A common symptom of any hype cycle is for companies–no matter how far removed from the object of hype–to find ways to get on board. Then, when the cycle turns, executives become concerned about how, exactly, those investments will make money.
Such is the case with
(ticker: MTCH), the company that owns dating apps including Tinder, Hinge, and OkCupid. Match earlier this week told investors it was pulling back from ambitious plans to expand into the so-called metaverse, an as-yet-unrealized future in which much of the human experience is duplicated in virtual worlds.
The metaverse, championed by
Meta Platforms Inc
(META) CEO Mark Zuckerberg, had a double dose of pixie dust in that he brought together the hot areas of virtual-reality technology and digital currencies, which some proponents think can be used for payments in the new industry.
Just last year, Match announced a $1.725 billion acquisition of a company called Hyperconnect to help build out its own metaverse ambitions.
Later that fall, Match detailed plans for a dating metaverse, with “innovative new dating experiences.” That would include a virtual world, called “Single Town,” where users’ avatars could interact. The company also said it was testing “Tinder Coins,” an in-app currency that the company said would be “essential for the virtual goods and trading ecosystem planned for 2022 and beyond.”
That announcement was Nov. 2. The Nasdaq peaked at 16,057 on Nov. 19. Needless to say, the market has changed.
This week, Match Group shares fell sharply after reporting second-quarter earnings that missed its own revenue guidance and analysts’ profit estimates. The company also announced that Tinder CEO Renate Nyborg is leaving the company. Since Match Group detailed its metaverse plans in November, its stock has fallen about 55%.
The drivers of the stock’s problems, of course, aren’t related to the metaverse plans at all but rather lingering weakness in the company’s core business of helping single people find each other. The company said some consumers have been slower to adopt dating apps than they were before the pandemic. It also cited weakening economic conditions and said it would focus on cost-discipline and reducing hiring plans.
Match CEO Bernard Kim, who has been in the job since May, wrote in an investor letter that he believed the virtual dating experience is important but said he had instructed the Hyperconnect team to “not invest heavily in metaverse at this time” given the uncertainty about how, exactly, the virtual world will work.
And Tinder Coins? “After seeing mixed results from testing Tinder Coins, we’ve decided to take a step back and re-examine that initiative so that it can more effectively contribute to Tinder’s revenue,” Kim wrote. On a call with analysts, Kim said he believes in the idea but that in his experience it made more sense to build demand from customers for virtual goods before launching a currency to buy them.
To be sure, not all companies are pulling back from virtual currencies and the metaverse. Meta’s Zuckerberg has said his company is committed to building out the virtual world, despite projecting that the project could lose money for years. just on thursday
said it had partnered with
to offer crypto trading to its institutional clients.
Unlike those companies, it’s clear Match doesn’t yet see a straight line from those innovations to making money.
“There’s no denying that the acquisition of Hyperconnect has not worked out the way we had hoped, at least in the first year. And so the bar has been raised around non-dating acquisitions,” said Match Chief Operating Officer Gary Swidler on the earnings call this week. For non-dating-company acquisitions, Swidler said, “we need to see a clear path to profitability, if not immediate profitability.”
If singles clamored to go on virtual dates, no doubt there’d be no reason for Match to pause its investments in the area. But with profits harder to come by in 2022, for some investors a virtual-reality side project just isn’t worth it.
Write to Joe Light at email@example.com