Of Love and Money: The Rise of the Online Dating Industry

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By Mary-Lynn Cesar for Kapitall Wire

Online dating is going mainstream. This week-just in time for Valentine's Day-the Pew Research Center released a new study on online dating and found that 15% of American adults have used online dating sites and/or mobile dating apps, up from 11% in 2013 . The study is based on a survey of 2,000 U.S. adults that was conducted in summer 2015.

And the rapid growth in online dating is as much about money as it is love.

Young adults are leading the surge in online dating, with usage among 18- to 24-year-olds almost tripling since Pew's 2013 online dating study. Call it the Tinder factor: 22% of young adults have used a mobile dating app, compared to just 5% just two years earlier. Aaron Smith, author of the report, told NPR that mobile apps' appeal lies in their simplicity and " game-ified way of engaging with other people ." Crafting snappy blurbs and swiping right or left are a lot easier and less time-consuming than writing a painstakingly detailed profile for a traditional dating site like OkCupid.

But young people aren't the only ones in pursuit of the digital get down . The study reveals that 55- to 64-year-olds are also flocking to online dating, with 12% of older adults having tried it-double the 6% reported back in 2013.

Online dating is a big market. Here in the U.S., the industry generates approximately $2 billion in revenue each year and expanded at an annual rate of 5% between 2010 and 2015. This helps explain why IAC/InterActiveCorp ( IACI ) decided to spin off its online dating assets last year with the Match Group ( MTCH ) IPO. Match, whose portfolio includes OkCupid, Tinder and Match.com, went public in November at $12 a share, and although the stock is trading below its IPO price, it currently boasts a market cap of $2.3 billion.

Online dating is also gaining traction overseas, most notably in China, where revenue is estimated to total $1.6 billion for the year by the end of 2016. Investors are interested in the market's potential: last year, German media firm Bertelsmann invested $5 million in dating app Tantan, while Sequoia Capital and Vertex Venture Holdings put $20.5 million into Qingchifan, yet another app.

Still, despite the increasing popularity of online dating, concerns remain over the industry's ability to generate a profit. The biggest issue is that, when the apps work and people find partners, they stop using the service. As a result, dating apps must be adept at acquiring new customers. Unfortunately, as the Wall Street Journal points out , most dating apps don't experience the same meteoric rise that Grindr and Tinder have, and users generally don't recommend the latest apps to their friends.

Match's first quarterly earnings illustrate the potential hurdles within the online dating industry. While the company beat expectations with $0.24 earnings per share compared to the consensus estimate of $0.19, revenue came up short. Analysts had expected $272 million for the fourth quarter, and Match generated $267.6 million. Following the earnings report, Barclays downgraded the stock, and both JPMorgan and Merrill Lynch lowered their price targets.

Keeping these challenges in mind (as well as the industry's growth), let's take a look at what analysts expect to see from online dating companies when they next report earnings.

Analysts provide estimates for various aspects of a company's operations, including its net income, earnings per share and revenue. The consensus estimate, which is the average of the provided figures, is then used as a benchmark come earnings season. If a company surpasses estimates, that's a positive earnings surprise and can boost a stock. On the other hand, missing estimates is a negative earnings surprise and can tank a stock. Just look at Twitter ( TWTR ).

Below is a list of online dating stocks and analyst estimates for their next quarterly earnings and revenue.

Click on the interactive chart to view data over time.

1. Jiayuan.com International Ltd. ( DATE , Earnings , Analysts , Financials ): Operates an online dating platform in the People's Republic of China. Market cap at $214.19M, most recent closing price at $7.23.

Jiayuan's portfolio includes Jiayuan.com and izenxin.com, among others.

Average earnings estimate for Q4 2015: $0.14 per share.

Average revenue estimate for Q4 2015: $28.68 million.

2. Spark Networks Inc. ( LOV , Earnings , Analysts , Financials ): Provides online personals services in the United States and internationally. Market cap at $85.29M, most recent closing price at $3.31.

Spark's portfolio includes ChristianMingle.com and JDate.com, among other properties.

Average earnings estimate for Q4 2015: -$0.01 per share (or a loss of $0.01 per share).

Average revenue estimate for Q4 2015: $12.14 million.

3. Match Group Inc. ( MTCH , Earnings , Analysts , Financials ): Provides dating products. Market cap at 2.35B, most recent closing price at $9.70.

Match's portfolio includes Match.com, OkCupid, PlentyOfFish and Tinder, among other properties.

Average earnings estimate for Q1 2016: $0.08 per share.

Average revenue estimate for Q1 2016: $282.14 million.

(Price and market capitalization data sourced from Zacks Investment Research. Analyst estimate data sourced from Yahoo! Finance. All other data sourced from FINVIZ.)


Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

Securities products and services are offered by Kapitall Generation, LLC - a FINRA / SIPC member.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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