Swipe Right for Match After Apple’s Legal Setback
Since 2009, executives at Apple (Nasdaq: AAPL) have ruled over the firm’s mobile operating system with an iron first. They made all the rules, mostly to their benefit.
On Friday, a federal judge ruled third-party developers can now direct customers away from Apple’s App Store for in-app payments. This breaks Apple’s stronghold on the iPhone ecosystem.
The best way to play this “breakup” is to make a move on a stock that’s about to become even more attractive, thanks in part to this new ruling.
One of the Top Apps by Revenue Now Gets to Swipe Left on Apple’s 30% Fees
Match Group (Nasdaq: MTCH) executives bill the company as the world’s leading provider of dating applications.
|Source: Match Group|
With products in 40 languages and availability in 190 countries, its portfolio is unmatched.
You’ve probably heard of Tinder, which is the most-downloaded free dating app on Apple and Android devices. But that’s just one of Match’s 45 different properties, which also include Hinge, Match, Plenty of Fish, Meetic, OK Cupid, Our Time and Pairs.
These applications serve everyone from same-sex millennials swiping for a date … to middle-aged divorcees seeking new relationships … to older singles in Japan, Korea and Taiwan looking for love.
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Match properties touch every demographic and most geographies. And while it’s free to download and get started with its apps, more people are opting to pay to get “matched.”
When Sparks Fly … So Do Profits
A June filing at the Securities and Exchange Commission (SEC) revealed Match had 15.1 million paying subscribers (up 15% from a year ago), annualized revenue of $2.7 billion and profits reaching $978 million.
• Match’s Tinder and Bumble apps are among the 10 top-grossing apps in Apple’s App Store, according to App Annie, a mobile application data analytics firm.
Top gross is an important metric entailing total revenue from new subscriptions and sales made within the application. Those small add-on purchases can make a big difference for dating apps.
Analysts at App Annie found that customers spent $2.3 billion in 2019 buying such digital delights as the ability to secretly discover who liked their photos. And many dating apps also charge users a small fee to hide profile details like age and location.
There’s no limit to the number and types of in-app purchases available to developers.
• That’s why this Apple court case decision is so important.
Judge Yvonne Gonzales Rogers actually sided with Apple on nine of the 10 issues being litigated.
In a blow to Fortnite maker Epic Games, which filed the lawsuit, Rogers declared Apple did not hold a monopoly position in mobile games.
Rather, she decided the iPhone maker was merely an extremely successful company operating in one aspect of the digital game marketplace. She also ruled that Apple was not obligated to allow Epic to develop a separate store within the operating system.
However, Judge Rogers did rule Apple violated California law by barring Epic from displaying in-app links to an alternative payment system. The ruling sets up the potential for developers to bypass the App Store for these lucrative payments … and the 30% commission Apple routinely claims for processing them.
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In 2019, Bloomberg reported that Match’s Android customers were being directed to enter payments details directly at the Match Group website, avoiding the Google Play store fee. Yet Apple customers continued to pay through the App Store.
It’s a policy Match lawyers have been litigating since 2020. Reuters reported last week that Match legal counsel asked a Dutch court to make its decision on the matter public within two weeks.
• Friday’s ruling in California means there is precedent for that change … and it should be quite lucrative for Match shareholders.
Like Netflix (Nasdaq: NFLX), Alphabet’s (Nasdaq: GOOGL) YouTube and Spotify (NYSE: SPOT), Match is a mobile gatekeeper. Its customers trust the platform. They will gladly sign up at the Match website to maintain service. It means the company can experiment with new business models that avoid the 30% fees levied by Apple. Those revenues flow straight to the bottom line.
Match shares were up 4% on Friday following the Apple/Epic news.
Match stock trades at 59.5 times forward earnings and 16.3 times sales. Market capitalization reached $43.6 billion following a share price rise of 9% in 2021. Shares could easily trade to $190 before year’s end on the Apple news alone, which would represent a gain of 14% from current levels.
Strongly look into buying the stock now … and then use those potential profits to buy your own “match” something nice for the holidays with that potential gain.
Jon D. Markman