With a fragile business model, Bumble will find it tough to sustain growth in a space that relies on fickle-minded people
The year 2021 has started on a high note for investors. The stock markets are in a frenzied state and we’ve just witnessed one of the gigantic short squeezes in recent times owing to a group of Redditors who took on large hedge fund managers that were shorting stocks like GameStop, AMC, and BlackBerry.
Affirm stock almost doubling on its IPO was a confirmation that we are in the strongest bull runs of the stock market history which is only further aided by a meteoric rise in cryptocurrencies.
In the midst of this storm and huge interest amongst IPOs, Bumble, the second most popular dating app got publically listed on Wall Street on Thursday. And the timing couldn’t be better as it’s just before Valentine’s Day.
After filing to go public in mid-January with an initial price range of $28 to $30 per share, Bumble exceeded expectations by raising more than $2.15 billion in its IPO, at $43 per share.
As a result, Whitney Wolfe Herd, not only becomes the youngest female founder to have led a company public but also finds her way into the billionaire club — which is an incredible feat in itself.
At the time of its debut on the New York Stock Exchange, BMBL opened at $76 per share and soared by more than 70 percent over its IPO price in another buzzing trading day.
Certainly, the Wall Street investors have swiped Bumble right.
However, on the closing bell, Bumble stumbled a little as it ended the day at $70 thereby giving early signs that the road ahead might be bumpy.
Bumble’s Business Model Is Fragile and Will Face Serious Competition
Launched in 2014 with an aim to challenge the archaic dating norms Bumble quickly gained buzz and has come a long way since.
The USP of Bumble lies in its female-centric approach wherein women make the first move. Deemed as a gimmick, this marketing strategy certainly won the hearts of female users as it significantly reduced the chance of them getting spammed.
And though asking the women to initiate a conversation was a creative decision and it allowed guys who’re horrible at initiating conversations a leeway, yet the results haven’t been optimal. For one, the matches expire within 24 hours if the lady doesn’t nudge. Secondly, despite efforts to pitch Bumble as a unique platform for building meaningful connections, it’s no different from Tinder after the first message.
True, Bumble has been expanding its product avenues to cater to users interested in finding friends and making professional connections too with the inclusion of BFF and Bizz modes. But sadly, these features haven’t taken off due to their uncanny similarities with Facebook and LinkedIn. Worse, the company has experimented with offline physical spaces and failed colossally.
Though the dating app had flourished in the lockdowns after managing to pique the user’s interest with its interactive stay-at-home features and COVID safety labels. Yet the core problem with Bumble lies in its business model — which like every other dating site isn’t moat.
Unlike social media, dating apps can’t really establish permanent connections with users especially when most of them are fickle and disappear quickly. And even when people are on it, they tend to use multiple dating apps at the same time.
To make matters worse, Bumble will be pitted against its arch-rival Tinder on Wall Street — both of them have a murky history(Whitney Wolfe Herd, the CEO of Bumble was an early founder of Tinder before she resigned on a bad note). For those who don’t know, MatchGroup besides holding OkCupid and Hinge is also the parent company of Tinder. This makes them a dominant player in the online dating stocks space with more than $40 billion market cap when squared off with Bumble.
So, despite a good first date with the Nasdaq, Bumble finds itself in a saturated marketplace with Hinge and Grindr, two rapidly growing apps already knocking on its doors. Moreover, if Facebook succeeds with its own dating app, that could clearly disrupt Bumble’s business and the whole online dating space in general.
Bumble’s Revenue Could Be Severely Impacted by Apple’s iOS 14 Privacy Feature
The fact that Apple keeps bumping up privacy measures is not a piece of breaking news anymore. But still, the Cupertino tech giant sent shockwaves down the entire mobile advertisement industry during WWDC 2020.
For starters, iOS 14 introduces an opt-in ad-tracking permission that prohibits advertisers from targeting users for personalized advertisements without their consent. A single popup has threatened to debilitate an entire digital advertising empire.
As a result, Facebook and tons of advertising agencies had criticized Apple for its monopoly. Understandably, the iPhone maker had delayed the feature until the start of 2021 to give developers and advertisers more time to prepare.
The dating app Bumble relies on its freemium business model wherein it offers enhanced features such as unlimited super swipes at a premium price. However, given users are temporary, the company largely relies on ad trackers to retarget its user on other websites such as Facebook and earn revenue.
Dating apps for long have been called out for being a privacy threat as they risk exposing your messages and location. The new iOS 14
AppTrackingTransparency framework only further tightens the noose on companies that were leveraging more user’s data with a fairly little marketing budget.
Bumble had warned its investors about Apple’s privacy push and how it could hurt their business in its IPO filing. To put it simply, the company would have to allocate more money in tracking users on the iPhone or be contained with less effective ads at the older price.
Ironically, Bumble is the app that put forth safety measures for its users. Be it through the hide their first name, photo verification, and an AI that blurs images that could be sensitive. However, their business growth potential effectively hinges on one iOS 14 privacy feature.
Almost every dating app gains a few days of fame and then disappears. From the perspective of Bumble, it seems like they’re already a spent force after a good run of 5 years.
With the restrictions already easing, one wonders if Bumble could manage to sustain the growth from its previous years. It’s hard to see a smooth road on Wall Street in the long run. More so since the primary purpose of the app is to match people so that they leave the platform.
But we’ve seen stocks of companies like DoorDash soar. So, while a $10 billion Valentine's date with Bumble might be extremely overpriced, yet one cannot discount the fact that the stock market is going bonkers right now. We’ve seen dead-beaten stocks like GameStop and AMC moon.
Given the buzz around every IPO and the likeability of Bumble amongst the young audience, it could possibly become the ideal candidate for a pump and dump scheme. After all, Reddit’s WallStreetBets is hunting for the next meme stock and Bumble might just swipe all the boxes.
Thanks for reading.
This article was originally published on The Startup.