Facebook is keen on entering the online dating space
In 2018, Facebook announced that it was about to launch its dating feature.Facebook's announcement led to a decline in stock Match Group, the parent company for Tinder, OkCupid and PlentyOfFish, among others. Tinder is the leading dating app globally in terms of number of users.
Despite the huge growth potential, Facebook will face growth hurdles in the segmentAlthough dating is potentially a $12 billion market (Facebook's revenues are in excess of $50 billion), the engagement potential that romantic conversations bring about can be very valuable for Facebook.
Facebook has the benefit of a massive user base, and even a small percentage of its users adopting the dating feature could catapult it to the lead position in this segmentHowever, the perception of Facebook's treatment of user privacy will act as a major deterrent for potential usersIn the backdrop of the Cambridge Analytica scandal, Facebook has come under fire for letting third parties misuse user information.
Facebook is no stranger to growing by acquisition, and Match Group looks like a great fit
Given Facebook's as a marketing platform, it was no surprise that the company paid top dollar for WhatsApp in 2014 despite having its own messenger platform. We think Tinder represents an asset of similar quality and potential as WhatsApp did back in 2014. Match Group's average revenue per user (ARPU) and enterprise value per user (as suggested by the market cap) are an order of magnitude greater than that of Facebook, further providing a compelling logic for the potential acquisition.
Per Trefis analysis, Facebook could pay $50 billion for Match Group which represents nearly a 150% premium to Match Group's current price.