Bumble Inc IPO: Take the First Step | R Blog RU

I believe that many readers were a little tired of the endless discussion of the consequences of the COVID-19 pandemic, so today we will talk about the romantic. Before all the shocks and self-isolation, mobile dating apps entered our lives. At first, the search for a “second half” in the network seemed something exotic and frivolous. But gradually dating someone from Tinder or a dating site became commonplace. Even a whole market for dating services has emerged. Tinder and Badoo became the leaders on it, but competitors in the face of such companies as Bumble are already breathing in their backs.

Bumble Inc. On January 15, she filed an S-1 application with the Securities and Exchange Commission (SEC) for an IPO. The placement will take place on the NASDAQ stock exchange, the company has been assigned the BMBL ticker. Let’s figure out what are the differences from competitors and the specifics of doing business for Bumble Inc.

Business Bumble

According to research from Stanford University, up to 40% of heterosexual couples around the world have met online, and among same-sex couples this figure has exceeded 60%. The Bumble application is designed in much the same way as its counterparts: people register, mark users they like, and, upon reciprocity, start communication.

However, the company still took a non-standard path, giving the right to start communication to a woman. If the user does not want to start a dialogue, the contact will disappear in a day. Thus, Bumble wants to protect women from annoying men, in fact, allowing them to take the first step. This is very relevant during an active campaign against harassment and gender discrimination in the world.

Business Bumble

In addition to the love of a lifetime, you can find friends in the application (Bumble BFF) and expand your professional circle (Bumble Bizz). The latter is used by freelancers to get new orders.

The company was founded in 2014 by former Tinder top manager Whitney Wolf Hurd (20% of shares) and Badoo founder Andrey Andreev (80% of shares, as he is the main investor).

Business Bumble

Since Wolf Heard herself was the victim of harassment (and Tinder paid her compensation for the moral damages caused), the Bumble app places such an emphasis on protecting women from harassment.

In the first month after launch, more than 100 thousand people signed up in the application. At the end of the third quarter of last year, the number of active users exceeded 42 million in more than 150 countries.

A paid subscription is a source of revenue for the company. The actual chatting and dating in Bumble is free, but users can take advantage of the paid Spotlight and Boost features.

Spotlight allows you to raise your profile in the hit list and increase your views. Payment is made in the special currency of the application – Bumble coins. Its cost depends on the country of the user.

Boost is a monthly subscription service that provides a number of benefits in the form of unlimited swipes, additional search settings, the ability to see who you like and others. Users can activate this feature indefinitely.

Spotlight and Boost are available in all three versions of the app: BFF, Date and Bizz. The number of paid subscribers exceeded 2.4 million.

The dating market in the world

The company’s target market in the world for 2020 amounted to more than 803 million single people aged 18 to 69 who have Internet access. According to a study by the Pew Research Center, the younger generation is increasingly postponing marriage or avoiding it altogether. By 2025, the number of single people could reach 981 million.

Source: Michael J. Rosenfeld, Reuben J. Thomas, and Sonia Hausen.  2019. “Disintermediating your Friends: How online dating in the United States displaces other ways of meeting” Proceedings of the National Academy of Sciences 116: 17753–17758.
Source: Michael J. Rosenfeld, Reuben J. Thomas, and Sonia Hausen. 2019. “Disintermediating your Friends: How online dating in the United States displaces other ways of meeting” Proceedings of the National Academy of Sciences 116: 17753–17758.

As you can see, the current trends in the transformation of social norms contribute to an increase in the number of online dating. In 2020, the number of users of various dating services reached 190 million people. К According to Bumble’s forecasts, by 2025 this figure may grow to 319 million people. The average annual growth rate will be 11%.

In addition, it is worth noting an important feature of this market – the winner does not take all. Typically, users consistently use multiple dating applications. Therefore, even if the company does not become a leader, it will be able to firmly hold its market share.

Bumble financial performance

Bumble Inc. does not generate profit, so we will focus on revenue analysis. According to the report provided to the SEC, over the past 12 months, Bumble generated 502.88 million USD in revenue.

Bumble financial performance
Bumble financial performance

For the first three quarters of 2020, revenue amounted to USD 376.59 million, a relative growth compared to the same period in 2019 was 3.84%. For the whole of 2019, the revenue amounted to USD 488.94 million, a relative growth to 2018 of 35.78%. We believe that by the end of 2020 the revenue will amount to USD 507.72 million.

It should be noted that the net profit for the first three quarters of 2019 amounted to USD 68.63 million, while in 2020 a loss of USD 84.12 million was recorded. This was due to the increase in expenses under the item of general administrative expenses from USD 47.37 million as of September 30, 2019 to USD 128.12 million as of September 30, 2020. This is a consequence of the low level of internal financial control. This problem was identified by the company and is being actively addressed.

Bumble strengths and weaknesses

The risk factors for investing in Bumble Inc. relate:

  • Potential drop in paid subscriptions.
  • The audience almost always uses competitors’ products.
  • The popularity of the service depends on the accepted and accepted social norms and may be subject to political movements.
  • It is difficult for a company to expand its product line of paid services due to the specifics of the market.

The strengths of the company include:

  • Bumble has a sustainable competitive advantage, empowering women to be the first to develop in-app communication.
  • A strong management team that has a wealth of successful industry experience.
  • Quality marketing in the study of audience needs.
  • Simple and straightforward business model: a free application with additional paid functionality.

IPO details and Bumble capitalization estimate

The company has applied to raise USD 100 million, but we believe that closer to the date of the IPO, the amount raised will increase. The placement was underwritten by leading investment banks: Morgan Stanley & Co. LLC, Citigroup Global Markets Inc, Goldman Sachs & Co. LLC and JP Morgan Securities LLC.

To assess the potential capitalization of Bumble Inc. we use the P / S multiple (capitalization / revenue of the company for 12 months). For technology companies with a targeted market of almost 1 billion people, the normal P / S value is in the range from 10 to 15. Taking the revenue data as of September 30, 2020 as the basis for calculations, we get a potential capitalization of 5.00 to 7.50 billion USD.

Thus, taking into account all of the above, we recommend this company for medium and long-term investments.

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