Twitter performed well its 4th quarter, in terms of both revenue growth and earnings. But this did not stop its stock price from falling. A number of things are to blame for this. The company recently forewarned of weak sales guidance in the coming quarter. They also announced that they would no longer report their number of monthly active users, and they further announced that their number of daily active users was less than Snapchat.
For investors looking to buy social networking stocks, there is a viable alternative to Twitter: Match Group, which owns Tinder and other online dating sites. While Twitter has lost around 10% of its value over the last 3 months, Match Group has risen 30%, and there are good reasons for this.
A More Defined Business Model and a Better Performing Portfolio
Match Group has a much better-defined business model than Twitter. It focuses entirely on online dating, while Twitter has tried to be a combination of businesses, such as a news feed, a microblogging site, and a media platform, and has not been succeeding in these markets.
Match Group owns popular dating sites, including Match.com, Tinder, Hinge, OKCupid and Plenty of Fish. But Tinder is its growth engine. Last year, the platform almost doubled revenue, earning in excess of $800 million. Its average number of subscribers also rose nearly 40% in 2018 and now numbers $4.3 million people. The total number of subscribers for Match Group also rose last year, to more than 8 million people, which represents a growth rate of 17%.
While Match Group still has far fewer users than Twitter, it has a better business model. Instead of relying on unpredictable ad revenue like Twitter, Match Group earns money through subscriptions and one-time purchases. So, it even though it has far less than half of Twitter’s users, its 2018 revenue of $1.73 billion compares favorably to Twitter’s $3.04 billion.
Room for Both Growth and Expansion
Analysts are predicting a good year for Match Group, with estimates of both earnings and revenue expected to climb 16% in 2019. While this represents a decline from 2018’s incredible growth numbers, there is a good reason. Unlike in 2018, the company is not planning on launching any new premium service.
The long-term growth outlook for the company is terrific as well. Tinder is now the second-highest grossing app in India, and as the country’s economy grows so will Match Group’s earnings there. Some of the company’s other properties, such as Pair and OKCupid, are also experiencing great growth in Asia.
Match Group Is a Better Investment Than Twitter
While the stock of both Twitter and Match Group is expensive, with both companies trading at 34 times earnings, you can consider Match Group a better long-term investment. It has got a better business model, a better performing portfolio of applications and stronger growth expectations.
Because of its high price, though, investors probably should not look to buy Match Group right away. But it could be the perfect stock to purchase during a market downturn.
Really interesting read. Never knew that so many of those dating sites came from the same place, but now that I say it… it does make sense.