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Hinge CEO on dating scene: expect pent up demand to take shape this summer

Dating app Hinge is on pace to double revenue in 2021, with profitable and expanding margins. Justin McLeod, Hinge Founder & CEO, joins Yahoo Finance Live to discuss the company’s success amid the pandemic and break down expectations for dating this summer.

Video Transcript

AKIKO FUJITA: Shares of Match Group are soaring in the session on the back of strong earnings. That stock up more than 5% right now. The online dating company earned $0.57 a share and revenue of $668 million. That is a 23% jump. Now one of the big standouts here is Hinge. Revenue tripled in 2020. And it's now on pace to double that number this year, as millions of people look to emerge from their pandemic dating slump.

Let's bring in Justin McLeod, Hinge founder and CEO. Justin, it's interesting. You know, a lot of people learned the art of virtual dating over the last year. But I imagine things are going to start shifting up a bit as we look ahead to the summer months, and things really starting to open up. What does that mean for Hinge?

JUSTIN MCLEOD: I think people will definitely be out and dating in person again. People who are our main age demographics, so millennials and Gen Z are just now, I think, getting their vaccinations and becoming fully vaccinated. And what they're telling us is that as they become fully vaccinated, they plan to start going on a lot more dates in person.

ZACK GUZMAN: Yeah, I've had my fair share of virtual dates in the pandemic here, Justin, even VR playing a role in there. But, you know, when we talk about this pent-up demand to get back out there, you've talked about maybe how many likes or matches it takes to actually get to a date. 1,000 when you guys, I think, were first starting out, down to 50 when you revamped it. But what are you seeing in terms of pent-up demand now when it comes to users on the platform wanting to go out on in-person dates?

JUSTIN MCLEOD: Yeah, I think that people-- interestingly, also, by the way, I think people are really looking for relationships, that, really, intention. Something interesting that we saw is that people are now prioritizing their romantic lives and finding a partner and finding a relationship ahead of their careers, ahead of their family, ahead of their social lives. So I think it's been a pretty big change in people's sense of urgency and people's sense of prioritization around a relationship. And I think that's a big reason why we will start to see all of that pent-up demand from the last year really start to take shape this summer.

AKIKO FUJITA: Justin, I thought it was interesting that you said you think the video component is still going to be a big part of the user experience on Hinge, essentially this hybrid dating model, if you will. It's certainly giving you a lot of opportunities to monetize on the platform with things like the virtual dating kits and other services you've offered. What other opportunities do you see as you look ahead to more of a hybrid experience?

JUSTIN MCLEOD: I think what's most exciting about the hybrid experience and video dating is that it's just going to be a much more effective experience for people. Hinge, we say we're the app designed to be deleted. And that's because we are focused above all on getting our users out on great dates and being the most effective dating app for people.

And so, video dating, if people use it as a vibe check, just a 15-minute call before you go out and meet up in person, you can just ensure that you're not going to be wasting your time or their time, that you've got sort of an initial chemistry and vibe so that you don't show up on the first date in five minutes and realize, like, this isn't the person for you, or this isn't something that you want to be doing. So I think it'll help people be much more efficient with their dating lives and have much less of a sense of burnout and that they're not going out with the right people.

ZACK GUZMAN: Yeah, let's dig into this doubling of revenues this year and where that's coming from. Because you guys introduced a new feature not too long ago called Standouts. It features profiles that the app says are most your type to match those to people-- to match with those people, you got to pay $3.99 for Roses out there. So you kind of paywall the cream of the crop, which is, at best, genius and, at worst, very bad for the user experience, I would guess. But first off, is it really based off of individual's user preferences or using the algorithm to maybe show them exactly who they would most desire? And what has the growth maybe from a revenue perspective been in that piece of the business?

JUSTIN MCLEOD: Yeah, we've seen really great growth overall in users, and then also, in revenue per user. And so, that's why we're going to see our revenue double again this year. With regard to Roses and Standouts in particular, this is a-- so we haven't changed the core algorithm of the app. It's still the exact same that it's always been. And of course, there are people on the platform that we know that people would find really attractive or that you would find really attractive.

And our core algorithm, the core Discover within Hinge is showing you people that we think you're going to like that also have just as equal, if not better, chance of liking you back to increase your match percentage. And what we found is that Roses, when you send a Rose, because you go right to the top of the queue and because it signals that you're especially interested in that person, those are actually two to three times more effective at getting people out on dates relative to just sending a like. And so, if you are going to send a like to a person who's a little bit of a reach for you, then we really encourage you to send a Rose so that you actually get that person's attention and have a chance of matching with that person to go on a date.

ZACK GUZMAN: When you say reach, is that data-driven? Is that a data-driven reach? Like, you know these profiles are attracting more matches than the one who would be buying a Rose?

JUSTIN MCLEOD: Yeah, like I said, I mean, we're really trying to find the people that you're going to like who are also going to like you back and have that equal or greater chance of actually liking you back. And so, at any given time, right, we're not showing you the people that you are most likely to like. We could obviously show you people who are just super attractive perhaps that maybe wouldn't necessarily be interested in liking you back. And so, Standouts are people that we still think have a good chance of liking you back, but still, it's not quite, though, like, I think highest chance of a match, just like what your Discover feed is.

ZACK GUZMAN: Yeah, I'm not going to get too deep into my own personal experience on Hinge with you here, Justin. Because we are-- you know, we're running out of time. I hear it in my ear right now. But when we dig into it, I've been honest with you before. I told you I've been a user on Hinge 2014 last time we chatted. When I'm out here in Dallas, though, I've seen some changes from the platform. I'd be curious your take on where Hinge fits into the competitive set now, right? Back then, it was friends of friends. It really differentiated from the mix that way.

But out here, kind of noticing some similarities from Tinder back in their dark days when they were your biggest competitor, and then kind of who is on the platform, maybe nefarious people looking for services out there-- you can call them escorts. The last girl I went on a date with was on there. When we look at maybe how Hinge separates itself from the competition in your mind, if it's no longer just friends of friends, and it's obviously growing very quickly, what's the biggest differentiator for you guys now?

JUSTIN MCLEOD: Yeah, it hasn't been friends of friends since we relaunched in 2016. And what we say is that we're the app designed to be the leader, that we are really focused on effectiveness for our users. And the way that the entire app is set up, from getting rid of the swipe feature and really making likes intentional and liking a piece of content to delivering likes when you like someone so that if-- they don't have to like you to find out if you like them. We got rid of the whole double opt-in thing. Really a focus on deeper profiles.

So I think it's-- people turn to us when they're really looking to get off dating apps and really find their person. That's clearly the value proposition that we have. And that's the way that the whole app is designed. And so, that's how people view us against the competitive set. It's just like we are the place that you go when you're looking for a relationship and not something casual.

ZACK GUZMAN: All right, Justin McLeod, the CEO of Hinge, appreciate you coming on here to chat with us. We'll have to have you back later on in the pandemic to see how the recovery is going for people out there on the platform.