Match Group (NASDAQ:MTCH) recently announced the $1.7 billion acquisition of Hyperconnect — its largest acquisition ever. Hyperconnect isn’t an online dating company, which may make investors wonder what Match Group hopes to gain from this deal.
In this video from Motley Fool Live, recorded on Feb. 17, Motley Fool contributor Luis Sanchez, Motley Fool analyst Meilin Quinn, and Industry Focus host Nick Sciple discuss Match Group and the online dating industry.
Nick Sciple: “Hey, is Facebook an innovator?” I mean, Facebook has been a big, significant acquirer, and copier, and has built an incredibly huge company. There’s an argument to be made that this online dating is this next wave of social media becoming more intricate, online becoming more impactful, and how people meet and being the core driver of how people meet others. You don’t necessarily have to be the innovator, although I will say the Hyperconnect acquisition which maybe we can talk about in a little bit of detail, now at $1.7 billion acquisition, the largest-ever acquisition from Match, as we mentioned, this is a company that historically has been very acquisitive, so the largest-ever acquisition is significant for this business. They have Hyperconnect as two apps, as Luis mentioned, in this live streaming feel. But the interesting one for me is Azar. Azar offers live video and audio chat, and can instantly translate voice and text for users that speak different languages. It’s the ninth-highest grossing non-gaming app on Google Play, the highest-grossing one-on-one live video and audio chat app globally, so really a significant player in this market. To begin with, as [inaudible] mentioned earlier, they’ve had some success with their Plenty Of Fish product, with live streaming. It looks like they’re maybe looking to push into that a little bit more. A really interesting quote is, Match Group CEO Shar Dubey sent a note to employees that she expects the market for helping people connect what she called “social discovery,” that’s this market that Hyperconnect plays in. She expects that market to be twice the size of dating and then she says, “The augmented reality technology that Hyperconnect is developing in connection with that will fundamentally change the way humans connect online.” When I saw that, it really blew my mind because for me, I see this Azar thing and people one-on-one video chatting, and I think about Chatroulette, which does not have a very good [laughs] connotation online. What are your thoughts on her quote, that this social discovery one-to-one video chat is going to be twice as big as dating in the future? Luis, I’ll let you go first.
Luis Sanchez: Sure. I mean, it sounds a lot like social networking. Look how big of a business Facebook is. Look how big of a business Twitter is. Look at how fast the company like TikTok is that has merged, video entertainment with social networking. When I saw this acquisition, it got me really excited for a few different reasons. You could tell that the tech is really good and they talk about their AI algorithm, they talk about their video infrastructure. They also talk about these AR filters and it reminds me a lot of Snapchat. It seems like there’s a lot of things there that they could probably transfer over to make the core Tinder or OkCupid apps better. But what also gets me excited is Match finally getting into Asia, and after this deal, they’re going to have a fourth of their revenue coming from Asia, which has been a market that they haven’t really been able to tap as well. I think that there is an interesting way that they could probably grow more into social networking, but there’s a lot more to it than that, in my opinion.
Sciple: What do you think Meilin ?
Meilin Quinn: I pretty much agree with what Luis said. I’ll just add that the Azar app is part of its Hyperconnect acquisition. It’s the app that translates voice and text where users speak different languages, that especially seems very compelling to me as the world becomes more globalized. I’m really excited to see how that evolves.
Sciple: Yeah, Match historically has had some really significant success in integrating acquisitions. It’s exciting to see where things go from there.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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