Bumble Ownership Change Could Cause Match Group Problems

Match group (NASDAQ: MTCH) had a remarkable year, and its success was reflected in its soaring Stock price, which has increased by around 60% so far in 2019, significantly outperforming the broader market. The company’s remarkable growth has been driven by the massive success of its online dating app Tinder, which has added more than 1.3 million new members so far this year, rising to 5.67 million, in 30% increase from year-end levels in 2018.

Now, one of Tinder’s biggest rivals, Bumble, has powerful new support. Investment firm Blackstone Group (NYSE: BX) announced last week that it had bought a controlling stake in Bumble’s parent company, MagicLab, in a deal valuing the company at $ 3 billion. Bumble founder and CEO Whitney Wolfe Herd, who also helped co-found Tinder, will lead the company.

Image source: Getty Images.

This could cause problems for Match Group, as Blackstone plans to provide a multi-billion dollar capital injection to MagicLab to strengthen its position in the online dating industry as part of a strategy to develop business opportunities. fast growing investment.

The Bumble difference

Unlike many other dating apps, only women can take the first step on Bumble, initiating the conversation that could eventually result in a date. The site also allows users to build and expand a business network through Bumble Bizz or expand their social circle through Bumble BFF.

Earlier this year, Bumble reorganized its corporate structure into a holding company – MagicLab – home to a group of successful dating apps, including Bumble, Badoo, Lumen and Chappy. Blackstone plans to strengthen Bumble’s competitive advantage by accelerating its expansion into new geographic markets to take on Match while increasing the usefulness of its no-dating features.

Match Group had to recognize the potential of a female-centric dating app like Bumble, which reportedly offered $ 1 billion last year to acquire Bumble and its sister dating apps, but its advances were dismissed. Things later took a turn for the worse when Match Group filed a lawsuit against Bumble for illegally copying features from Tinder.

A win-win?

This could end up being a winning strategy for Blackstone Group and for Bumble. As the global economy slows, Blackstone is looking for ways to boost its growth. The company resisted the temptation to take smaller stakes in fast-growing but unprofitable companies and instead decided to invest heavily in a company that is already making money.

MagicLab is profitable: It has an income execution rate of just under $ 500 million and has over 75 million users, according to The Wall Street Journal. The company recently delivered approximately 40% year-over-year growth while maintaining strong cash flow. This isn’t Bumble’s only result, but is bolstered by the success of Badoo, a name that might not be familiar to U.S. investors. The dating app, which is popular in Europe, is said to have 450 million users in 190 countries and reportedly generated $ 400 million in revenue last year.

Blackstone’s cash injection will give MagicLab the resources it needs to move faster to take on Match Group. At the same time, Blackstone is building a visionary leader and a proven company.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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