Interactive Corp.’s investment thesis on Tinder from the 2015 IRA Sohn Conference.
- Interactive Corp (IACI) is a leading media and Internet company. The company is organized into four segments: The Match group, Search & Applications, Media, and eCommerce.
- The Match Group: Online Dating including Match.com
- Search and Applications: Ask.com, About.com, Investopedia
- Media: Vimeo
- eCommerce: HomeAdvisor
- Market Cap: ~$5.9B
- Enterprise Value: $5.9
- 2014 EBITDA: $544M
- 2015E FCF: ~5-6%
Investment Thesis On Tinder
- Sum of the Parts analysis that is used by the street does not acknowledge the value of Tinder, giving us a free option
- Morgan Stanley: “There is no Tinder upside”
Clearly, they have been living under a rock.
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Tinder changed the way people look at online dating. It’s now cool. Very cool. And it is changing the way we date.
- Tinder has grown to ~50 million users, and grew 300% last year
- International users represent 2/3 of user base
- Tinder is 50 times larger than the next app or dating website
- Online dating is here to stay. In words that it may be easier to understand for investment professionals: it brings liquidity to the market.
- Once you use Tinder you will always use dating sites to find someone
- The question is: which app or website will win?
Spoiler alert: IAC dominates the market
Why This Opportunity Exists?
- Analysts are extremely short-sighted and are valuing Tinder on 2016 EBITDA
- Analysts are afraid of other free dating websites
- Tinder was created in an IACI incubator, and has never had VC backing
- IACI recently bought back 10% of Tinder, which explains why they’ve been modest about its potential
Keys To Investment Thesis
- Singles Landscape: Over the past 25 years the marriage rate has gone down 40%. There are more single adults than married ones in the U.S. According to Pew Research Center, only 13% do not want to marry
- Network Effect: Although barriers to entry seem low for online dating, the number one problem is getting enough people on board. You can go through over 100 profiles on Tinder, but you only get one match per day on competitor’s Coffee Meets Bagel
- Unrecognized EBITDA: Tinder has cannibalized Match.com and OkCupid’s growth by ~20%; remarkably revenue is up 11% YoY. Competition is extremely severed. Both competitors Zoosk and Ashley Madison are rushing to IPO
See full slides below.