apple device the second day it came out, and I did it on purpose because I wanted to experiment with it and see what does it mean for us. When you're in it, you know, even just the current app on it is way more awesome than the app is on your phone. Just to be totally frank about it. And so, I think there's a ton of opportunity, in that sense.
Where, you know, where exactly it'll go, kind of TBD, but I think that companionship and loneliness is a really big factor for all people, but it's especially an issue for the gay community. Like, we just know that to be a fact. Mental health is a really significant issue in our community as well. So if we can build technology that addresses some of the loneliness concerns and some of the mental health concerns, that can be really powerful. That's one of the reasons why I think AI companion is an interesting kind of thing to think about. And then if you can make it be more real through virtual reality, I think that's really powerful. I don't think we're quite there yet from kinds of the technology perspective, right?
But we will be there in two to three years, and so we're thinking about it, but less working on it today, 'cause I think we need the tech to catch up with the where you wanna go, for right now, right? Like I think I had a team actually go and look at all the kind of GenAI- like products that are out there right now to see what can they actually do and what they can't. You know, they're really good at facial, kind of replicating your face, but they're not very good at replicating your body yet. And they're not very good at kind of movements, but that's probably only, you know, two years away.
and so I think we need to be on top of it, but I don't think we need to, like, rush into it yet because it's a little bit too early. Does that answer the question? Yeah.
Fascinating. Take a question we had from the online Q&A: How does Grindr plan to increase its presence with retail investors, if at all?
Well, we obviously, anyone can buy our stock. You know, I think we are a product that is beloved by a lot of users, and so hopefully, they buy stock as well. We've not really done anything specific and concrete vis-à-vis retail investors. A lot of our trade actually is more retail heavy than not right now, given the float. So we've been more focused on, I guess, institutionals, but it's a good push and something that we can think about after Investor Day, on, like, what do we want to do specifically on the retail side.
Any other questions from the audience? Go ahead.
Could you talk a bit about how you plan to increase paid penetration?
Yeah. So for context purposes, we have about 7.5 paid penetration, and that includes people who subscribe to a subscription or people who pay for an à la carte, which is a one-off, like a Boost that you pay for and use it for an hour, and then it's done. That's up significantly from a year ago, so both the weeklies and then Boost have kind of done very well, and more and more people are paying. Grindr has an extremely robust free offering, and what we mean by that is that you could literally never pay and get vast majority of the things you want from the product as a free user.
'Cause really, the only limitation on being able to use it in a good way is how many profiles you see, but even there, there are a bunch of backdoors to be able to see more people, right? So we say that a free user only sees 100 people, but if he then goes to filters and changes the filtering, they could see more people because, say, 25 people disappear, but we'll still show you 100. So now you're seeing 25 new people, or you could move from here to, you know, two blocks away and see a different set of people based on geography or on location that you previously were not seeing.
So the product is very robust on the free side, and one way you could drive more pay penetration is to say, "Okay, I'm gonna take a bunch of these features away," right? Like, reduce the things that a free user can do. That's certainly something we have thought about, and there are some experiments that we've run, are running on that front. If you, you know, look at social media, some of the things I mentioned, and they're out there. But generally speaking, we don't want that to be the focus because reducing the free product in a significant way will probably hurt engagement, and we don't think that makes sense.
The most aggressive move there could be, "Okay, you can send three messages for free, but if you wanna send a fourth message to a new user, you have to pay." Like, that would be a more aggressive way to kinda do that. So our approach has been, let's build a lot of new features that are primarily paid features, add them to either our current two tiers or maybe one day create a different tier, and through that, drive higher payer penetration by creating value, basically, through features that people want to pay for and then asking them to pay. So far, that's actually been pretty successful. Boost was a really good ad in that sense. Albums was a really good ad in that sense as well because Albums is a way for people to share many photos at once.
It took off, you know, like, the number of albums shared every day is massive. And so as we build these viral features that are very popular, then we can monetize them. So that's the approach we're taking now. It's a slightly longer kind of approach, meaning, like, this approach takes longer to make happen. But it's better for the long term because you're not hurting the app in the immediate sense. Whereas if you took the former route, which is like, I'm just gonna take a bunch of stuff away, not let you send messages, et cetera, you might have a really big benefit in year one and year two, but then you start paying for it on the back end because users will be really upset with the product and probably start using something else.
That's the approach that we've taken. Not to say that the... Like, I don't think it's viable for us to continue having all these free features be free. Like, that's just not good for the quality of the app and the marketplace dynamics, but we'll be pretty careful in what we take away and, and how we do it.
Great. If there's no other questions, I think we can wrap, and thank you all for joining us.
Thank you.
Great.