Match Group Inc - New (MTCH) — Q2 2025 Earnings Call Transcript

Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Spencer Rascoff; and CFO, Steven Bailey. They'll make a few brief remarks, and then we'll open it up for questions. Before we start, I need to remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate or similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release in our periodic reports with the SEC. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the published materials on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results. With that, I'd like to turn the call over to Spencer.

Thanks, everyone, for joining. Since stepping into the CEO role 6 months ago, my goal has been to confront the hard truths, take decisive action, and reshape Match Group and Tinder into an innovative product and engineering-first company optimized for user outcomes and built for the long term. Over the last 6 months, that is exactly what we have done. This is a 3-phase turnaround. First, we reset the company, then we revitalize the products, and last, we undergo a resurgence with our audience and investors. Let's start with a recap of Phase 1. I spent the first few months of this reset phase learning the businesses, getting to know our teams, and rebooting the culture to emphasize urgency and accountability. Match Group is a multi-brand company with over 20 different dating apps in the dating and human connection space. Some of them, like Hinge and Azar are growing rapidly and simply need more resources and time to achieve their full potential. Other brands need more focused attention in order to improve their results. Tinder needs a lot of work, and it is therefore my primary focus. As the largest dating app in the world by revenue and usage, Tinder has unparalleled brand awareness and scale, but the product had grown stale through a lack of innovation and a focus on short-term monetization. To address this, we acted quickly by installing new management, improving the product roadmap, and placing Tinder under my direct leadership given its central role in Match Group's performance. We started by fixing what wasn't working at Tinder, beginning with organizational design. We flattened the org by removing over 20% of managers and reducing the size of teams. We then created autonomous product and engineering pods with greater accountability. We retooled the culture to prioritize urgency and user outcomes. We doubled our release cadence. We now ship new code to production every week instead of every 2 weeks. We have changed decision-making so it is informed by data but no longer burdened by analysis paralysis. We broke down silos between Tinder and other Match Group brands in order to gain the benefits of our company's scale and centralized core functions like shared data and content moderation. We now allow nearly 1,000 engineers at Match Group across all of our brands to see one another's code in a shared GitHub repository, allowing for unprecedented cross-brand visibility and collaboration. In addition to rolling out cursor and other AI coding assistants globally, we created a centralized AI group building shared AI tooling for all of our brands. The most important changes at Tinder centered around our product strategy and our roadmap, which we realigned to prioritize low-pressure ways to connect, more on that in a moment. An important part of Phase 1's reset was communicating with employees and shareholders about what needed to change, both internally in our culture and across our products. I shared that directly with employees in the company-wide letter in March. And then when I took the helm at Tinder, followed through with new product principles that are already showing up in how we operate. We are now guided by a commitment to speed, accountability, and relentless product execution. We also aligned all of our brands around a single organizing principle, delivering real user outcomes. We now think about those outcomes across a broad spectrum from casual to serious, romantic to platonic, and we're building apps that support the full range of user preferences. We have crystallized our brand strategy such that Hinge is singularly focused on winning in the intentioned dating category. Tinder is focused on winning in the casual connections category. Our E&E brands are focused on unleashing the power of a unified platform and supporting communities with shared identities, and MG Asia is focused on launching and growing our brands in Asia and expanding Azar's low-pressure one-on-one video service globally. With Phase 1 complete, we're now entering Phase 2, revitalize, where the products begin to reflect our renewed commitment to users and user outcomes. I'm going to talk through the rapid product acceleration at Tinder, the tremendous momentum and growth at Hinge, and how we're scaling new brands across the portfolio with focus and intention. Let's start with Tinder. The product roadmap aims to solve 3 core user pain points: Authenticity, dating fatigue, and outcomes. In just the last few months, there has been a burst of energy and urgency to launch several initiatives at Tinder. We launched Double Date globally in June, giving users a new social way to connect as a pair. Rolled out 6 months ahead of schedule, it's showing strong early traction with 92% of Double Date users being under 30. Women who are pairing up are 3x more likely to send a like and 4x more likely to match compared to when using Tinder Solo. In New Zealand, we've piloted an interactive matching product, sometimes referred to as Daily Drop or AI-enabled discovery, which is a whole new way to use Tinder that goes deeper to deliver high-quality, personalized matches. We are expanding this to other regions shortly. We made substantial progress in trust and safety by expanding our face check service, a facial liveness check feature that helps confirm users are real and match their profile photos to new markets, including California. At the same time, we've made strides on authenticity by enhancing our bot detection systems, reducing false positives, meaning fewer legitimate users are being mistakenly flagged while also further reducing bad actors. With more sophisticated detection models in place, we're making the platform safer and more trustworthy at scale. We've started testing a more flexible preferences system like height as a premium preference option, which give users more control over their matches. This builds on what I shared in February, long-term investments to strengthen the ecosystem and drive sustainable value. Here's what we have planned through the end of the year on Tinder. We're testing major updates to our recommendations engine to show users more compatible matches. We're rolling out contextual liking and messaging, giving users a low-pressure way to engage by reacting to specific parts of a profile. This makes likes more purposeful and increases the chances of starting a real conversation. We're on track to test Version 1 of a redesigned see who likes you tab this fall with the goal of helping users connect with people that are more likely to be interested as well as to drive more revenue. We're preparing to introduce a feature called Modes, a new navigation system that lets users toggle between different dating goals and discovery experiences in real-time for serendipitous connections. We'll expand our interactive matching product with additional geographies coming online by year-end, and we'll take the first steps towards a new UI refresh in Q3 with a cleaner, faster, and more modern look across the entire app. For the first time in a long time, Tinder's pace of product innovation is strong. To track progress, I am focused on metrics connected with user outcomes, things like match rate, contact exchange, and inferred in-real-life meet-ups. Many of these deeper signals are trending up, and we're actively exploring ways to give investors more visibility into these metrics. Turning now to Hinge. This focus on real-world outcomes applies across the portfolio, and nowhere is that clearer than at Hinge. Simply put, Hinge is crushing it. Hinge's success should put to rest any doubts about whether the online dating category is out of favor among users. Hinge shows that a great team that is highly motivated can build great products, which attracts huge audiences and creates significant revenue and shareholder value. This is the formula we are following in the turnaround at Hinge's sister brand, Tinder, and Hinge's success gives me pride in Hinge but also confidence in Tinder. At Hinge, everything ladders up to one North Star: getting users on more great dates. It's how we measure success and stay focused on delivering real-world outcomes. And it's been a huge driver of our success at Hinge. As a result, Hinge is well positioned to deliver accelerating year-over-year revenue growth in each subsequent quarter of 2025, a particularly impressive accomplishment at a business of this scale while also continuing to expand margins. So how is Hinge achieving this? As one might expect, it's the tried and true combination of product innovation leading to audience growth. Let's start with product. Over the past several months, Hinge has rolled out a number of core initiatives designed to keep intentionality front and center in our users' dating experience. We launched a new AI-powered recommendation algorithm in March that is driving a 15% increase in matches and contact exchanges, driving meaningfully more dates for our users. And it's important to note that while we are creating more value for users, we're also observing meaningful upticks in payer conversion. We rolled out prompt feedback, a first-of-its-kind AI feature that gives users real-time suggestions during onboarding to help them better express themselves on their profile. This reduced generic answers by one-third and more than doubled the thoughtful high-quality responses, helping spark better first impressions and more meaningful connections. We rebuilt our notifications platform, unlocking faster delivery and robust metrics tracking. This has enabled us to launch chat-specific notifications, helping users maintain momentum with matches they're most interested in. Over the second half of 2025, Hinge will continue to develop its product strategies to address user needs. In the first half of 2025, users discovered experiences that became more personalized and relevant to their preferences. Now in the second half, we'll plan to noticeably improve recommendations throughout the app experience as more of our algorithms are powered by AI. Users will see and feel this difference in experiences, including boost, standouts, most compatible, and more. In the first half of 2025, we experimented with different coaching capabilities and dog food at several AI-powered features. In the second half, these experiences will move into test, and they include warm intros, which will highlight small yet meaningful details on select profiles to give daters a deeper consideration of compatibility and conversation starters which offer personalized prompts to help daters break the ice and spark more meaningful conversations. Turning now to user growth. Hinge is growing users in every geography it operates in. Hinge grew its MAU by nearly 20% year-over-year in the first half of the year. In European markets, its momentum continues to build as we enter our third year of expansion with MAU up more than 60% year-over-year in European expansion markets in the first half of 2025. This growth is driven by brand campaigns tailored to local dating culture, boosting awareness and perception. While there is still much more room for growth in Europe, we're excited to further Hinge's growth ambitions with planned launches in Mexico and Brazil later this year. With strong user growth and continued product innovation, Hinge is delivering on its mission for users. It has become the most reliable growth engine in our portfolio and one of the most exciting businesses in consumer tech today. Across the rest of our portfolio, we're applying the same focus, building for distinct audiences, prioritizing user outcomes, and driving urgency. With a stronger financial foundation from our recent restructuring, favorable foreign exchange trends, and reduced in-app purchase fees through alternative payments testing, we believe we are in a position to reinvest savings while still delivering on our revenue and margin targets. I'm excited by our plan to allocate approximately $50 million in the second half of 2025 toward product testing at Tinder, geographic expansion for Hinge, Azar, and The League, and early stage bets like Archer, Her, and a new dating app concept. These investments reflect our commitment to delivering more value to users through product innovation and to driving long-term sustainable growth across the portfolio. In 2026 and 2027, we expect to enter the third phase of our product evolution, resurgence. We intend to transform Tinder into a low-pressure serendipitous experience designed for Gen Z. We expect Hinge to extend its leadership in intentioned dating powered by both continued AI innovation and international growth. And across the board, we believe the category will enter a new era with renewed trust, strong demand, and long-term growth potential. We are operating like a company that is just getting started, and we believe the best chapters of this category and company are still ahead. We are moving with urgency, we are obsessed with product, and we're building for the long term. Thank you again for being with us. Now Steve will walk you through the financials.

Thanks, Spencer. We are pleased with the Q2 results as both Match Group total revenue and adjusted operating income exceeded the high end of our guidance, excluding a $14 million charge for a preliminary settlement with the Federal Trade Commission relating to a case filed in September 2019, which we did not anticipate at the time of May earnings. The team is executing well against the 3-part turnaround Spencer laid out to drive sustainable long-term user growth, revenue growth, and profitability. In Q2, Match Group's total revenue was $864 million, flat year-over-year, down 1% year-over-year on an FX-neutral basis. FX was in line with our expectations at the time of our last earnings call. Excluding the exit of our live streaming businesses, total revenue was up 1% year-over-year and flat year-over-year FXN. Payers declined 5% year-over-year to $14.1 million, while RPP grew 5% to $20. Indirect revenue was up 15% year-over-year, driven by continued strength in the advertising business. Moving to total company profitability. In Q2, Match Group's operating income was $194 million, down 5% year-over-year, representing an OI margin of 22%, and AOI was $290 million, down 5% year-over-year, representing an AOI margin of 34%. Excluding the costs associated with restructuring our operations of $18 million, and the legal settlement charge of $14 million, OI increased 10% year-over-year, representing an OI margin of 26% and AOI increased 5% year-over-year, representing an AOI margin of 37%. Tinder direct revenue in Q2 was $461 million, down 4% year-over-year and down 5% year-over-year FXN. Payers declined 7% year-over-year to $9.0 million, and RPP grew 3% year-over-year to $17.14. OI in the quarter was $217 million, down 1% year-over-year, representing an OI margin of 46%. AOI in the quarter was $246 million, down 2% year-over-year, representing an AOI margin of 52%. OI and AOI were negatively impacted by costs associated with the restructuring of our operations. Hinge continued its strong momentum in Q2 with direct revenue of $168 million, up 25% year-over-year and up 24% year-over-year FXN. Payers grew 18% year-over-year to $1.7 million, and RPP grew 6% to $31.96, driven by strong user growth across all markets, combined with continued monetization optimization. OI was $39 million in the quarter, up 29% year-over-year, representing an OI margin of 23%. AOI was $54 million, up 27% year-over-year, representing an AOI margin of 32%. E&E direct revenue in Q2 was $148 million, down 8% year-over-year and down 10% year-over-year FXN. Ex live, E&E direct revenue in Q2 was down 6% year-over-year and down 8% year-over-year FXN. Payers declined 15% year-over-year to $2.3 million, while RPP rose 8% year-over-year to $21.34. In Q2, E&E delivered an operating loss of $4 million, a decrease of $24 million year-over-year, and AOI of $16 million, down 62% year-over-year, representing an AOI margin of 11%. OI and AOI were impacted negatively by the legal settlement charge and costs associated with restructuring our operations. Match Group Asia delivered direct revenue in Q2 of $69 million, down 6% year-over-year and down 8% year-over-year FXN. Ex live, direct revenue in Q2 was up 3% year-over-year and up 2% year-over-year FXN. Azar direct revenue was up 3% year-over-year and up 6% year-over-year FXN; payers direct revenue was up 3% year-over-year and down 5% year-over-year FXN. Across Match Group Asia, payers increased 6% year-over-year to $1.1 million, while RPP declined 12% year-over-year to $21.53, partially due to the exit of Hakuna mid-last year. Match Group Asia had an operating loss of $0.3 million in the quarter, an improvement of $5 million year-over-year, and delivered AOI of $16 million, up 16% year-over-year, representing an AOI margin of 23%. Looking at costs, including stock-based compensation expense, total expenses were up 2% year-over-year in Q2. Cost of revenue decreased 1% year-over-year and represented 28% of total revenue, flat year-over-year driven by reduced variable expenses from the shutdown of our live streaming services mid-last year and lower web services costs at Tinder, offset by an increase in IP fees primarily at Hinge. Selling and marketing costs decreased $6 million or 4% year-over-year due to lower marketing spend at Tinder and E&E and was down 1 point year-over-year as a percentage of total revenue at 17%. General and administrative costs increased 19% year-over-year, up 3 points year-over-year as a percentage of total revenue to 16%, driven primarily by costs associated with the restructuring of our operations and the legal settlement charge. Product development costs grew 1% year-over-year and were flat year-over-year as a percentage of total revenue up 13%. Depreciation and amortization decreased by $3 million year-over-year to $29 million. Turning to the balance sheet. Our gross leverage was 2.8x, and net leverage was 2.5x at the end of Q2. We ended the quarter with $340 million of cash, cash equivalents, and short-term investments on hand. In Q2, we repurchased $7.6 million of our shares at an average price of $29.45 per share on a trade date basis for a total of $225 million and paid $47 million in dividends, deploying nearly 120% of our free cash flow for capital return to shareholders. We maintain our commitment to target returning 100% of free cash flow to shareholders on a full-year basis through share buybacks and the dividend. Now turning to guidance. We expect Q3 total revenue for Match Group of $910 million to $920 million, up 2% to 3% year-over-year. This range assumes a 1-point year-over-year tailwind from FX. FXN, we expect total revenue to be up 1% to 2% year-over-year. We expect Match Group AOI of $330 million to $335 million in Q3 representing a year-over-year decline of 3%, and AOI margin of 36% at the midpoint of the ranges. The expected year-over-year decline in AOI is driven by an expected 17% year-over-year increase in marketing spend due to the timing of brand campaigns at Tinder and Hinge and our savings reinvestments. For the full year 2025, we expect Match Group total revenue to be towards the high end of our guidance range primarily due to positive FX impacts. We now expect a nearly 0.5-point tailwind from FX, which is nearly 3 points better than we expected when we provided our initial outlook in February. FXN ex live, we expect total revenue growth to be within the initial guidance range we provided in February. We expect year-over-year indirect revenue growth in the mid-teens, given strong performance in the first half of the year. We expect to achieve our 36.5% AOI margin target after excluding an expected $25 million in costs associated with the restructuring of our operations, of which $18 million was realized in Q2 and the $4 million legal settlement charge, which would equate to an approximately 35.4% AOI margin on an as-reported basis. Our margin expectations include approximately $50 million of reinvestments Spencer outlined earlier. We will continue to monitor the return on these investments as well as business and FX trends as the year progresses. We expect free cash flow of $1.06 billion to $1.09 billion, a meaningful improvement from our initial guidance in February, driven by an increase in free cash flow conversion, partially due to expected lower cash taxes from the new U.S. tax law. We expect capital expenditures of $55 million to $65 million. We expect SBC expense to be $260 million to $270 million, an improvement from the guidance we provided at our last earnings in May, due to restructuring of operations and our continued focus on managing headcount costs. We continue to test alternative payments across our brands, including Tinder, and expect to have alternative payment options in test at Hinge by late Q3. Additional savings from further rollout and optimizations of alternative payments is not included in our guidance and could provide margin upside or fund growth initiatives. In June, Canada announced its intention to rescind its digital service tax. If and when it enacts the change in the law, we expect a one-time benefit to AOI related to expenses accrued in prior periods. We anticipate this change could be enacted into law as soon as September. However, we have not included it in our AOI guidance. In other updates, we plan to make changes to how we report certain financial measures and metrics to better align ourselves with our tech peers. Starting next quarter, we will rename our non-GAAP profitability measure from adjusted operating income to adjusted EBITDA. There's no numerical difference between adjusted EBITDA and AOI. We plan to continue to include discrete expenses such as restructuring costs but intend to reference such expenses, if significant, in our earnings materials. We also plan to change our MAU definition from a last 28-day to a calendar month basis. We plan to provide a reconciliation of MAU using both definitions. Now let's open it up to Q&A.

Spencer, you've been clear that one of your big priorities at Tinder is to improve engagement with the U.S. users, particularly under the age of 30. Hoping you could give us an update on how this cohort of users have responded to some of your recent product launches and how Tinder engagement trended during the quarter?

Thanks, Cory. At Match Group and at Tinder, we have incredible insights into Gen Z and millennials and how they want to connect. Nobody even comes close to understanding this generation's attitudes and preferences towards dating better than we do. It's through the excellent research functions that we have at Hinge, at Tinder, at Match, and our other brands as well as research at the MG corporate level. And I've also personally been doing focus groups in London and Los Angeles and spending a lot of time on college campuses doing direct consumer research. So what we know about this generation of daters is that they're different. They want to connect. They have a loneliness epidemic, and they're exceedingly digital, consumed by smartphone usage. But they went through high school or college through COVID, and they want dating apps to have different offerings, which are lower pressure. So that's the roadmap that we've created and that we're building at Tinder. Cory, I'll just give you 4 quick examples. Double date, which we've talked about, is showing great product market fit between 3% and 6% of our users, depending upon the country are using it already. About 90% of our usage is under 30. Women are 4x more likely to match through Double Date than they are when using Tinder Solo. So Double Date is really resonating with this audience. Number two, we're about to launch a series of college-specific features on Tinder that I'm very optimistic about. It will allow users to just search within their college or other selected colleges and a number of other features just around the college experience. Number three, the interactive matching experience that we've been testing in New Zealand is specifically designed to appeal to this type of audience. Somebody who doesn't just want to be judged based on their physical appearance, which is one of the ways that Tinder got its start. Somebody who instead is willing to put in a little bit of time, answer some questions, and then get a custom result back. We're seeing very good product market fit with under 30 users on that feature in New Zealand, and we're getting ready to expand it to other countries. And number four, there's a whole series of features, some of which I talked about in the prepared remarks around changing the way that users think of Tinder so that it's less about assessing the attractiveness of a photo and more about assessing the compatibility with that individual. So these are things like contextual likes where you'll be soon responding to specific information in somebody's profile rather than just swiping right saying, yes, I think you're attractive. It's about having prompt information up in the photo carousel. So you'll be seeing in what we call the tap photo wheel information that comes from deeper in the profile, so you can present a different version of yourself instead of just the attractiveness of your photo. So these are the types of things that we're doing to regain product market fit among under 30. I'll come back to the question about metrics in just a second. Next question, operator.

As it really came through in the letter, it seems like product testing velocity has accelerated over the past few months. Given the large number of changes the company is making across brands, what's the best way for investors to track the status of the turnaround as you go through this revitalized phase? And what are you monitoring internally?

Yes, we have a completely new team in place. I am personally overseeing Tinder, and we have appointed new leaders for Products, Technology, and Design, along with several new product leads. We have also established a new roadmap, all of which has occurred in the past few months. The team's response has been outstanding, and I am very proud of what we are creating. In terms of the metrics I monitor, consider our product as a funnel. At the top, we have new registrations or accounts created. Below that are existing accounts, followed by Monthly Active Users (MAU) or Daily Active Users (DAU). Moving deeper into the funnel, we track 4-way chats, which are conversations that have four or more exchanges. Finally, at the bottom, we look at contact exchanges, where users share their iMessage, WhatsApp, or Instagram details to arrange a date. These are the four key metrics I focus on daily: registrations, audience MAU or DAU, 4-way chats, and contact exchange. As I mentioned earlier, I understand that for investors, tracking the turnaround progress can be challenging without more visibility into these metrics. The team and I are exploring which metrics, if any, we can share more transparently with investors. Currently, I can say that all these metrics have improved compared to a couple of months ago, even though they continue to decline year-over-year, the pace of decline has noticeably decreased. For instance, new registrations are down about 7% year-over-year, whereas a couple of months ago, they were down around 15%. MAU is currently down about 8% to 9% year-over-year, compared to 9% to 10% at the time of the last earnings report. Even MAU, which is challenging to shift, is beginning to show signs of improvement. I am honestly surprised to see positive movement in some of these metrics, especially since it's only been a couple of months since this new team began rolling out products.

And congratulations on some of the early progress. But just curious on some of the things you're rolling out or expanding like face check. I wanted to just ask about that one in particular, the expansion there. Curious if you've made any changes to the experience or if you're just seeing users more willing to make the trade-off of verification in exchange for improved experience? And then I know you said that there could be an opportunity for upside related to it, but I just wanted to ask about the alternative payments experiments. And anything that you can share about your early learnings there and the financial potential of potential expansion there?

Regarding face check on Tinder, we've had it live in Canada and Colombia for a while, more than 6 months. And we just launched it in California, just a month or 2 ago. What we're studying in all 3 of those markets is the impact on trust and safety, the impact on revenue, the impact on audience. But perhaps most importantly, the impact on user perception of the safety of the community. Starting about a month ago, we launched an ad campaign, mostly on social media in Canada, promoting face check. And now we're in market with research to assess what impact the face check is having qualitatively on perception of Tinder safety. So that's one of the metrics that we're looking at and just assessing what the results are in California before we decide whether to move forward. I'll let Steve answer the question about in-app purchase and alternative payments.

Yes, happy to. Thanks for the question. We're making really good progress testing alternative payments on iOS. The first thing I'll say is this is a great example of the power of our portfolio. We mentioned this last quarter, we first started testing across E&E, the E&E brands who have a more mature web presence. And now we've applied those learnings to help guide the testing we're doing at Tinder today and start to inform the plans at Hinge, where we plan to start testing later in Q3. We're testing a lot of different variants, 3 to 5 variants, I would say, across any particular brand, and we're continuing to optimize the experience. So the tests are ongoing. But if you look at the average results we've seen thus far, I would say we're seeing more than a 30% shift in transactions from IP to the web. And that's resulting in more than a 10% increase in what we call net revenue, which is revenue less IP fees. In some cases, we're seeing a little bit of a top-line revenue impact that we're optimizing to improve. But in nearly all cases, we're seeing net revenue increase across the board. The impacts to 2025 AOI have been relatively small thus far, call it, in the $5 million range, given the Tinder tests are still a relatively low percentage, and we haven't yet rolled it out at Hinge. But I think it's a big opportunity for later this year and in 2026, in particular. If you extrapolate the test results out to full rollout across all our brands, including in the U.S. including Tinder and Hinge, that equates to about at least $65 million AOI savings opportunity in 2026. So it could be a big opportunity for us. We continue to test rapidly. We look forward to rolling it out in a test at Hinge in later in the quarter. And we're also continuing to monitor the Epic versus Google case and growing regulatory pressure and other geos, too. So hopefully, that gives you a little bit of guidance on the size of the opportunity we're seeing.

Let me try two, please. So Spencer, I understand the growth in monthly active users and the context around it. However, when considering the trajectory of the metrics you're trying to enhance, specifically the registrations for contact exchanges rather than payers, how do you view the expected improvements and their magnitude? Any insights on that would be helpful. Additionally, regarding marketing spend, could you elaborate on your investment strategy for Tinder and Hinge in the latter half of this year and into the first quarter of next year?

The first step is to create new product offerings that we believe will resonate with younger users, some of whom we have lost connection with. Next, we need to promote reconsideration by ensuring that people know they should give Tinder another look. I feel like we are currently in the early stages of progress. The team is just beginning to come together and we are starting to launch products. We have a comprehensive roadmap ahead of us, and it's essential to encourage people to reassess it. That's how I approach improving these metrics. While we are not pleased to see metrics like registrations, the number of four-way chats, or contact exchanges decline year-over-year, it is encouraging to observe the rate of decline slowing down. If a line has a negative trajectory, the only way to shift it to positive is first to stabilize it. So, seeing the initial signs of improvement in that trend is where we need to start. Steve, I'll allow you to discuss the marketing expense as it relates to our reinvestment strategies.

Sure, let’s take a moment to discuss the $50 million investment in more detail. I see the investment being divided into three main areas. One-third will go towards Tinder product tests aimed at optimizing user outcomes, focusing on recommendation algorithms, trust and safety initiatives, and improvements in user interface and user experience. These tests may impact short-term revenue linked to AOI, but we will have to conduct the tests to assess their effects. The second third will be allocated to marketing for Tinder and Hinge, supporting product launches like Double Date and driving user growth in key markets. The final third will be directed towards geographic expansion for Hinge, Azar, The League, and new growth opportunities such as Archer, Her, and a new dating concept. So, the $50 million investment is split evenly across these three areas. Regarding Tinder marketing, most of the two-thirds designated for marketing will primarily support Tinder, with a portion also going to Hinge. Hinge already has a sufficient cost of acquisition budget and is spending proportionately to revenue year-over-year. In contrast, we've kept Tinder's marketing spending more stable year-over-year. This reinvestment will enable us to support exciting new initiatives like Double Date. I hope this clarifies things.

So just had a follow-up on this kind of secular industry trends. Spencer, you mentioned the Gen Z cohort. Just wanted to drill in a bit more there. COVID had these negative effects, but there's a view out there that maybe we're just sort of in an air pocket here and maybe the next cohort might be exhibiting different behavior and maybe more favorable behavior. And all of your research you mentioned would be curious just to understand anything of your learnings that might support that view and what might be going on there?

That would be positive news. I don't believe we fully understand how Generation Alpha will engage with the online dating sector. Right now, my focus is on enhancing product market fit with Generation Z, ranging from ages 18 to 28, as well as millennials. However, I am hopeful that Generation Alpha will show greater interest in this area, though it's not our immediate priority. Our current priority is to regain product market fit, particularly with those aged 18 to 24. Additionally, regarding the online dating category, I've seen articles and headlines suggesting that it is no longer relevant and that people have moved on. However, claims about the demise of online dating are completely untrue. Just look at Hinge's results to understand this. Hinge's audience is expanding by about 20% annually, and in key European markets, it's growing around 60% each year. Clearly, young people are actively using this category. In fact, through the Gen Z research and focus groups I've been conducting, young people express their desire to connect digitally and want different options available to them. They haven't abandoned the category; rather, they are dissatisfied with the lack of innovation from current offerings, particularly from Tinder. Moreover, to illustrate the level of engagement in this sector, there are 100 million messages exchanged daily across all Match Group apps. Therefore, to suggest that people aren't participating is absurd, considering that amounts to 100 million interactions in our apps daily. There is considerable activity in this category, and we just need to provide the experiences that they are looking for.

This is Bill on behalf of John. Could you discuss the weakness in a la carte trends among younger users? Have those issues continued, and how are you addressing the weaknesses caused by macro factors and potential economic downturns? I also have a follow-up question.

Yes, why don't I take that one. You're right. Last quarter, we talked about some concern about macro more generally. I think a lot of companies were talking about it at that time. and we specifically called out an area where we were starting to see some, which was Tinder a la carte revenue amongst younger users. A quarter later, I think we're feeling a lot better about the macro in general. We haven't seen any further macro pressure in any of the data we're looking at. We do still see it a bit at Tinder, again, amongst younger users. So it hasn't necessarily gotten better, but it also hasn't gotten worse. And it's relatively small in the grand scheme of things. We're continuing to test various merchandising and monetization strategies that help deal with the pricing and macro pressures on younger users today. But I think at the highest level, we feel much better about the macro environment and impacts on our business than we did a quarter ago. We're not really seeing it aside from some small pressure at Tinder that we mentioned last call.

And then just my follow-up was, you mentioned in the prepared remarks that you're expecting Hinge revenue acceleration in the back half of the year. Could you just talk about some of the key drivers there that will get you to that accelerating growth?

Hinge is performing exceptionally well. It has a strong and unique company culture, highly engaged employees, and is producing innovative products. They possess a great brand and a clear product strategy, and they have a deep understanding of their users and their needs. Notably, they've integrated AI into their product more than any of our other brands, which is quite evident. Looking ahead, there are many features in the pipeline for Hinge that will enhance AI usage in facilitating transitions from chats to dates. Additionally, there is a strong emphasis on improving the female experience. The team is also focusing on enhancing the onboarding process and profile creation over the next six months. Furthermore, Hinge has a significant opportunity for international expansion; it's currently available in only 25 countries compared to Tinder's 188. It's worth noting that many of those 25 countries are not heavily marketed, and about two-thirds of Hinge's revenue comes from the U.S., while only 45% of Tinder's revenue is U.S.-based. Therefore, there is considerable potential for Hinge to expand globally, with plans to prioritize this effort in late 2025 and into 2026.

Just one. So Spencer, in response to your point about the critics claiming that online dating is dead and that we've reached a point of stagnation, it seems you believe that improving the product plays a significant role. As you introduce more features in Tinder, do you think this allows you to better identify those who are problematic or not genuinely interested in connecting in real life? Ultimately, can you use the algorithm to ensure those individuals are not shown, leading to an enhanced overall experience? Could you elaborate a bit more on how the new feature roadmap might address some of the concerns from users related to transitioning to real-life interactions?

Trust and safety play a significant role in user satisfaction and are essential for shaping brand perception within the industry. As a leader in this space, our efforts to enhance trust and safety will positively influence how users perceive the presence of bad actors. The new product initiatives and organizational structure we discussed last quarter are making a notable difference in this area. We have established an integrated trust and safety engineering team that spans Tinder and our E&D brands, which allows us to leverage combined resources, improve our use of AI to combat bad actors, and refine our detection models. This collaboration has also helped us minimize the number of good users wrongly banned due to false positives, an issue we have made great strides in addressing over the past six months. Improving trust and safety remains a priority for us, and we are also focusing on communicating our enhancements—such as our efforts in Canada—to change overall perceptions. While I firmly believe the category is not dead, I acknowledge that it faces challenges regarding trust and safety perceptions. We are committed to making genuine improvements and sharing these developments with our users and the media to illustrate that using dating apps like Tinder or Hinge is a safer option than meeting strangers in person.

This is Jeff on for Ben. Maybe could you just give a little bit of color on the RPP trends that you're seeing at Tinder and maybe some of the initiatives that you have there to improve that? You mentioned some of the upcoming features like the see who likes you tab could be a driver of revenue. Maybe you could talk about that feature and others how they could drive monetization?

The section of the app that shows who likes you, known as Gold Home, hasn't been redesigned in about five years, which presents a significant opportunity for improvement. We plan to approach these changes thoughtfully and learn as we implement them, given their importance. The revenue team at Tinder is dedicated to redesigning the Gold Home section. To give you more insight into our product roadmap, we don't have many initiatives specifically tied to revenue per payer, aside from a few key ones like the Gold Home redesign. We do have a comprehensive plan aimed at boosting audience growth through different strategies I've mentioned. We believe that by increasing our audience and enhancing user experiences, we can generate more revenue, which will then positively impact revenue per payer and the number of payers. However, our main focus isn't on revenue per payer or the number of payers as key metrics. Instead, we prioritize audience growth, user outcomes, and the resulting revenue, with revenue per payer and payer counts being byproducts of these efforts.

I would like to better understand the factors affecting Tinder's products and the trends we can expect in the second half of the year. Although you're no longer providing payer guidance, are there any challenges from the trust and safety features, like bots and face checks, impacting the products in a significant way? Have these features contributed to any notable improvements in payer activity yet? Additionally, regarding in-app fees, could you explain how your experiences with E&E, which follows a more traditional web model, compare to Tinder? What expectations do you have for Hinge in terms of user reception to a web-based model? Is the transition facing different challenges?

I'll address the first question about trust and safety for Tinder. There may be times, and I expect there will be quarters during my tenure, when changes in trust and safety could lead to a decrease in our audience. In the past, we have seen quarters where that has indeed occurred, particularly when we worked to reduce the prevalence of bots, which had a negative impact on our audience size. However, that’s not the case right now. Currently, most of our trust and safety initiatives are actually contributing to audience growth. This is one reason we are noticing improvements in audience size and engagement metrics in the mid and bottom funnels. By decreasing the number of false positives, we are allowing more good users to join and preventing fewer valuable users from being excluded. This positive trend has been advantageous for our metrics related to trust and safety over the past few months. Steve, I’ll let you address the question regarding IP.

Sure, happy to. Here’s how I would think about it. You're correct, E&E is a bit more mature, and they've observed, in some cases, a larger shift to the web compared to the Tinder test. However, in the few tests we're currently conducting at Tinder, we’re noticing a roughly 30% shift to the web and at least a 10-point increase in net revenue. This trend applies to Tinder as well. While we haven't started testing it yet for Hinge, I’m confident that it will follow a similar trajectory. That’s why I’m projecting that 30% shift and 10-point net revenue increase for the entire U.S.-based company, leading to an estimated $65 million plus AOI savings opportunity in 2026.

You guys have talked a lot today about some really good early success on the product front for Tinder. Are you expecting to capture any more value by taking price in the back half of the year? And Steve, I believe you made a comment last quarter that you're kind of expecting similar year-over-year payer declines at Tinder as you were kind of expecting similar year-over-year declines for MAUs. Just want to make sure if that's the right way to be thinking about it?

The answer is no. We do not plan to increase prices due to our product roadmap at Tinder. Instead, as Steve mentioned, a significant part of the $50 million investment focuses on enhancing the value users receive from Tinder. For instance, we are adjusting our recommendations algorithm to prioritize user outcomes more effectively. This means we will focus more on recommending the best matches for users rather than solely on revenue generation. If the AI is primarily set for revenue optimization, it might suggest someone who could churn; by showing that individual, we might maintain their revenue if they express interest. However, if that person isn't the right match, I wouldn't want to see them at all. Therefore, by shifting the recommendation algorithm to focus more on user satisfaction and less on revenue, we are directing part of that $50 million investment accordingly. We believe that improving user outcomes will, in the medium to long term, lead to growth in our audience and subsequently increase revenue. In the short term, we are willing to make those trade-offs. I’m proud that we continue to meet our commitments from Investor Day and our guidance while also enhancing user value for Tinder users as part of this turnaround.

Yes, I'll just reiterate what Spencer already said, which is we're not really focused on the payer metrics specifically or providing guidance around payers. I would think about it in terms of users, and our focus is on reversing the MAU trends and some of the other funnel trends Spencer mentioned earlier on the call. I would expect payers to move in that same general direction when that occurs.

So not really strong what you can say on the Spencer, but just very curious about the point you made about a new data concept. Would this theoretically be a new form factor maybe something less holistic in terms of brand focus in the demo group? Just anything you could say on that would be very helpful and enlightening.

Sorry to end on a disappointing answer, Curtis. For competitive reasons and other reasons, we're not going to share right now. But we periodically incubate brand-new apps, and we've got something that we're picking up, which I'm excited about. Thank you, everyone, for joining the call today. We are excited to update you on our progress, and I can't wait to talk to you next quarter and maybe I'll have an update for you then on this front as well, Curtis.