Every new dating app which hits the market seems to have a mission of selling to a larger dating company. How realistic is that path? Geoff Cook, CEO of The Meet Group, joined us at our European Dating Conference 2017 to talk about how he sees the current trend of consolidation and acquisition in our industry.
The Meet Group is a publicly traded company with a market cap $300m, and an impressive portfolio of companies. A portfolio which they are growing aggressively, recently buying Skout and if(we) (the latter coming with two apps; Tagged and Hi5) for around $60m each, and LOVOO for $70m. Hence Geoff being the perfect person to talk through the current state of the market when it comes to acquisitions.
The mission of The Meet Group is to “innovate, acquire, and build the largest mobile portfolio for meeting new people”. And Geoff sees these as all very much interconnected parts.
They intentionally take the portfolio approach, as oppose to focusing on a single app, as the dating industry isn’t a “winner takes all” industry. It’s an industry “defined by a collection of users in various ponds, and the ponds which consistently bear fish for that user is the most popular”. Different niches and communities get the most out of different services, hence a single app can’t ever cover as many people’s requirements as several apps.
Acquisition also drives growth; MeetMe, Skout, and if(we) combined have 10.6 million monthly active users on mobile, and is gaining 160 thousand new users per day. The company has doubled the number of users on their service within a year. And by allowing members on one app to chat to those on another, they saw the network effect boost conversations between users by 15%.
In other interesting statistics, around half of all users within their network will end up meeting someone in real life as a result of joining.
What do The Meet Group look for in an acquisition?
Geoff talked through the main things they look for when deciding whether or not to acquire a company; the size of the product and level of engagement of its users, the business model they use, and the revenue being generated.
They take a keen interest in the technology within the companies they buy; can it be easily integrated with the existing network, and how relevant is it? For example, they’re pushing for video technology in their apps, so are interested in successfully executed video features in other companies they can buy. They see video as very much the future of online dating. The industry moved from websites to apps, and he sees the next step being to video. And their early data is looking to back up that thesis.
They also look for companies they can learn from. When they took the best practices from MeetMe and started applying them to if(we), they saw an increase in chats between users, revenue per user, and even advertisements served to each user. “When it comes to converging metrics, there’s obviously a financial opportunity here.”
How much is a dating company worth?
Geoff put forward the notion that the value of a company is very much tied to their EBITDA (“earnings before interest, tax, depreciation and amortization”, which is a very pure measure of a company’s profits). Acquisition helps grow their EBITDA, which in turn grows their market cap.
The Meet Group trade publicly at around 8x EBITDA. The Match Group at 11x, and Momo at 8x. “Really 8 to 11 is where you’re seeing these public companies trade.” And when you look at the private market and the buyouts, you see a relatively tight grouping around 7x EBITDA. “This is how the dating landscape trades. It’s an EBITDA multiple”.
You can learn more about The Meet Group on their website.