Investors will soon be able to hook up with the world’s most-popular gay-dating platform. A merger with the special-purpose acquisition company Tiga Acquisition, announced in May, values Grindr at $2.1 billion and is expected to close by the end of the year. As with any SPAC merger, historical details on the business are slim. In online dating, though, a snapshot often says all you need to know.
Grindr’s popularity relative to its total market size is impressive. A study commissioned by Grindr estimates the size of the LGBTQ+...
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Investors will soon be able to hook up with the world’s most-popular gay-dating platform. A merger with the special-purpose acquisition company Tiga Acquisition, announced in May, values Grindr at $2.1 billion and is expected to close by the end of the year. As with any SPAC merger, historical details on the business are slim. In online dating, though, a snapshot often says all you need to know.
Grindr’s popularity relative to its total market size is impressive. A study commissioned by Grindr estimates the size of the LGBTQ+ population as of 2021 was just about 7% of the global tally. Meanwhile, Grindr had amassed 601,000 paying users as of last year, according to its registration filing, about 40% of the number of paying users of Bumble , the No. 2 dating app after Tinder.
Granted, Grindr is no spring chicken, having been founded when the iPhone was in its infancy. Attitudes toward a Pinterest-like grid of mostly shirtless men, organized by satellite location data, might have been less enlightened at the time. The world has evolved, even as Grindr hasn’t changed much—for better or worse. The company says it still has no proprietary matching algorithm, and there is no Tinder-like swiping. The app is still a very “visual experience,” as creator Joel Simkhai described it to the New York Times in 2014. It is used to find instant community—romantic or otherwise—wherever users go.
LGBTQ+ daters have the potential to be a valuable bunch. Pew Research Center data shows dating-app use varies significantly by sexual orientation. While just 28% of straight adults had tried a dating app or site as of a 2019 survey of U.S. adults, 55% of lesbian, gay or bisexual adults had tried one. Perhaps because of its first-mover advantage, Grindr says it has an 85% brand awareness among gay, bisexual, transgender and queer people, and is the best-known gay-dating app among the general population.
It hasn’t paid much for this. Grindr’s registration statement shows sales and marketing expenses amounted to less than 1% of its overall revenue last year. Match Group and Bumble spent nearly 19% and 28% of their revenue, respectively, on selling and marketing expenses over the same period.
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Chalk some of that difference up to size. While on pace potentially to expand its top line faster than its competitors this year, Grindr’s run rate as of June 30 implies the company will put up about $180 million in revenue this year. Wall Street is forecasting that Match Group will generate about $3.2 billion. Most dating-app companies have several brands under their umbrellas. Match, for example, has more than a dozen, but Grindr has remained something of a lone wolf in the dating space.
Which raises the question: If Grindr’s brand was so valuable, wouldn’t a bigger company have bought it by now?
The concern could be a matter of the company’s past missteps, including periods of third-party data sharing of sensitive information such as users’ HIV status and the selling of other user information including location—problems the company says it has long since remedied. Or it could be the more delicate nature of Grindr’s mission. Lingering stigma on being “out” on a dating app persists to varying degrees by location and culture, which could crimp expansion potential. It is worth noting that predominantly straight dating apps such as Match’s Tinder enjoy many LGBTQ+ users.
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Perhaps the biggest unknown is how quickly Grindr can increase monetization. Well over a decade into its existence, Grindr had nearly 11 million monthly active users as of last year across 190 countries, but its paid penetration was still under 6%. By contrast, Bumble had about 9% paid penetration as of September 2020 in less than half the time.
Grindr will tell you it has only recently started pushing its monetization efforts with the introduction of a few a la carte paid features this year. But the app’s simplicity could be working against it financially. While you have to pay to message suitors on Tinder before matching, Grindr is a bit like a digital bar, where users can approach and message whomever they see at no cost. While you can pay to see more (and avoid ads), freemium users can see 100 local singles on Grindr. That seems plenty to work with, given that Grindr’s users already spend an average of over an hour a day on the app.
The public market might not welcome Grindr with open arms. Stock-market investors since 2015 have lost an average of 37% of their investment on SPACs a year after the merger through the end of September, The Wall Street Journal reported this month. Meanwhile, Match and Bumble have shed an average of 68% of their market values over the past year as tech stocks have taken a beating and economic pressures have called into question near-term growth of nonessential spending.
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Grindr’s latest valuation implies it is worth 17% of the dating giant Match, despite having fewer than 4% of Match’s paid users as of the end of last year.
That mismatch could break some hearts on Wall Street.
Write to Laura Forman at laura.forman@wsj.com