Game Stops on “Metaverse” Dating and Tinder Cryptocurrencies, Stocks Tumble 20% After Surprise Loss

Shares in Match Group Inc. were pummeled on Tuesday after the online dating firm’s new CEO detailed a slowdown in its most popular product, Tinder, and decided to suspend new ventures such as cryptocurrencies. Tinder and “metaverse” dating.

MTCH match,
+ 4.32%
reported a loss of $ 31.86 million, or 11 cents per share, compared to earnings of 46 cents per share a year ago. Revenue reached $ 794.5 million from $ 707.8 million a year ago, but missed analysts’ estimates.

According to FactSet, analysts on average expected earnings of 57 cents per share on sales of $ 804 million. The shares fell more than 20% in after-hour trading shortly after the earnings release, after closing with a 4.3% gain at $ 76.71.

One of the main reasons for the surprising loss was a $ 217 million devaluation on the acquisition of Hyperconnect, an Asian dating company trying to integrate “metaverse” capabilities. Match paid more than $ 1.7 billion for the company last year, but new chief executive Bernard Kim said it was slowing development and spending.

“I think a dating experience in the metaverse is important in capturing the next generation of users, and Hyperconnect has opened up new horizons in this area. However, given the uncertainty about the final contours of the metaverse and what will work or not, as well as the most challenging operating environment, I asked the Hyperconnect team to repeat but not invest heavily in the metaverse right now, ”Kim wrote in a letter to shareholders on Tuesday. “We will continue to carefully evaluate this space and consider moving forward at the appropriate time when we have more clarity on the overall opportunity and feel we have a service well positioned to be successful.”

Match has grown steadily for years thanks to the growing number of paying users for Tinder, but this effort has also hit a bump. Kim said Tinder CEO Renate Nyborg will be leaving and “will be fully integrated into the team at our main Tinder office in Los Angeles to oversee the company’s progress until the research is completed.”

One of its first moves: to sink the introduction of cryptocurrency-like rewards on the platform.

“After seeing mixed results during the Tinder Coins test, we have decided to step back and re-examine this initiative so that it can contribute more effectively to Tinder’s revenue,” Kim said in the letter. “We also intend to devote more attention to virtual goods to ensure they can be a real engine for Tinder’s next phase of growth and help us unlock untapped power users on the platform.”

Kim gave no hope that Match’s difficulties would be reversed in the short term. For the third quarter, he drove revenues from $ 790 million to $ 800 million, roughly stable both year-over-year and quarter-over-quarter. Analysts on average had expected third quarter revenue of $ 883 million, according to FactSet.

The news for the end of the year hasn’t been much better, although Kim hopes Match can cut back on marketing and hiring enough to improve results.

“In the fourth quarter, we expect a limited improvement in year-over-year revenue growth rates compared to the third quarter as teams focus on executing ongoing product initiatives through 2023. We expect a modest improvement in margins as we remain disciplined on the marketing spend. and hiring, ”he wrote.

Match Group executives plan to hold a conference call at 8:30 am Eastern Time on Wednesday to discuss the results.

Shares of Match Group have fallen 42% so far this year as the S&P 500 SPX Index,
-0.67%
fell by 13.6%.

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