All right. There we go. Good afternoon, everyone. I'm Lauren Schenk, Morgan Stanley small midcap internet analyst. I'm thrilled to be joined this afternoon by Justin McLeod.
Hi.
Hinge's founder and CEO, Tanny Shelburne, head of investor relations for Match. Before we begin, just a couple of disclosures. For important research disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. From the Match side, during this presentation and during the Q&A session, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, w e believe, we anticipate, or similar statements. These statements are subject to risks and uncertainties, our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our periodic reports filed with the SEC. All right, with that out of the way, Justin, you haven't presented at many of these types of conferences before.
First time.
First time. Maybe take a step back, walk us through your founding vision for Hinge and how the app has evolved since then.
Yeah. I started Hinge in 2011, so this is pre-dating app world. What I really wanted to do was bring online dating to the next generation. Originally, Hinge was an app that looked pretty similar to Tinder. It was a yes, no kind of swipe feature experience, and it was friends of friends. A few years into it, Tinder came along, a couple other apps came along, and in the face of pretty steep competition, we decided to pivot the company. I let go of about half the team. We threw out the code base. We started the whole thing over from scratch, and we relaunched as Hinge, the relationship app, the app that's designed to be deleted. What that really means is three things.
First is that we really got dialed on who our core audience was. It was clear that the other swipe apps were really focused on the more casual, fun, young end of the spectrum, and we really wanted to be for people who are really looking for their person. That was a big piece of it. We set as a part of that, we actually changed our strategy. Before, we were really focused on things like engagement and retention and DAU over MAU and all these kind of traditional social media metrics. With the reboot, we focused all of our attention on Great Dates Per User.
We set that up as our North Star metric, and everything that we did was going to be revolved around Great Dates Per User and really just dialing on what our customers came to us for. That led to a very customer-centric rather than competitive focus. Our app stopped looking like all the other apps, it became a really, really differentiated experience. We no longer had the swipe feature, so that is kind of the story of the reboot and the way that Hinge shows up today as the dating app designed to be deleted.
Great. I think the area most top of mind for investors with Hinge right now is probably international expansion. Maybe talk on the international go-to-market strategy, how the expansion is going in markets that you've recently launched in, what are your biggest learnings?
Yeah. We've really paced our international launches. We really wanted to get a solid footing in our core markets before we started to go abroad. Also there's a lot of nuance associated with launching Hinge in new markets. Because there's so much cultural context with our vitals and our prompts, we really like to take trust and safety very seriously, obviously, and making sure that our algorithms, especially our trust and safety algorithms, are set up when we enter a new market. That said, when we enter a new market, we've had a lot of success. In the first international markets that we launched, which were the U.K., and then Australia, we're now vying actually for the number 1 position in downloads. We're actually number one in the U.K., in January.
That gave us a good signal that we thought Europe would be a great place for us to start launching next. In Europe, we launched in Germany, and within the first couple of months, we went from the number 20 app to the number 3 app. We launched in the Nordics, and actually within the first couple weeks, we shot up to the number 2 app. We just most recently launched in France. We've had really, really good momentum so far in Europe and really excited that we're going to keep rolling out countries every couple of months going forward.
I also just want to add, not only are you hitting these marks, but you're sustaining them. It's much more about staying at these number one and number two places for a long period of time.
To be clear, these aren't like marketing-driven pushes where we pop up and then we fall back off. Every time we've hit a position, we've sustained that position. Again, that's because I think of the strength of the product. We come to market with a very differentiated product that people that I think is really the market is ripe for. Once we hit that level, we sort of just keep sustaining and growing from there.
Great. How long does it take for a new market to build a level of scale that you can turn on monetization and you start to see revenues flow through P&L?
Well, to be clear, we're seeing revenue flow right now in Europe, in Germany, in France. Obviously, like as, you know, our penetration in a market goes up, so does brand love, so does brand trust, so does willingness to pay. You'll see more of like an exponential curve over time as like overall monthly active users grow, so does payer penetration, and then that creates a more of an exponential growth of revenue in a market like Europe. We expect over time Europe to contribute, probably continental Europe, excluding the U.K,, over 20% of revenue at Hinge.
Looking beyond Europe, where do you think Hinge has the biggest opportunity to expand? How do you balance new market expansion with existing market development?
We're very focused on existing market development. I do think that, you know, Latin America is obviously a place where we can go next. We've already translated for those languages. It's a very natural place for us to head. We have a lot of natural organic momentum in India. I also just want to point out that we really are still growing in our core markets. For the U.S., for example, monthly active users are up 20%-25% year-over-year, and that's especially true for the, I would say, like, the bellwether groups that we really focus on, which is Gen Z women and LGBTQ. Gen Z women is actually up 35% year-over-year. We're really starting to see women move to choose Hinge as their dating app.
We, unlike some of the other apps out there, have a pretty close to a 50/50 gender split. On LGBTQ, which has been a really big focus for us on the product and marketing side, that audience has actually grown 50% year-over-year for us. I think it's a really, really important market for us to focus on because about 20% of Gen Z is identifying as queer, 20%-25%, depending on who you ask. I think that whoever the dating app of the future is going to be, is really going to have to be dialed on that market.
Okay. you recently launched your new tier Hinge, HingeX, the new premium subscription tier. What was the impetus for launching that, and how has the consumer reaction been thus far?
The impetus is that we have users who I think are very intentioned, very motivated. They're looking for their person, there are not a lot of ways for those people to be able to stand out and find the person that they're looking for. The only way on the app to do that before was to send Roses, which is also known as, like, a super like or. Some people don't feel comfortable doing that, and we wanted to give them a way for people who are really intentioned. Our previous tier, which we called Hinge Preferred, it was $35 a month. We dropped that down to $30. We actually added more features to it. That experience is essentially just unlocking more of Hinge.
It's being able to send unlimited likes and set advanced preferences and things like that. HingeX, on the other hand, which is priced at $50 a month, which is again not like a super premium tier, but we're seeing pretty good uptake rate on it as a result. What it's for is for people who want to get priority access. You get access to people who are most your type. When you send a like, it's a priority like, so you get pinned at the top of the list for the people that you've liked. Overall, what we're seeing is really strong effectiveness, which is, again, Hinge as our focus on Great Dates Per User.
That is at the end of the day, like, what we want to make sure we're moving. With Hinge+ or what previously Hinge Preferred, we see people going on about 2x as many dates per user. With HingeX, we're actually seeing 4x. People are going on 4 times as many dates who are using HingeX. I think that's a really good indication of retention rates and things like that for the future. Overall, it's delivering very in line with expectations, giving us confidence that we're going to hit our $400 million revenue number this year.
Okay. Longer term, what do you think the monetization opportunity is for Hinge from a revenue or average revenue per user, per payer perspective? What features do you think dating apps more broadly can launch from a paid perspective?
Well to address Hinge specifically, we are, I would say pretty early in our monetization journey. If you look at our comps relative to some of the swipe apps, we monetize lower revenue per user overall. We're just, in a sense, like, not mature along that journey. We don't have a lot of the optimizations that the other apps do. For example, we don't even have international pricing. We have, like, one global USD price that, we use throughout the entire world. A lot of that, we're still building those capabilities and optimizing. To step back and look at the bigger picture, I just think that we're pretty far away from the cap on, where I think revenue per user can be in this industry.
If you just think what people spend, I mean, this is one of the most important decisions you'll make in your life is finding the right person. If you just look at what people spend on dating and going out on dates and preparing for a date, much less like self-improvement and gym memberships and everything that people do, I think, in order to make sure that they end up with the best person possible, I think that the ceiling is relatively high. There's, in addition to all the optimizations, of course, I'm really excited about what we're working on when it comes to AI, and I think that's going to be a pretty transformative piece of dating and will open up a whole new slate of revenue opportunities.
Okay. I'm going to come back to the AI in a minute. But we've been pretty vocal in our research that we think Hinge can become the number two dating brand over the long term. My question to you is, do you agree? If so, what timeline would you think that could happen?
Thanks. I appreciate the vote of confidence. Setting aside the competition for a minute, I do want to say that I think that Hinge has a lot of room to go grow. If you look at like the momentum that we have in the U.S., right now we are the number 2 app on iOS. We have been since January. We have great momentum there. We have really great momentum in our core markets, the U.K., Australia. Europe, we've been off to an incredible start, frankly, better than I imagined. We're also pretty early in our revenue per user journey. I think Hinge can definitely become a $1 billion plus company. At the same time, of course, the competition isn't standing still.
I think we have to be really conscious about that. It's been amazing that we've gotten to where we've gotten. Frankly, because we have a fraction of the marketing budget and a fraction of the technical team size of our competitors, and we've still been able to achieve this. But I think to achieve number two, we're coming from behind, we're operating with pretty strong margins. It will take investment, I think, to get to number two. If we're going to do that, I think that, like, it will require real investment. Given the macro environment, we at Match Group are pretty focused on delivering our like, preserving our best-in-class margins.
Understood. I'll jump back to AI topic, a hot topic, I think that will be here for the next four days. How do you think about recent advancements in text and visual AI impacting the online dating ecosystem? A re there any ways that you're looking to immediately integrate into the core Hinge products?
Yeah. I'm thinking about this a lot. I really think that if you listen to people out there who are working on the forefront of AI, they're telling you that it's going to change everything. I think when it comes to dating, that's going to be no exception. I do think that AI and neural networks and machine learning are going to be as transformative and probably more transformative than mobile was to the category. I think about it, in two dimensions. When we ask our users what their two biggest problems are on dating apps and on Hinge, one is relevant matches. It's feeling like, t his app doesn't really get me. I'm not quite sure I'm really finding the person that I want. The second is conversations that don't really go anywhere.
People feel like, we match and we sort of chat for a minute, but it doesn't really get off the ground. I don't know how to transition this offline. I think that articulates pretty well the two big areas that I think, AI can help us, which is the matching side and the coaching side. I could talk about this all day. Without getting into too much detail, I think that there's a lot of opportunity to advance on the matching side.
I think that we can move from a world which is pretty basic, where you're kind of voting up or down a catalog of personal ads, to a world where we're actually understanding more deeply who each user is, who the other people are, what you're looking for, and make more intentioned like higher quality, fewer quantity matches. On the coaching side, just helping people through their journey. Helping them set up their profiles, helping them move their way through interactions, even potentially going past the first date and coaching people through the process. I think that there's a lot of opportunity on both those ends.
I think if you put those together, what you get at the end is essentially having the best matchmaker or personal matchmaker in the world that's only available to people who want to go out and pay, like, $25,000-$50,000 in your pocket. Not only that, but those people usually then go on Hinge to try to find the person that they're actually going to match you with and t his person, like, this matchmaker would essentially know everyone out there.
I think the advancement and value that we'll give to users to help them find their person is very incredible. I could talk about this all day. I'll stop talking about it, but.
I'm going to go a little off script because you told me I could. Don't worry, Tanny . What is the concern that we've been thinking about this, like the inauthenticity aspects of it, right? If you have people using ChatGPT to write their profiles, is there a concern that maybe it makes it a little less authentic over time if there is that risk that people are using those tools?
Yeah. It's interesting to watch how culture is changing. I mean, if you look at, like, the percentage of people that think that dating a robot would actually be, like, socially acceptable. The fact that someone would help you write an opening line or a funny prompt based on, we know your personality, we know your interests. Here's a fun thing to say that might get the conversation started in a really good way, that I think is actually something that we all consult our friends, like w hat should I say next in text? I don't think any of us are being like, well, this is
Like, I don't want to go out with this person because you used your friend to help you write your, like, next text response to me. This would be like your friend who joins you on that journey.
Okay. Fair point.
Yeah.
Hinge has been one of Match's strongest acquisitions to date. Now that Hinge has been part of the Match Group for a few years, what do you think Match has added to Hinge that has enabled you to grow at this pace?
Yeah. I mean we began our relationship with Match Group in 2017. We were trying to do. Our target was to hit, I think, $1 million of revenue that year. We plan to do $400 million this year. It's hard to decouple the Hinge growth story from the Match Group relationship. We've really grown up inside Match Group. I think the magic of that was that you had a very passionate team with a different point of view on both product and market, and we combined that with Match Group that had a lot of wisdom and experience around opening international markets, around monetization, around trust and safety.
Took a lot of the burden off of us in terms of legal and regulatory and accounting, so that we can focus on innovation. Match Group can focus on a lot of that stuff. Obviously I think that was a very successful partnership that we've had. I'm excited to be able to help replicate that. We've just gone through a restructuring at Match Group and into reorganizing the business units. I'm now reporting directly into the CEO alongside Tinder and then a couple other business units. Hoping that I can share a lot of the learnings that I've had as a CEO of Hinge with the rest of the portfolio.
Okay, great. We're going to switch gears. I've talked to you about Hinge all day, but we're going to switch gears because I know people in here might care a little about something called Tinder. Tanny , can you walk us through the state of the Tinder turnaround currently, and what signs you're seeing that are giving you confidence in the re-acceleration?
I've actually been with the company for a long time. I was Tinder's first finance partner back in 2013. What I can say is the leadership team is so in sync. It's more in sync than I've seen a team at Tinder in a really long time. I credit a lot of this to BK for choosing the right people to lead this team and to lean in with them on it. In fact, they're so in sync that, we are announcing that we're putting on hold the Tinder CEO search right now. That's pretty exciting that we have confidence in this team and where they're going. The number one goal that this team has put forth for this year was re-accelerating growth.
These people have been in the organization for a long time. They know the most quick way to get to re-accelerating growth is through optimizations. That is why two-thirds of the roadmap is on optimization because they're more known quantities. There's less variability in what they're going to deliver. That's really what gives us confidence in this re-accelerated growth throughout the year.
Okay. Is there anything you can share on Tinder progress quarter to date like on the earnings call, you were encouraged by what you were seeing in January? Did that continue into February, and have there been any changes on the macro impact of the business?
When we exited last year, we were shipping 50% more products and features than we were Q4 2021, and we've seen some wins there. We've been testing pricing in the U.S., which is actually leading us to increase pricing that we'll be rolling out in the next few weeks, as well as continuing testing our weekly offering. We've expanded it to several countries, and we'll be expanding that testing to the U.S., before the end of March. In addition, we had an optimization on Incognito Mode. This is a feature that actually existed within the Tinder product for a long time. We rebranded it, re-merchandised it, and we're seeing a win there. We're actually collecting 4% more cash from female users on the Hinge+ offerings today through that change. On the flip side, though, we've been testing à la carte pricing internationally.
That hasn't been working out, the team is pivoting, and they're working on new offerings for those international markets. It's important to note that this isn't linear. There's going to be puts and takes throughout the year, but we feel really confident in this team and the roadmap and their execution.
Okay. Given the pricing optimization that you talked about in the last call that affected the fourth quarter Tinder net adds, one key with Tinder net adds will still be modestly negative. How should we think about net adds for Tinder through the course of the year?
When we guided to payers in Q3, we guided to mid-single digits, which backed into, using round numbers, a loss of 150,000 payers in the quarter. We decided to make a change mid-quarter that impacted the other additional 150. BK talked about this pricing team that came together in Q4, and they started evaluating our offerings. One of them was an intro price point that wasn't contributing anything to the ecosystem or on the revenue side. We rolled that back. It was a decision that was revenue neutral and good for the overall ecosystem. The other 150 decline that we guided to was a little bit on seasonality, but the majority of it was really the lack of execution throughout the year. The team is executing. They're getting wins.
They're getting things out the door, we have to build back the momentum to get out of this hole we dug ourselves. We'll still be in negative territory in Q1, probably just out of it in Q2, and really growing in the back half of the year. This all being said, at the end of the day, we are focused on maximizing revenue. Depending on how these optimizations come out, there might be some puts and takes between RPP and payers because at the end of the day, revenue is what we are focused on.
Okay. On the margin side, how should EBITDA margin move through the course of the year, and how should investors think about the impact of the increased Tinder marketing and Hinge international expansion? Maybe a note on the Tinder marketing campaign, which just launched last week, I believe, and initial thoughts.
We're very committed on delivering flat, if not better margins. There will be some puts and takes throughout the year. The biggest one is re-accelerating growth at Tinder. It is our highest margin business. Even with the incremental marketing spend, we said we would be spending about 2 points of revenue incrementally at Tinder this year, still below 10% of revenue. We will be investing into Hinge, but we're really funding these through pulling back spend on our evergreen businesses. Overall, our marketing spend is not a drag on margins for the year. Some of the puts and takes is there are some one-time nature costs in the first half of the year that have a drag. You have the Google escrow payments as well as the one-time costs associated with our headcount reductions.
Okay. Maybe just talk on your capital allocation strategy from here. How are you thinking about acquisitions now that some private market valuations have come down, and stock buybacks as well?
Nothing has changed in our capital allocation strategy. It remains the same. We invest in our businesses first, we look for opportunistic M&A deals, then we look to return capital to shareholders. You are right, valuations are coming down. That being said, we're very interested in companies that we see immediate synergies with right now, most likely in the dating field, where we can really jump in similar to how we did with Hinge and really help drive growth in those businesses. In terms of returning capital to shareholders, I will share, we are out in the market. In the open window, we did buy back this quarter. I know there's been a lot of questions around that. I did want to share that today, I think we will obviously continue to evaluate and opportunistically buy back.
Okay. Excellent. I don't know if there's any questions in the audience. one.
Thank you. I was hoping you could elaborate a little bit on the Tinder management now that you've called off the search. Who is going to be leading the business? What does it look like? Do we expect any other changes? On Hinge specifically, how has dating changed post-COVID, if at all?
Do you want to go first?
Sure. I think COVID accelerated a lot of the trends that we were already starting to see. It accelerated, I think an adoption in the category in online dating. We saw that and it sustained afterwards. It, I think it accelerated the shift to reach media. I think people are much more willing to use video and audio especially, whereas before I think people were pretty skittish around doing that. When the sort of the price of, or the cost of going out and meeting someone in real life rose, I think people wanted to have higher confidence that it was going to be worth it.
They're willing to do a video call, and I think that that has continued post-pandemic and people are more willing to do that, which is great because I think it creates a much better dating experience overall. Those are the main ways.
For the Tinder CEO, what I would say is, BK is going to remain as interim CEO. He's based in L.A., with the Tinder team. They're working really well together, and it just, at this point, it's much better to keep the team focused on continuing to drive growth of that business. We will see how that pans out in the future.
All right. We will leave it there. Thanks everyone so much for your time, and thank you both for joining me today.
Thank you.
Thank you.