Bumble app relaunch aims to turn growth story around: Analyst

Bumble (BMBL) released first quarter earnings, reporting a beat on the top and bottom lines. Amid pressure faced by dating app stocks, Citi's US Internet Analyst Ygal Arounian, joins the Morning Brief to discuss the outlook for Bumble moving forward.

Arounian notes that "expectations have been so low" for dating app stocks, with a slowdown in growth across the user base. However, he highlights Bumble's ability to beat first quarter estimates while attracting more paying users. This, coupled with the company's not lowering its outlook, "was enough to get investors a little bit more excited here."

Regarding Bumble's recent relaunch of their app, Arounian acknowledges that "it's a little early to tell" whether these changes will have a significant impact on the company's momentum. However, he says this restructuring is a strategic move to "turn around the stories" of dating apps.

Arounian discusses the importance of Gen-Z users to the company's margins. However, he says today's young generation is not as active on dating apps as previous generations.

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This post was written by Angel Smith

Video transcript

Investors swiping right on.Bumble earnings shares of the online dating app surging this morning after beating Wall Street revenue expectations driven by growth and it's paying users for more on the latest results here, we're joined by Igal Orian who is the city us internet analyst here.Great to have you here with us to break down.Why Bumble shares are Abuzz this morning?What do you think investors are zeroing in on it?Hey, thanks for having me this morning.Um Yeah, look, the, the really the the the biggest thing here is that the, the expectations have been so low uh both for Bumble and, and the broader dating app ecosystem uh in general ma Match also reported ear earlier in the week, they lower their, their full year outlook.Um And, and, and we've seen declining data uh on on the payer side and the monthly average user side on time spent um really for for, for a couple of years now.Uh the broader online dating ecosystem um bumbles seem uh pretty pronounced slowdown in growth uh just really over the past couple of quarters and it happened pretty quickly.So the expectations have, have certainly gotten low.Um, and with the, with the one QB and the fact that they didn't lower their full year outlook, I think that was enough to get, uh, investors a, a little bit more excited here, but there's still a lot that's hanging on, on, on a new, a new product that just launched recently, um, or an app refresh and, and expectations that that's gonna lead to accelerating growth, uh, in, into the second half.And then we're gonna need to see that play out for this momentum.Do you think it will?Uh, well, we, we hope so.It's a little early to tell.Um, the, the, the new app, um, the app we launched just came out last week.So it's just, just a week.I mean, management talked about it pretty positively on, on the earnings call.They're seeing some good early signals.Uh, they're, they're seeing some, uh, some strong adoption of, of some of the key features oo on it.Uh, they say they've gotten good feedback and testing.So, you know, that's certainly what management is, is hoping and expecting again.Uh, just pointing back to, to match and what they're, what they're expecting with Tinder.It's a very similar story.They're, they're expecting growth to accelerate and see an reflection point in the second half.They, they've also refreshed the Tinder app.There's more, more product changes to come over time and so both, both Tinder and Bumble are expecting these products to, to kind of turn around the stories and some of the softness we've seen in user trends, um and, and lead to re acceleration in the second half.I mean, and, and they've talked about how much they're leaning into the, the Gen Z customer on bumble as well on the earnings call.You know, I, I just wonder when we hear reports about Gen Z tapping into credit or, or loans earlier than their millennial counterparts, how much of the customer lifetime value investors should really rely on to be infused into the the bumble financial performance over time?Well, Gen Z is super critical in, in, in this world, right?And I mean, that's the kind of obvious statement.Um they're, they're coming in in as early users and, you know, expected to, to stick around the, the, the move in and out as they get into relationship and, and out of relationships.But this is a young cohort that over time will, will presumably spend a lot of time and money and uh on the dating apps and some of the challenges that you've seen in terms of uh users and slowing growth.Uh It is really, we're seeing from Gen Z and younger audiences that um you know, haven't been using dating apps the, the same way over the past couple of years as um you know, younger generations in, in, in the past have and um the management teams at, at match group and bumble are really trying to evolve the products to make it more in line with what they, what, what younger audiences are looking for.Um, and to try to bring them back into the ecosystem more.So I, if I, if they can get it right and, um, make the experience better, uh they'll, they'll get younger audiences to spend more over time.There's definitely some softness right now, uh match called, called out Twitter, um or earlier this week and, and, and they're seeing some softness and how people are spending and that's not AAA new phenomenon.And they said that it did get a little bit worse, but this is AAA bigger picture than um just how Gen Z and younger audiences are spending today.This is about um you know, getting interest back up to higher levels in the way that it's been 3 to 4 years ago.So, you know, you know, given that changing landscape that you're just describing here, the fact that companies are having to adjust to this new reality here within the industry, who then is best positioned, do you think to take advantage or best position to capitalize maybe on some of these changes that are happening?Well, I, I mean, the, the online dating ecosystem is uh uh at least in those, these specific apps are really dominated by two big players and that's that, that's match and bubble, there's, you know, plenty of smaller apps but uh these are the, the two dominant players.So you would think that they're, they're the best positioned here.Um You know, but, but they do have to capture some of these changes.So some, some of what's happening, uh maybe a little bit hard to um to, to reverse in, in the near term.Um I think you're seeing um younger people that uh back at school and, and more in person, you're seeing that play out a little bit.Uh I think younger audiences are spending a little bit more time on social media and meeting people on, on, on social media.We certainly hear, hear that at least anecdotally on, on how um you know, uh people are just messaging people on, on, on Instagram, for example.So the really those that will capitalize the most are the ones that and kind of follow these trends to make, make the experience strong and, and bring people back into their ecosystem, spend more time there.Um You know, I, I think maybe balancing this uh real world and, and, and digital world uh in a strong way is maybe one of the most challenging parts to figure out.Um But the larger players are probably the ones that, that can handle it the most.But of all who, who though is best position bumble versus match right now.Given that, that, well, that, that, that's a, that's a really tough question and um you know, it, it, it, it depends like I, I'll, I think I'll, I'll say it this way and then, you know, bumbles challenges, uh maybe a little narrower uh than, than Tinder, but bumble is much smaller than Tinder, right?Tinder dominates uh, the dating app ecosystem.It has b 40% of the time spent on, on dating apps is, is spent on Tinder.Tinder's seen their subscribers decline for, for nearly two years now.So I think, um you know, what, what Tinder needs to do to really get back to a much healthier place is uh maybe there's, there's more work there.Um You know, bumble kind of uh they saw some challenges in, in the number over a couple of months and quarters and, and they, they quickly went to work and revamp revamped their product.Um but Bumble is still seeing uh users grow uh on on a global basis, they're still much smaller than Tinder is.So the hurdle for them might be a little bit smaller, but that's not to say that um you know, Tinder is the market leader doesn't have the ability to, to, to get back on track as well.