Facebook wrecks the dating app scene for investors by joining it

facebook dating
Facebook CEO Mark Zuckerberg speaks about a dating feature at Facebook Inc's annual F8 developers conference in San Jose, California, May 1, 2018. REUTERS/Stephen Lam

(Reuters) – Like an old flame wrecking a first date, Facebook burst in on the matchmaking scene on Tuesday and sent investors in rival apps on a panicked rush for the door.

Shares of Match Group and its parent IAC plunged, wiping some $5 billion off their combined market values, after Facebook Chief Executive Mark Zuckerberg said his social media platform would develop its own dating app to rival Tinder, Match and others.

Tinder became known for users swiping right on their cellphones to indicate interest for a potential match and swiping left to reject someone.

Match fell 22% – its largest one-day drop ever – and IAC, which owns more than a fifth of Match, fell nearly 18% in its biggest daily loss in about 13 years.

Spark Networks, owner of JDate and Christian Mingle, also closed 4% lower.

Although analysts said Facebook’s initial foray would not likely be a threat to established dating sites – some of which are highly specialised to cater to specific groups – its heft and deep pockets makes it a concern over the long term to the smaller companies.

Atlantic Equities analyst James Cordwell said there was “significant potential for Facebook to be a big problem for Match,” but one that was dependent on execution over the long term.

Facebook brings to the dating table a treasure trove of data on its active users, which are over 2 billion strong. That could potentially allow it to match people more effectively than rival sites with less data at their fingertips. But privacy concerns surrounding the technology behemoth could discourage some from embracing such a service, some analysts said.

Daniel Kurnos, an analyst at the Benchmark Company, also cited the difficulty of creating a popular dating site, cautioning that it was not an overnight project and one that requires much more than sheer machine learning.

“I think the reaction is a combination of the Facebook news along with concerns that Match was getting toppy,” or expensive, Kurnos told Reuters. “I can’t see Facebook supplanting Match any time soon – too big a moat.”

Facebook connects friends and acquaintances but until now, has not delved into the domain of match-making, where a host of competitors offer services, from privately held eHarmony to IAC-owned OkCupid and PlentyOfFish.

One problem for Tinder is that their users can log in to their accounts using Facebook.

That has been one way Tinder has assured that their users are real people, noted Morningstar analyst Ali Mogharabi.

“When you’re a Facebook user, and over time you became aware of a comparable service, then it’s less likely that you will go on to Tinder,” Mogharabi noted.

On the other hand, the lower average age of Tinder users could be a competitive advantage for the Match company, he added.

Data from research firm eMarketer shows that approximately 27% of smartphone users are single, a number expected to grow to 35% in the next five years.

(Reporting by Arjun Panchadar and Munsif Vengattil in Bengaluru; Writing by Alexandria Sage; Editing by Sai Sachin Ravikumar and Lisa Shumaker)

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