If you’ve ever tried to find the love of your life online, chances are a 73-year-old billionaire played a hand in helping you meet your match. From dating sites for anyone from pet lovers to Mormons, Republicans to Italians, and divorcées to senior citizens, Barry Diller has bought or incubated many brands under his Internet conglomerate, IAC/InterActiveCorp. Now the company is selling a stake in its Match.com division, giving public investors a chance to bet on the business of love.
IAC’s Match Group, which also owns OKCupid and dating app Tinder, plans to to sell as much as 20 percent of its common stock this year. The sale could fetch $600 million to $1.2 billion if 10 percent to 20 percent of the business is sold to the public, according to Cowen and Co., valuing the division at $6 billion or more.
No other dating empire has been able to appeal to so many different demographics, says Britanny Carter, a dating services analyst at IBISWorld. “With dating sites, you have to be somewhat niche,” Carter says. “You are dealing with different people, different needs.” IAC’s Match Group is the biggest in the dating services market, with a 22 percent share, Carter estimates. Lagging behind are EHarmony, with 14 percent, and Zoosk, which filed and later withdrew plans for an initial public offering last year, with 5 percent.
Much of IAC’s growth comes from Diller’s penchant for buying up the fastest-growing competition, an almost necessary move in today’s market. The barriers to entry are low—all you need is a way to match two people—and the number of dating and matchmaking rivals is set to rise to 4,177 companies by 2020, Carter wrote in a report. IAC’s strategy of owning a range of niche services accounts for how fickle dating app users can be, moving from one trendy app to another. “Unlike buying a car, this is something where you’re on multiple products; so having a portfolio is a basic requirement to be a market leader in this category,” says Sam Yagan, chief executive officer of Match Group.
IAC planted its stake in the dating industry when it bought full control of Match.com’s former parent company, Ticketmaster, in 2003. By 2004, the site was named the biggest dating property. Meetic joined the fray in 2009, when Diller bought a piece of the company, bringing a strong foothold in the European online dating market. Later that year, IAC agreed to acquire People Media for $80 million, nabbing 255,000 paying subscribers for such sites as BlackPeopleMeet.com and LDSPlanet.com (for Mormons).
In 2011, IAC spent $50 million to acquire data-driven matching site OKCupid, which had been founded by Yagan, who was promoted to CEO of Match Group. The same year, IAC introduced OurTime.com, a dating site for singles older than 50. IAC had amassed the online dating sites to cater to a wide variety of people. That doesn’t mean all the targets were willing to use the services. “The biggest challenge for our business, historically, is the number of people who don’t consider themselves online daters,” says Yagan, who will remain CEO after the IPO.
In 2012, along came Tinder, the IAC-owned smartphone app that lets users swipe through other users’ photos to quickly find out if they are romantically interested. Tinder “gameified” the online dating process, appealing to smartphone-tethered twentysomethings who get an ego boost when they’re matched with someone they swiped correctly on. “There’s a lot of people that just weren’t prepared to get onto Internet dating,” says Mark Brooks, a dating-website analyst and consultant at Courtland Brooks. “Tinder warmed people up to the psychology that it’s not a dating site. Everybody is on it; it’s fun. That’s really the thrill ride here.”
But free and fun dating apps can be volatile, while cannibalizing customers from such paid services as Match.com, Brooks says. Last year, as the popularity of free-to-use Tinder grew, paid subscriptions at Match fell by about 100,000 in the fourth quarter, compared with the third. Now IAC is trying to make money out of Tinder, and has started to charge users based on age—the older, the more expensive—when they want to access premium services such as the ability to undo swipes.
The challenge for IAC’s Match Group will be to keep its single users engaged with one—if not many—of its dating sites. The funds from the IPO, expected in the fourth quarter, could give IAC the cash to continue carrying out Diller’s playbook of buying the competition. IAC “has a long track record of creating value through acquisitions, and at this point, we suspect the cash would be used to continue this strategy,” John Blackledge, an analyst at Cowen, wrote in a note. “Likely further strengthening the Personals business.”