Dating apps 'have to go back to the drawing board' for Gen Z

Is your portfolio struggling to find love in the market? Raymond James analyst Andrew Marok sits down with Julie Hyman and Josh Schafer to talk about which dating app stocks investors should swipe right on.

Grindr (GRND) shares are up by over 38% year-to-date, while Bumble (BMBL) is down by 58% in that same window. Match Group (MTCH) — the parent company of online dating apps and websites Tinder, Hinge, Match.com, OKCupid, Plenty of Fish — is down nearly 6% in 2024, but has seen a slight uptick in its share price over the past month.

Marok notes the generational differences becoming apparent between Gen Z and Millennial users on these apps, especially in the straight-dating scene. Younger users coming onto the dating scene are preferring in-person events and activities, rather than swiping for matches.

"These two generations have kind of antithetical preferences to how they choose to approach relationships. And since these apps were largely built by Millennials, for Millennials, navigating this switch to the Gen Z preferences has proven quite tricky," Marok explains. "We haven't seen that so much in the gay dating market, which is why Grindr has kind of prospered while the others have stumbled."

Marok underlines the fact that dating apps with more specific purposes find larger engagement. Several of them even have functions and in-app settings to socialize and find friends or even network professionally.

"Hinge does really well and resonates with Gen Z. I think the focus on more serious relationships, not a swipe based model, is something that is quite positive. Grindr, the fact that it serves a pretty wide variety of social connection needs within the gay community is something that has resonated really well."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

Video Transcript

Max Bumble and grinder dominate the online dating scene.

But those company stocks haven't been universally loved over the past year.

We're looking at how to navigate the dating landscape in your portfolio with the Yahoo finance playbook.

Joining me now is Andrew Merrick Raymond James analyst, Andrew take a look at these three stocks over the past year and it's really just been a very different stories.

So you take a look at grindr that stock's been soaring.

Other two stocks have not performed nearly as well.

You can see it on your screen there just what is going on in the space.

And is this saying more about the future of the dating app space or is this a company specific story?

And there's a real reason that's driving grinder higher.

Thanks for having me on.

Yeah, I would say the biggest single factor that we see in the online dating space today is a generational transition between millennials and Gen Z, particularly in the straight dating market.

Um You know, these two generations have kind of antithetical preferences to how they choose to approach relationships.

And since these apps were largely built by millennials for millennials, navigating this switch to the gen Z preferences has proven quite tricky.

Um We haven't seen that so much in the gay dating market, which is why Grindr has kind of prospered while the others have stumbled.

So, Andrew is this then an existential threat for these services?

I think that they are having to go back to the drawing board in a pretty meaningful way.

Um We've heard bumble on their latest quarterly earnings call, talk about a reimagining of their strategy going forward.

You know, I think that's going to manifest in a number of different and interesting ways in terms of the user experience.

But yes, I think the the swipe based model that we've all been familiarized with, with Tinder and Bumble especially is something that doesn't really resonate as well with Gen Z as it had with millennials.

Andrew does Gen Z just not want to do this on their phone.

I, I look around New York City, there's this big craze right now.

You see it on tiktok, run clubs, right?

Everyone's going to run clubs now and wearing a black T shirt to meet people on the west side highway.

Like is that where Gen Z wants to meet people now?

Is it just not on their phones?

Like people might have thought was the case?

I think increasingly so.

That's true.

It's not to say that Gen Z is abandoning the dating apps user growth, you know, while be below historical levels is still supporting the thesis that Gen Z and younger users are coming on to the apps at least, but they are showing a preference for in person connections and the run clubs are a great example of that.

You know, we have seen a rise of in person events pointed specifically at singles which um is is very much addressed at the gen Z market.

And I think uptake of those is maybe not directly competitive with the dating apps, but it is at least somewhat competitive, right?

Because if you're spending time meeting people offline, you are necessarily not spending time on the apps.

So what do they do?

You said they've been trying to sort of address this, they've been going back to the drawing board, you know, Bumble, I think has a friend service where you can meet friends uh through the app instead.

Is that the right tech, what should they be doing?

Yeah.

And I, and I don't mean to paint the picture that every dating app in the space is, is suffering or, or is, you know, significantly impaired.

We've seen apps like Hinge Hinge does really well and resonates with Gen Z. I think the focus on more serious relationships, not a swipe based model is something that is, is quite positive grinder.

Um The fact that it serves a pretty wide variety of social connection needs within the gay community is something that has resonated really well.

Um I wish I could say exactly what the product or feature is that um that strikes exactly what Gen Z is looking for.

Um But I think there will be a good amount of testing and experimentation that we'll see from some of the major apps before we see any specific go forward path.

And Andrew quickly before we let you go.

I'm curious about the the meeting friends on these apps concepts, right?

Like we know Bumble has come out with that is, is that part of the gross story?

Is it not enough of the gross story to get excited about at this point?

I think it can be interesting, but I don't know if I would necessarily frame it as like a primary driver for a recovery in the business or the stock.

Uh Bumble put out some interesting facts when they were going through their testing phase of the BFF offering that um the users who use BFF and the dating apps were significantly more engaged than dating only us.

Uh We have seen grinder, um Grinder's usage per user is much higher than many of its um relationship peers specifically because it serves so many non relationship based connections for gay men.

Um But yeah, II, I think it's something that could be interesting but maybe not, you know, the primary driver.

All right, Andrew, appreciate you joining us today and breaking that down for us.