I think in the interest of time, we are going to get going. It is my pleasure to have Match Group back at the conference this year. Spencer Rascoff, CEO. I am going to dust off my law degree and read the safe harbor. During this presentation and during the question and answer session, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or similar statements. These statements are subject to risks and uncertainties, and 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. Also today, we may discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the published materials on the company's IR website.
These non-GAAP measures are not intended to be a substitute for the company's GAAP results. Okay, so you have been in the CEO role over the last couple of years since coming back into that role inside the company from your involvement with the company before being in an operating role. Before we take a step forward, let us take a step back and just reflect a little bit on all the things that have been put in place and the journey you have been on over the last two years, or just under two years.
Yeah. I was on the board for about a year before I became CEO 18 months ago. Being on the board is helpful. It gave me a running start and let me have some relationships formed, but you never really know until you get into the company and you roll up your sleeves and I quickly learned a lot. I am very proud of what we have accomplished in the first 18 months. I feel like we have changed the company culture pretty significantly. We have built a much more of a consumer-oriented culture where people really focus on user efficacy and the quality of the user experience.
We have personas built out for every one of our apps now. You will hear employees talking about Jasmine, the joyful butterfly, and Abby, the anxious romantic, and all these different personas across our different brands and thinking through what they need from the product. So that probably sounds like a small thing, but it is a big thing in terms of shifting the way employees think and what they prioritize. Then we created a much greater culture of innovation and of improving the quality of the products, starting with just using our products more. There are a couple oddities about our category that make online dating quite different from other companies that you might be here to listen to. O ne of them is that it can be difficult for employees to use the product.
Imagine if you are an employee at Instagram and you do not use the product, or you are an employee at Snapchat, you do not use the product, or at Zillow, you do not use the product. Here, a lot of our employees, including me, are married, and a lot of us do not use the product day to day unless you really force yourself to. If we make it a job requirement, which we have, and you make it front and center to get employees actually utilizing our own apps, then it unleashes all sorts of observations that people now have about how we can improve the products. If you are not using them, then that does not come through. We accomplished a lot in a short period of time. I am happy to go into different detail in different areas, but it has been a busy 18 months.
Okay. Maybe starting big picture first. We continue to get a lot of questions from investors on where the dating opportunity online still sits today. Obviously, we went through a COVID period, we went through a post-COVID period. I think investors still try to question what the market opportunity is here.
Yeah.
Has there been an evolution in your view of the market opportunity, or has it been relatively stable, but there has been dynamics of volatility around it?
Well, there are about 250 million people worldwide who are single and dating and do not use dating apps. There are a lot of potential people out there that could use dating apps, but several of our apps, notably Tinder, the number one dating app in 166 countries and our number one app, had really lost product market fit. Which is a funny thing to say because it is still the number one app. It is a little bit weird to say that it lost product market fit. It had not innovated in about 10 years and users changed and user expectations changed. To answer your question, the size of the prize has always been massive.
I feel more confident than before that we can go after it because of the way we have changed the product to regain product market fit. I will give you a couple quick examples.
If you talk to Gen Z, 18 to 28-year-olds, they will tell you that dating is stressful. Dating feels like a job interview. A one-on-one date feels very stressful. They are not ready for it. They do not want it. Part of it is because of COVID, because they lost a couple years of social and emotional development. Part of it is because of the Me Too movement, which changed the way men and women relate to each other, and some men are afraid to ask women out or to come off as potentially aggressive inadvertently. There are a lot of societal reasons for it. Nonetheless, where we are is that it can be stressful to engage in online dating.
What we have done with Tinder is we have created social features, starting with Double Date, extending to group dates, which we are testing right now, and events, which we have rolled out to 25 cities on its way to more than 75 cities, all of which lower the pressure.
Yeah.
They take us a little bit away from dating and kind of dating adjacent into the meet new people safely for fun category. If you can be in that space, which is a little less stressful, then we think you can earn your way back into product market fit and go after a lot of that TAM.
Okay. Talk to us a little bit about the journey that Tinder has been on, because the KPIs for Tinder have now shown market improvement over the more recent periods, and you have been on quite a recovery turnaround journey with respect to Tinder. What have been the signals you have picked up on that have started to build in momentum, and how are you thinking about investing behind those signals for that transformation?
We are a much more consumer-oriented company, as I mentioned. One of the biggest consumer innovations that we have brought to Tinder is improving our recommendation algorithm. If you think of a dating app, the beating heart of a dating app is the recs algo. Figuring out whom to show to whom, that is kind of the whole thing, right? That is ultimately what we do, is we show people to one another. The recs algo that powers that is critically important. Just as TikTok's recs algo is critically important, Instagram's recs algo, YouTube's recs algo, Spotify's recs algo, even Zillow's recs algo. That is really, really important to any of these services, but most important in dating apps. We have significantly improved our recommendation algorithm. I have talked a little bit about this.
Last week, we did an investor event called the CEO Connection, which is on our IR website, where my CTO and my chief product officer and I discussed in detail the improvements that we made to recommendations. I will not go through them all right here, but suffice it to say, we have significantly improved recommendations. The other significant set of improvements have been these social features, like Double Date and Events, all of which have improved what we call sparks and spark coverage. A spark is a conversation that goes back and forth 6 or more times, and I am just pulling out some of my data so I get all of my metrics right. Our daily active users, for example, which is a metric that we look at, it is the measure of how many people are coming to the app at any given day.
For Q2, those were down 4% year-over-year. For July, daily active users were down 2.5% year-over-year. In August, it was down about 1% year-over-year, and it is trending better than that in the first week of September. That is daily active users. Then sparks, which is a chat that goes back and forth six or more times. In Q2, those were down 4% year-over-year. In July, they were down 1% year-over-year. In August, sparks were actually up 2% year-over-year. The last metric I will give Eric real quick is spark coverage. That is what percent of the users of Tinder are getting to a spark in that period of time. In Q2, it was up 2%. In July, it was up 5% year-over-year. In August, it is up 6% year-over-year.
These changes, like recommendations-
Yeah
Improvements, and events, and social features are having the intended effect. It is improving results and improving audience growth.
No, that's really helpful framing. I want to stick with events because I think that was sort of the theme coming out of the last earnings call that struck me as quite interesting. You're trialing and testing this in L.A. Seems like you're getting very good signal back on what events can do for the platform. How do we think about what you've learned, and how do we think about how it could be scaled
Yeah
Going forward?
Yeah. Events are very important. They're a very important way for us to drive reconsideration. To get people who maybe used Tinder 5 or 10 years ago, or maybe have a preconceived notion of Tinder. Maybe they've probably heard of Tinder, but they think it's a hookup app. And events causes them to reconsider Tinder and say, "Oh, hold on, maybe I should give this a shot." We decided to go down this direction in January. We launched in Los Angeles in March. By the summer, we were in 25 cities. We said we'll be in 75 cities by the end of the year. About 70% of 18 to 24-year-olds in L.A. are engaging with the Events tab. They're looking at events. And about half of them are coming back weekly to look at more events. People are very interested in going to events.
Even if they find online dating stressful, they are still wanting human connection, and they want to do that in person. They are going to our cold plunge events, karaoke, book clubs, run clubs, and hiking events, and all of these are bookable on Tinder. To answer your question about scalability, we are not organizing these events. We are aggregating them through partnership.
We have partnerships with national, local, regional, global event operators and other sources of events. Then we are also working with individual entrepreneurs that put on these events, and we are curating them so that in all of these cities, you can see fun things to do. We have also built a digital layer on top of the event. If you go to Tinder right now and tap on the second tab, then you go to the dropdown, you can select whichever city you want. I was just looking at San Francisco moments ago. You can see five, 10, 15 upcoming events in San Francisco. If you tap on any of them, you can see the people going to that event from Tinder. You can look at their profiles and see their photos and their interests and information about them.
After the event, you can message with them, which is a really important use case for people who are nervous about getting somebody's number. Maybe they met at the event and they talked, but he felt it was too forward to ask for her number. Maybe she was too nervous to share it with him. But afterwards, they can digitally connect and message through Tinder, and that is another really important way to lower the pressure for Gen Z so they can connect on their own terms. I am very optimistic about the alibi that it provides to people who say, " I am not a Tinder person," or, "I am not a dating app person.
Its ability to drive consideration and reconsideration for people, and these are the types of features that we need if we want to really turn around now and revenue.
Okay. Let's pivot to Hinge, which has continued to see solid, steady momentum on the operating side. What do you see as the market opportunity that sits for Hinge, both in English-speaking language markets and non-English-speaking language markets when you think about the global opportunity for Hinge?
Well, Hinge serves a different segment than Tinder. Internally, the analogy that we use is, it's the difference between going to a concert and going to a music festival. If you go to a concert that's like Hinge, you have tickets to a particular show. You're going to see this artist at this date and time. You probably review the setlist ahead of time, which is what most Gen Z people do, so they know every song that's going to be played in the order. You know what you're looking for. You're going to Hinge to go find the one. If you go to a music festival like Coachella or electronic music festival or any festival, you're going to vibe your way through it.
You might have some inkling that you're going to go see a couple songs from this act or that act, but you're going to sort of feel your way through it, and you're not really sure. The serendipity is the point. It's the adventure and the uncertainty of how this path will unfold, and that's the Tinder experience. You might find the one. Plenty of people find their spouse on Tinder. You might find fun. You might explore your own sexuality. You might have a fun night out. You might meet people at an event. Who knows? You could vibe your way through it. So that's the difference between Tinder and Hinge in terms of the positioning and the feature set.
Hinge ought to eventually. The revenue potential of that segment of people trying to find the one should actually, in my view, exceed the revenue potential of the people just looking for fun and casual exploration. For the same reason, frankly, that concerts are bigger than festivals because there are more people that know exactly what they're looking for. If you're looking for the one, you should be willing to pay more for it because it's a pretty important use case. You're trying to find the one. That's obviously not where these businesses are at in terms of their evolution. Hinge is at $700-odd million on a path to a billion next year. Tinder's in the two-ish billion range. But I think the potential for Hinge is very significant, probably bigger because of the customer segment that it goes after.
Okay. When measured against the customer segment and the revenue opportunity, how do you think about product innovation at Hinge? You talked a little bit about where you're
Yeah.
Going or the journey you've been on with Tinder. Talk to us a little bit about Hinge.
Yeah, absolutely. Hinge's product innovation is focused on improving the efficacy of getting people out on great dates through this very intentional use case. For example, there is a lot of friction around profile creation because it's high stakes. Think about how high stakes it is to create your LinkedIn profile if you're looking for a job, and now think about how high stakes it is to create your Hinge profile if you're looking for your spouse. It's like this is pretty important and stressful to try and figure out what to say. When it says, "What are you interested in?" It's like, "I don't know." It's stressful, right? A lot of Hinge's roadmap is about improving profile creation using AI. Making it easier to select the right photos, making it easier to answer these prompts.
A lot of Hinge's product roadmap is also about improving the quality of chat because once people get matched with each other, now what do I say? And that also can be stressful. Hinge has a date ideas feature where they're suggesting things to do or places to go. Hinge has conversation starters, lots of features around trying to improve the liquidity in the chat section. Hinge also is building social features from a different lens. When I say social features at Tinder, I already described what some of them are. Hinge's social features are about letting your friend improve your profile. So there's a feature called Friend's Take, for example, which is sort of like LinkedIn testimonials where a boss or a colleague can write on your LinkedIn information about you here.
A friend can write information about you or upload a video or photo or a voice note on your Hinge profile. These are the types of things that Hinge is doing, which is exactly what you would expect a brand that is going after the very intentional use case, what you would think their product roadmap would be focused on.
Okay. Another topic I wanted to touch upon was earlier this year, you announced the minority stake investment into Sniffies. Talk to us a little bit about the genesis of that investment and how you think that fits into your broader sort of brand and go-to-market strategy long term.
Yeah. Absolutely. Again, I am pretty easy to decipher. I basically operate on two things. The first is what do consumers want? How can we delight the consumer? And what will make the stock price higher in three years? If you ever want to know what am I going to do, how am I going to answer this question, how am I going to think about X, Y? Those are the two things that I apply to every decision. The Sniffies investment, where we bought about half the company and we have the right to buy rest, the rest is a perfect example. I started looking at the LGBTQ space. I saw how strong Tinder and Hinge are in the gay male space. I looked at Grindr's market position and success.
We did a lot of consumer research about the gay male use case and what they like about Grindr, what they do not like about other services. And Sniffies immediately stood out as the company that has enormous product-market fit, is founder-led, understands their users better than anyone, has an innovative product roadmap, and needed to become part of the Match Group portfolio and will absolutely make the stock price higher in 3 years. Fortunately, our board supported my decision to go after it. I think there is a ton of potential available in Sniffies, and we are working with them to improve their trust and safety. They are not even in the App Store.
Yeah.
Sniffies is the number two gay dating platform, and they are not even an app. They are just mobile web. We are of course working to get them into the App Stores, and we think there is huge potential as they do that and potential as they expand globally. I am very excited about Sniffies. I encourage you to ask any gay male in your network about Sniffies. I think you will be really surprised by how strong the brand affinity is for it. It is unlike anything I have ever seen before in terms of the brand love that its users have for it.
Okay. I wanted to turn to the marketing side because obviously you have a multi-brand approach as a company. How do you think about absolute levels of marketing, the scope for ROI on marketing, and the competition for marketing dollars across your brand portfolio?
It is very complicated for a couple reasons. One is we have a diverse portfolio with 25 brands. The more important reason why it is complicated is this category has some similarities to social networking or network effects businesses that make it different from e-commerce or other types of businesses. What I mean by that is there is this concept of network LTV that we now focus on quite a bit at Match Group, which is to say if we acquire a certain user that is not a payer, you might think, oh, there is no value because if you are Spotify or you are Netflix or you are a B2B SaaS company, you think about LTV and CAC to LTV based on what the revenue is in an acquired user.
But actually certain users are highly valuable to us even if they do not pay because they make the ecosystem much better and they help get other people to retain and pay.
Yeah.
That is an important insight which people sort of knew. If you walked around the halls at Match Group before I got here, people would sort of say, "Well, women are more valuable actually, even if they don't pay." We had never calculated that.
That certainly wasn't factored into how we allocate our $600 million of marketing spend. It is now. We hired the former head of marketing and performance marketing at Zillow Group, who I'd worked with in the past. They built out attribution models across all our different brands, including network LTV. Then we hired a different former head of performance marketing group from Zillow, who spent all performance marketing across all brands there, and now she's doing it for us. We're just now starting to execute on this much up-leveled sophistication about marketing spend, which we were never operating with before. It's a little early to declare victory or point to results, but we're in a much better place than we ever have been before on this front.
Okay. Moving beyond from marketing, what do you see as some of the key strategic investments in growth you need to make inside the company in the next 12, 18 months?
Well, to continue to up-level our trust and safety, one of the reasons why the category has headwinds is because people believe that they can't trust the profiles that they see.
Yeah.
For example, we now have Face Check on Tinder and Hinge. Face Check is a short video selfie which proves that you are a human and you are who you say you are and the photos match your selfie. It significantly, I think around 60% reduction, if I remember correctly, in people's interaction with bad accounts and spam and bots. Basically it significantly up-levels the authenticity of profiles. We do not yet have that on our E&E apps. Those are apps like Match.com or PlentyOfFish or OkCupid. These are really big in the category and they are bellwethers and they impact category perception even more than their revenue would indicate because people look at them like the category. They have sort of outsized influence on category perception. Your question was what are big investments we need to make?
We need to improve trust and safety, including at the E&E brands. We need to continue improving Tinder's recommendation algorithm. One of the things I talked about at this CEO Connection event last week was we will be making Tinder recommendations real-time. Right now it takes four hours for the signal that you send to Tinder on people. If you swipe left on certain types of people, the algorithm does not actually adjust to get rid of those types of people for more than four hours. If you are swiping right on certain types of people, you would think you would see more of those people. You actually do not for four hours. That will change by the end of the year. It will become real time. That is a significant change with a lot of potential. Tinder Events, I think is the other one to watch.
Can that actually change perception and cause people to reconsider Tinder? Will that result in MAU and revenue improvements?
Okay. Within the broader investment theme, you have talked a fair bit on earnings calls about AI reducing friction in the dating process. Where does that broadly fit into your investment philosophy, generally putting AI at the front of the way in which consumers experience your product?
AI has been very impactful in the product itself. But to be honest, it has been even more impactful on our internal productivity, which I guess indirectly improves the product itself. Again, we talked about this a little bit at the CEO Connection event where the CTO elaborated talking about how features that used to take us six months are now taking us one month, or it used to take us one month, it will take three days. We are seeing that all over the place where more than 90% of our code now is AI-assisted. 100% of our engineers and almost all of our employees are using AI assistance. We are very big customers of all the hyperscalers, and also using Chinese open weight models as well to mitigate cost.
Just employees have superpowers now in a way that they did not even one year ago. It is pretty extraordinary.
Yeah.
Every single employee has changed the way they do their work.
Understood. You have talked a lot today about investing in the business. You have also talked about investing in other companies, like Sniffies, we talked about, and you have been a company that has returned capital to shareholders. Talk to us a little bit about the priorities for capital allocation inside the company. How might they change as the company becomes more anchored around growth if some of this comes to the good over the next six to 12 months?
Yeah. It is a good question. We have always, not always, but for the last couple of years, we have been returning 100% of free cash flow to shareholders through dividends and buybacks. I have not changed that approach. We are in this transition where we have been a, not just low growth, but a no growth, a negative growth revenue business, and I am aiming, I aspire to chart a path here, chart a course to be a revenue grower with the goal of getting re-rated as more of a growth stock and having different comps and multiple expansion based on that. I am doing that within the constraints of maintaining margin commitments and capital return commitments that we have made for the last couple of years.
That makes it a little bit harder, but I do not think impossible, and so we have been maintaining that posture. That will continue for the foreseeable future.
But again, I already gave you the cheat sheet. If I think it will make the stock price higher three years from now
Yeah
then I am willing to revisit that and really any other assumption, but for now, I think the best path to make the stock higher three years from now is to maintain that capital return commitment while also improving product and user outcomes.
Okay. We only have a few minutes left, but I always like to end on looking out over the next 12 to 18 months. When you think about the industry you operate in, the brands and the company you run day to day, what do you think are the things that investors generally are not thinking about that they should be thinking about? What are some of the elements of how the landscape might change and evolve in the years ahead? How do you think about all of that?
So my conversations with investors have changed a lot in the 18 months since I have been here. And starting about three to six months ago, they got to the following. They got to the, "Okay, Spencer, I agree. I will posit, I will stipulate that you have improved user outcomes, you have improved the products, users are having better results. Maybe I will even underwrite and stipulate that you can get MAU to flat or increasing on Tinder by regaining product market fit. But now show me the money. When will revenue follow? When will cash flow follow? What is the timeline in which we will start to see financial benefit from all of the groundwork that you have laid, which I will now accept as fact?" Which I take that as good.
For the first six or 12 months, they were just skeptically doubting that we could get to here, and now I've got them all at that line, and now I'm of course trying to get them over the line. But at least we got them up to the line. Most of them are saying, and you talk to them every day probably as much as I do, maybe even more. Many of them say to me, "I'd rather be one or two quarters late than two or three quarters early." I'll wait to see more financial results from what you've been talking about. So that's where people are. Your question is where do I hope they'll be in a year or two? Obviously, I hope they'll be over that line. I think we have to put more points on the board on getting towards flat MAU.
I think we have to put more points on the board on improving revenue. I get that, and we're up for the challenge. But that's where I hope we'll be in a year or so.
Okay, maybe last one I'll squeeze in. With that as a backdrop, what do you see is the thing that excites you the most that can incite growth in the company? I've known you a long time. The way you talked about events on the last earnings call felt very much like a catalyst of you had seen signal that could potentially build and scale.
Yeah.
I don't want to put words in your mouth, but-
Yeah.
Just what are you most excited about executing again?
No, that's definitely it. The reason is, I think it has the potential to really change the perception of the category.
Yeah.
Like at Zillow, for example, we planted a lot of seeds with rentals and mortgages, which took years to pay off, but I was always confident that the TAM was big enough and that those were worthwhile investments. They didn't really change the perception of Zillow, or it's like Spotify moving into podcasts or Netflix moving into originals. I guess Netflix moving into originals is maybe a good example where it does really change your perception of Netflix. No longer is Netflix just buying old mediocre content. They're actually creating prestige content. So I will change the value prop that Netflix provides to me in my brain, and I'm willing to pay $20, $30, $40 a month instead of $5 or $10 a month. Actually, that's a pretty good comp. I think Airbnb moving into experiences is a pretty good comp because it really changes your perception.
For me, for example, and maybe for many of you, I never thought of myself as an Airbnb person. Especially when I'm traveling with my wife or family, I'm more of a nice hotel sort of person. The idea of renting someone's house or spare room, you're not really sure what you're going to get. I was quote unquote "not an Airbnb person." Then I entered the category through experiences. I booked a tour guide at the Eiffel Tower. I booked a whiskey tasting in Tokyo. I actually entered Airbnb through experiences, and then I gained confidence in Airbnb, and then I started renting luxury houses, and now I am actually an Airbnb person. So it expanded the TAM, but it also, more importantly, changed the perception overall and then entered people into the category. Another good comp is what Uber did with trust and safety.
Five years ago, it was like you were nervous. You are like, "Am I getting in the backseat of a stranger's car? Do I want my wife to do that? Do I want my kid to do that? God, no." But now Uber has put in so much work towards trust and safety that you think to yourself, "Well, Uber is safe, or it is certainly safer than taxi, so it is okay for me or my spouse or my kid." There are a couple of these examples where companies can really find a step change. I do think that if we are successful with events, we can reposition Tinder. It is not the hookup app. It is not even a dating app. It is the fun night out app. It is the safe way to meet new people.
It is the way to find your meet cute at a karaoke event or at a run club, while also having this other related product where you can swipe and meet new people through a one-on-one experience. That is why I think it has a lot of potential, and I am comping it in my mind to some of those other transformative things. It is not just like a nice add-on ancillary business. It actually has the potential to recast the core.
Okay. Well, look, I always appreciate the opportunity to have a conversation. Please join me in thanking Match for being part of the conference.
Thank you. Thank you.