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February 9, 2021
They say money can't buy you love, but it can buy five SuperSwipes. And as of Feb. 11, money can also get you an ownership stake in Bumble, the women-first dating and lifestyle app.
Bumble's stock price jumped more than 85% within a few hours of its Nasdaq debut. The company ended up raising $2.15 billion through the IPO process, though it initially set out to raise $1 billion. By getting in on the IPO frenzy, Bumble willbe better-positioned to compete against rival online dating company Match Group (owner of Tinder, Match.com, OKCupid and Hinge), which currently boasts a market cap of nearly $46 billion.
While Match Group and Bumble are both in the business of love, Bumble insists that dating is only one facet of its broader community-building platform, designed around core values of inclusivity and safety. Bumble hasn't always lived up to its own values, however, and investors will bet on whether its brand can stand the test of time.
What Does Bumble Do?
Whitney Wolfe Herd founded Bumble after departing Tinder in 2014. Wolfe Herd alleged in a lawsuit that her fellow Tinder co-founder, Justin Mateen, had discriminated against and sexually harassed her following their romantic breakup.
Wolfe Herd eventually settled the lawsuit, but the falling out with Tinder is central to Bumble's branding as a friendlier, more inclusive space for online dating. On the heterosexual version of Bumble, only women are allowed to initiate conversations with men. Wolfe Herd says that Bumble started with dating because that's where she saw the greatest need to challenge "archaic gender dynamics and old-fashioned traditions that still ruled the dating world."
Bumble's ambitions extend beyond dating, however, as the company hopes to become a "preeminent global women's brand." To that end, Bumble repurposed the swipe system to launch the friendship-oriented Bumble BFF in 2016 and the networking-oriented Bumble Bizz in 2017. Bumble has also experimented over the years with managing physical spaces, such as a food pop-up in Los Angeles and a coffee shop in Manhattan.
Bumble also owns Badoo, one of the most popular dating apps in Latin America and Europe. Badoo founder Andrey Andreev asked Wolfe Herd to join him and build what eventually became Bumble. The companies shared back-end infrastructure and Andreev owned 79% of Bumble. Badoo still accounts for around half of Bumble revenue, though that share has been steadily decreasing in recent years.
Bumble faced its first major PR crisis after a Forbes expose came out in 2019, detailing a toxic work culture at Badoo. Investigative reporter Angel Au-Yeung spoke to sources who suggested that Andreev was worried that not having enough white people on the Badoo app would diminish its brand; another source claimed Badoo hired female candidates based on appearance. Wolfe Herd initially backed Andreev, stating that he had "never been anything but kind and respectful to me." The fallout from the piece eventually resulted in Blackstone buying out Andreev's ownership stake.
According to its S-1, Bumble generated $377 million in revenue for the period between Jan. 29, 2020, and Sept. 30, 2020. The company reported a net loss of $84 million in that same period. Bumble has enjoyed periods of profitability; during 2019, for instance, it made $86 million in profit from a total revenue of $489 million. The Badoo app also became profitable in 2010, before Bumble existed.
Bumble generates most of its money through premium subscriptions and in-app purchases. Advertising and partnership revenue only represented around 3% of total revenue for the first nine months of 2019.
For the nine months ended Sept. 30, 2020, the Bumble app had 1.1 million paying users, while there were 1.3 million paying users on the Badoo app and other services. In that same period, paying Bumble app users brought in $25.72 per month on average, compared to the total average for paying users across Bumble's ecosystem of $18.48 per month.
The Bumble app is also growing faster than Badoo: Bumble App annual revenue went up 70% between the end of 2018 and 2019, while the Badoo App and other revenue grew only 8%. Similarly, for the first nine months of 2020, the number of paying users on Bumble grew at a 30% rate compared to the 11% growth rate for the Badoo App and other paying users.
What Could Go Wrong?
Two key risk factors stand out for Bumble: loss of interest and reputation damage.
Bumble hasn't yet developed significant non-dating revenue streams, exposing the company to more risk should its core dating services wane in popularity:
- Competitors such as Match Group are squarely in the business of online dating. Match Group hedges risk by maintaining a portfolio of apps that cater to a broad range of demographics. If Tinder becomes a wasteland of data-scraping bots, then lonely millennials can just migrate over to Hinge. Zoomers looking for a short fling, millennials looking to settling down and boomers looking to remarry could all ostensibly achieve their goals through various Match Group services.
- Bumble is instead focused on one community, and it wants to grow by expanding the types of services offered to them. This strategy could be risky because Bumble hasn't yet proven it can make "significant revenue" (in the company's own terms) through Bumble BFF or Bumble Bizz.
- If Bumble doesn't create new business segments by growing within its community, it risks also losing its core business due to competition. The company writes in its S-1: "Within the dating industry generally, costs for consumers to switch between products are low, and consumers have a propensity to try new approaches to connecting with people and to use multiple dating products at the same time … It is possible that a new product could gain rapid scale at the expense of existing brands through harnessing a new technology, or a new or existing distribution channel, creating a new or different approach to connecting people or some other means."
By homing in on a particular demographic, Bumble is also more vulnerable to the whims of that community.
- Bumble writes in its S-1: "We believe that Bumble app users value our commitment to our mission. However, because we hold ourselves to such high standards, and because we believe our users have come to have high expectations of us, we may be more severely affected by negative reports or publicity if we fail, or are perceived to have failed, to live up to the Bumble app's mission."
- Advertising practices are an area of vulnerability, as Bumble acknowledges: "There is a risk that these groups will seek to challenge our practices, particularly in relation to targeted advertising or international data transfers. Any such campaign could require significant resources to mount a response and could lead to negative publicity …"
- Along those lines, there's an evident contradiction between Bumble's authentic "mission-driven" branding and its profit motive. How authentic can a community be when it's majority-owned by the world's largest private equity group? Within any publicly-traded corporation, a mission can only be tolerated so long as it helps maximize shareholder value.
Who Gets Rich?
Bumble redacted shareholder information from its S-1. However, according to S&P Global, Blackstone will own around 67% of outstanding shares and Wolfe Herd will own 11%.
What People Are Saying
- "Bumble, like many tech companies, wants to ride the rewarding wave of tech IPOs and they fit the bill. They are among the younger companies to file for IPO, seeing a 6 year road to IPO, but that doesn't negate the fact that this seems to be a fantastic opportunity for them. Bumble definitely seems to land itself as one of the hottest IPOs of 2021." —Yash Purohit wrote in his Startupology substack.
- "Bumble founder and CEO Whitney Wolfe Herd, 31, is expected to take her company public with a female chair and women occupying eight spots on its 11-member board, or more than 70 percent, a figure rarely seen in corporate boardrooms." —Jena McGregor wrote in The Washington Post.
Update: This story was updated Feb. 11 to reflect Bumble's trading debut.