$BMBL: Swipe Left or Right? An Insight Into One of the Hottest Tickers in 2021

If you care just a slightly bit about the stock market (and maybe, dating apps), you probably know that on 02/11, Tinder-rival Bumble made its debut on NASDAQ under the ticker symbol ‘BMBL’. It was initially priced at $43 per share, and by the end of the first trading day, the stock soared to $70.31 apiece (you do the math, that’s a 63.5% rise).

The stock closed at $71.75 per share on the trading day of 02/19, marking the market cap at $8.28B.

Bumble's stock price (Resource: Google)

There was a lot of buzz around the company.

We know that Bumble’s Founder and CEO, Whitney Wolfe Herd, was indeed the former co-founder of Tinder (the tea!) We know that they had a much-talked about lawsuit in 2018. We also know that at 31, Herd is the youngest female executive to lead an IPO.

So, back to business. What is the deal with Bumble?

But first, what is Bumble?

For those who don’t know, Bumble is essentially a location-based dating app: you log in, browse profiles of people in your area, then swipe right if interested, or swipe left for Thank U, Next.

If both individuals swipe right, it’s a match.

There is a twist: after the right swipe, only the woman can send the first message, and the match goes away if no message is sent after the first 24 hours. That gives the women their control of the conversation, and saves users from the exasperation of a 6-month match without a move.

While Bumble is free to use, you can pay an extra fee for advanced features. We have Boost, starting at $12.99 per week, where you can unlock options like Rematch, SuperSwipe, or Spotlight. Or, if you are feeling real fancy, you can pay $17.99 per week for the Premium, where you get even more features like Travel (match with people from other cities) or Beeline (see all the singles who like you).

Bumble also offers BFF mode for platonic relationships, Bizz mode for professional networks, and Badoo - its sister app in Europe and Latin America.

Bumble's IPO (Resource: @bumble)

Why Is It a Big Deal?

Impressive Performance with Opportunities to Grow

Now, let’s talk numbers.

These figures below reflect the financial indicators of Bumble Holdings from its Bumble and Badoo apps.

Figure 1: Bumble’s Financial Indicators 2018-2019 (Resource: SEC.gov)

Figure 2: Bumble’s Financial Indicators 9/2019 - 9/2020 (Resource: SEC.gov)

Pre-COVID, Bumble saw a lucrative revenue of $488.9M - a YOY growth of 35.8%. This is impressive compared to the YOY increase of 11.59% by Match Group (resource: MacroTrends). In 2019, Bumble also enjoyed a net earnings YOY growth of 17.6% and net cash provided by operating activities of 41.2%.

In 2020, the company posted less-impressive revenue growth of 15% with a net loss of $84.1M. This was attributed to the impact of COVID-19 and the company’s increasing costs. However, this shouldn’t be a factor to predict Bumble’s financial performance in the next few years, considering the high volatility of the market.

We will need to wait for its reports in the coming quarters to be able to observe the performance and use of money flow from the public offering to weigh the performance.

Even with the slowdown in revenue and negative profitability, Bumble managed to grow its usage by 25% and steadily increase its market present in the U.S. dating app market, and almost doubled in market share in 2020 from 2017:

Figure 3: U.S. Dating App Market Share by Revenue (Resource: SensorTower)

The real potential growth for Bumble lies in its international market, where it now occupies 2% of market share (the big guys are Badoo and Tinder, but Badoo has been declining for the past 5 years). OC&C projects that in North America alone, the online dating scene will grow 11% annually to a $3.4B market in 2025.

The global market will see an annual growth of ~13% to 981M singles having access to the interweb and a $9.9B market in 2025 (resource: SEC.gov). It is without question that Bumble will enjoy the benefits of scale in the years to come. 

Strong Brand Presence

In the Company’s S-1 introduction, Founder and CEO Whitney Wolfe Herd writes:

Our users connect deeply with our brand, making it a powerful marketing tool which generates word of mouth virality and strong, efficient user acquisition. This is evidenced by the fact that only 22% of new users across our apps came from attributable performance marketing in the nine months ended September 30, 2020.

Take a second to look bumble up on Instagram, you will see several accounts such as @bumble, @bumblebizz, or @overheardbumble (which is mad hilarious), each with a hundred million followers; not to mention the hashtag #bumble with more than 400K related posts. With gen Z rising and living their life through social media, this Instagram influence is a real deal.

(Resource: @overheardbumble)

The Bumble team makes extra efforts to connect with other organizations and give back to the community. For example, for Valentine’s Day Special, it teamed up with AirBnB for special virtual dating experiences. It also launched the Bumble Fund to invest in women founders. It also pushes market presence through programs like Bumble Honey, recruiting college students to be the ambassadors.

With its continuous efforts to improve brand awareness, Bumble is now the second largest dating app in the U.S. with 5M users, and comes 4th on the global scale (resource: Business of Apps). 

The Powerful Whys: Bumble's Mission to Create a Safe Space

It is undeniable that even though we are in 2021, discrimination against women in both their professional and romantic life still exists. Being the women-first dating app, Bumble works to address the situation.

“The Bumble brand was built with women at the center—where women make the first move. We are rewriting the script on gender norms by building a platform that is designed to be safe and empowering for women, and, in turn, provides a better environment for everyone.”

Whitney Wolfe Herd, Bumble SEC S-1 

Bumble claims to create a safe and equitable environment for the users. For instance, in 2019, they introduced a new feature that blurs nude images automatically, leaving users’ the decision whether to see it or not.

Challenges Ahead

Industry Competition and User Base Flux

The booming online dating market can be a double-edged sword to Bumble. The most prominent competitor is Match (Tinder’s parent), who is close to monopolizing the space, with a wide-ranged portfolio of 45 businesses in total.

And the rival is not just Tinder. In Figure 3 above, we can see that Hinge expanded rapidly from less than 1% in the U.S. market (2017) to 6% in 2020. Not to mention other apps like Match, SingleParentMeet, SeniorPeopleMeet, by which Match caters to users of all backgrounds.

A glance at Match Group’s portfolio (Resource: The Motley Fool)

Even Herd admits that the dating app market is not a winner-takes-all situation, “with people using or having an average or two different apps installed on their phone at the same time”. With dating apps now operating on a freemium basis, the cost of switching apps for users is minimal, which leads to potential user base fluctuations.

There are a number of risks associated with the user base for any app, and Bumble is not an exception. Users can engage less in Bumble, which leads to a potential decline in in-app purchases. Users can also find preference in competitive apps, which offer more in terms of features and product innovation. Or, users can find their significant other on Bumble and no longer see the need to use the services. 

The question is, while Match can rely on other revenue streams if Tinder goes south, what alternatives does Bumble Holdings have if Bumble falls short? Can Badoo take place with a declining performance? Will the company have enough time and resources to roll out other services to keep up in the game?

The Role of BFF and Bizz

Launched in 2016 and 2017 respectively, BFF and Bizz shows Bumble’s ambition to tap into the “non-romance” aspects of forming a relationship, both platonic and professional. The question is, how much of an impact is there?

Bumble BFF sounds like an exciting platform for young people (*cough* gen Z *cough*) to make new friends especially in a new city or in this pandemic we are living in. However, its similarity to Bumble Date is questionable. Would you really decide not to be friends with an individual based on a minimum of 4 photos and an excerpt of their life (some won’t even fill it in)?

What would you do when all you want is to make new friends in your new place, but some think that you’re not cool enough for a conversation?

It seems like Bumble hasn’t quite reached its goals to convert the traditional way to form a friendship, at least from what I gather.

The professional platform, Bumble Bizz, can be an addition to the networking book; however, it is not the ultimate networking site. Do you want to swipe hours to find a potential business match who may or may not be interested in the same field as you are? If you want to network with other people based on professionals and locations, LinkedIn seems like a much more optimal solution.

Don’t get me wrong here. If by any chance, you’re reading this story and happen to have a very good experience on either platform, I’m very happy for you. Yet, I believe these two leave a lot to be desired in order to stand out from the crowd.

Furthermore, since there is no record of BFF and Bizz generating revenue for Bumble, their role is almost oblivious to potential investors.

Conclusion

At the end of the day, it depends on the investor to decide whether BMBL is their perfect match. Do you see Bumble as a portfolio maker in the future, providing its steady increase in market presence and high potential of dominating the market? Are you moved by its mission and core value? Or are you still reluctant, waiting to see the public balance sheets in 2021 before making an investment decision? As for me, I am excited about Bumble's earning calls, where I have a more thorough understanding of its financial health and efficiency, after raising $2.51B from the IPO.

Disclosure: On the date of publication, the author of this story does not have (either directly or indirectly) any positions in the securities mentioned above.

Disclaimer: This story is intended only for informational purposes, which does not, and will not serve as a recommendation or offer of buy or sell of the securities. This reflects the opinions of the author who is an associated person of Hacker Noon and does not reflect the opinions of Hacker Noon or any of its subsidiaries or affiliates. Nothing in this story should be taken as a solicited advice to buy or sell the securities.