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The disruptive wave of artificial intelligence (AI) innovation is sweeping through broader markets. As generative AI technologies and large language models (LLM) grow to become a staple across numerous industries, businesses that stand to see their core markets impacted (or disrupted) may need to start investing heavily in AI to get up to speed - or run the risk of being left in the dust.
The dating app scene is one of those markets that's ripe for AI disruption. The market has been dominated by the likes of Tinder owner Match Group (MTCH), though there are a handful of smaller players, such as Bumble (BMBL), that have carved out nice niches for themselves.
Although there's quite a bit of user-facing tech involved with dating apps, I'm sure you've heard of the many anecdotes that slam the new-age technologies. Indeed, dating apps are far from perfect for many users. But as these apps collide with the AI age, dating app track records may finally be in a spot to improve, given that matching is a complicated procedure that could be made more efficient with a bit of help from AI.
And with that, the firms behind them may be able to charge quite a bit more. After all, time is money - and I'm sure many serial daters would be more than willing to pay a bit more to improve their shot at being matched with that perfect someone.
In this piece, we'll have a look at two firms that have a lot at stake as the so-called AI revolution works its way into the dating app scene.
Match Group
Match Group is a relative behemoth in the dating scene, with its $12.6 billion market cap. Though the valuation makes the company more of a mid-cap than a large-cap, the firm is a dominant force, with brands such as Tinder, OkCupid, Plenty of Fish, Hinge, and, of course, the flagship Match.com, among other brands in the portfolio.
Match may have an extensive arsenal of sites and apps. However, it isn't quite a monopoly, with smaller firms like Bumble and Grindr (GRND) continuing to put up a good fight. Though the company's various brands may be viewed as somewhat of a moat in the pre-AI boom days, I do think Match needs to take the rise of AI seriously or run the risk of losing its dominance.
Fortunately, Match Group is on the right track, with the company recently hiring Mark Kantor as Vice President of Innovation, who previously served as head of growth at Zynga - a mobile gaming company that's since been acquired by Take-Two Interactive Software (TTWO). As part of Mr. Kantor's new job, he'll lead a team wandering further into the AI waters. Only time will tell what Match's AI pipeline yields. Regardless, Match's management team seems to know what's on the line as generative AI mania continues to capture the hearts of investors.
At writing, MTCH stock trades at 27.5 times trailing price-to-earnings - not at all a hefty multiple for a firm that could use AI to add to its strengths.
Bumble
Bumble is a lesser-known player on the scene, with a modest $2.24 billion market cap. The stock has been a disaster since debuting on the Nasdaq in February 2021, with shares now down over 80% from their opening-day highs.
Bumble stock could use something like AI to regain its buzz after a rocky start to the year, coupled with May's untimely departure of its president Tariq Shaukat. As the smaller player in the dating scene, Bumble has more room to grow if it can get things right. That's a big if!
At this juncture, Bumble seems to be dabbling with AI, recently launching an AI tool that helps censor inappropriate profile images. Though Bumble may not have as much AI firepower as the likes of its top foe Match, I think it wouldn't be too far-fetched to see the firm match (forgive the pun) any Match Group AI features with similar offerings of their own.
The Bottom Line
It's probably too early to fall in love with either of these dating stocks, even after their considerable share price underperformance. Though they can innovate on the AI front, there's always a chance that a new entrant to the market does AI matching better. For Match Group and Bumble, that's the real risk.
On the date of publication, Joey Frenette did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
