Bumble (BMBL) announced its first quarter earnings results, with an increase in both the top and bottom lines. Amid the pressure dating app stocks are facing, Citi's US internet analyst Ygal Arounian joins the Morning Brief to discuss the prospects for Bumble's future.
Arounian notes that "expectations were so low" for dating app stocks, with a slowdown in growth among the user base. However, he emphasizes Bumble's ability to beat first-quarter estimates while attracting more paying users. This, coupled with the fact that the company didn't lower its outlook, "was enough to get investors a little more excited here."
Regarding Bumble's recent relaunch of their app, Arounian acknowledges that "it's still a little early to tell" whether these changes will have a significant impact on the company's momentum. However, he says this restructuring is a strategic move to "change the narratives" of dating apps.
Arounian discusses the importance of Gen-Z users to the company's margins. However, he says that today's young generation is not as active on dating apps as previous generations.
For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Angel SmithVideo transcription
Investors swipe right. Online dating app Bumble profits shares are rising this morning after beating Wall Street revenue expectations, driven by growth and it's paying users for more on the latest results here, we're joined by Igal Orian, the city in our internet analyst here. Great to have you here with us to explain. Why Bumble Shares Are Abuzz This Morning? What do you think investors are focusing on? Hey, thanks for having me this morning. Um yeah, look, the, the really the most important thing here is that the, expectations have been so low, both for Bumble and, and the broader dating app ecosystem uh in general Mon Match also reported earlier this week ear, they lower their, their full year outlook. Um And, and, and we've seen declining data for a few years now on the payer side and the monthly average user side of the time actually spent on it. The broader online dating ecosystem seems to be um in a pretty pronounced slowdown, actually over the last few quarters and it happened quite quickly. So expectations have definitely gotten low. Um, and with the, with that one QB and the fact that they didn't lower their prices full year outlook, I think that was enough to get investors a little more excited here, but there's still a lot riding on a new, new product recently launched, uh, or an app refresh and the expectation that that will lead to an acceleration of growth, uh, in the second half. And then we'll have to see if this works out for this momentum. Do you think that will happen? Uh, well, we hope so. It's a little early to tell. The new app, the app we launched, was released last week. So it's only a week. I mean, management has talked about it. quite positive about the profit figures. They're seeing some good early signs. They're seeing some, uh, strong adoption of some of its key features. Uh, they say they've gotten good feedback and testing. So you know, that's certainly what management is hoping and expecting. Uh, just pointing back to, to match and what they are, what they expect from Tinder. It's a similar story. They expect growth to accelerate and see a reflection point in the second half. They also revamped the Tinder app. There will be more product changes over time and so on. both Tinder and Bumble expect these products to kind of reverse the narratives and some of the softness that we've seen in user trends, um and, and lead to an acceleration in the second half. I mean, and, and they've talked about how much they lean on the Gen Z customer, both on the earnings call point. You know, I, I'm just wondering when we hear reports of Gen Z credits or loans, how much of the customer lifetime value should investors, ahead of their millennial counterparts, really rely on to be involved in the inept financial performance? Well, Gen Z is super critical in, in, in this world, right? And I mean, that's the kind of obvious statement. Um, they come in as early adopters and, you know, expected to be stuck in the, the, the movement in and out as they get into relationships and, and out of relationships. But this is a young cohort that will likely spend a lot of time and money over time on the dating apps and some of the challenges that you've seen in terms of users and slowing growth. It's really, we're seeing from Gen Z and a younger audience that, you know, haven't been using dating apps in recent years in the same way that younger generations in, in, in the In the past, the management teams at Match Group and Bumble really tried to evolve the products to bring them more in line with what they, what, what the younger audience is looking for. Um, and to bring them back into the ecosystem more. So if I, if they can get it right and make the experience better, they'll get younger audiences to spend more over time. There's definitely some softness right now, uh Match called, Twitter called, um or earlier this week and, and, and they're seeing some softness and how people are spending and that's not a AAA new phenomenon. And they said it was getting a little bit worse, but this is a bigger picture than how Gen Z and the younger crowd are spending money today. This is about, um, getting interest rates back to a higher level, where they were three to four years ago. So you know, you know, given the changing landscape that you just described here, the fact that companies are having to adapt to this new reality here within the industry, which is then best positioned, do you think they can benefit from the best position to perhaps benefit from some of these changes that are taking place? Well, I, I mean, at least the online dating ecosystem is in there, these particular apps are really dominated by two big players and that's that, that's match and bubble, there's, you know, there's a lot of smaller apps, but this are the two dominant players. So you would think that they are best positioned here. You know, but they have to capture some of these changes. So some of what's happening might be a little difficult to reverse in the short term. I think you see younger people who are in school and, and more personally, you I see that happening a little bit. I think the younger crowd is spending a little more time on social media and meeting people on, on, on social media. We hear, definitely hear that, at least anecdotally, about how um You know, people are just messaging people on, on, Instagram for example. So the ones that will benefit the most are the ones that kind of follow these trends to make the experience strong and bring people back into their ecosystem, spend more time there. You know, I think balancing this uh real world and, and, and the digital world uh in a strong way is maybe one of the most challenging parts to figure out. But the bigger players are probably the ones who can handle it the most. But of everyone who currently has the best position in bumble versus match. Considering that, well, that, that, that's a very difficult question and um, you know, it, it, it, it depends like I, I'll, I think I'll say it, I'll put it on this way say and then, you know, stumbling blocks challenges, uh maybe a little narrower uh than , than Tinder, but Bumble is much smaller than Tinder, right? Tinder dominates uh, the dating app ecosystem. 40% of time spent on dating apps is spent on Tinder. Tinder has seen their subscribers decline for almost two years now. So I think, um, you know, what Tinder needs to do to really get back to a much healthier place is maybe there's more work to be done. You know, they're kind of um, they saw some challenges in the numbers over a few months and quarters and they quickly went to work and revamped their product. Um, but Bumble is still seeing users grow on a global basis, they're still much smaller than Tinder. So the hurdle for them may be a little smaller, but that doesn't mean Tinder is the market leader and doesn't have the ability to get back on track.
