Match/Tinder: the $441m cost of avoiding a messier break-up

Dating apps are supposed to help users find love. But they can also result in messy and expensive break-ups, as dating giant Match Group and shareholder Barry Diller have just discovered.

Match has agreed to pay Tinder founders $441m to settle allegations that it and its former owner IAC, which Diller chairs, purposely understated the app’s value to avoid paying billions of dollars to the entrepreneurs.

The amount is far less than the $2bn in damages that Tinder’s founders were seeking. Still, it is a substantial sum. It works out to about 60 per cent of the net income that Match is expected to pull in this year. Match, which also owns Hinge and OkCupid, said money for the settlement would come out of the company’s cash on hand. This stood at $523m at the end of September.

Settling is the right call. Letting the case go to a jury could have resulted in a bigger payout. Jurors were unlikely to appreciate the technical maths involved in determining Tinder’s value. Match’s shares, up 3 per cent on Wednesday, remain down 24 per cent from their October peaks. The settlement means the company can put a very public and bitter legal dispute behind it and move on.

At the top of the company’s to-do list is getting investors to fall in love with its stock again. The pandemic has proved to be a boon for dating apps. Match reported that engagement shot up during lockdowns as lonely singletons looked for love online. The habit has stuck even as restrictions eased. Match posted a 25 per cent rise in sales to $801m during the third quarter. The company added 2m paying users during the period.

Tinder remains Match’s crown jewel. The app accounts for almost two-thirds of the company’s total paying users. That is both good and bad news. To justify its heady multiple of 48 times forward earnings, Match will have to show it can create valuable assets on its own.