“We want quality over quantity and I think Bumble’s really been able to bring that” :CleoCapital Managing Director

Sarah Kunst, CleoCapital Managing Director, Former Senior Adviser to Bumble joins the Yahoo Finance Live panel to discuss the Bumble IPO.

Video Transcript

ZACK GUZMAN: So where might this go on day one of trading? Let's break it down a little bit further here with Sarah Kunst, our next guest, CleoCapital Managing Director and a Former Senior Advisor to Bumble. And Sarah, I appreciate you coming on here to chat with us. I mean, you just heard us kind of walking through the storyline with Bumble.

When you go back and compare, though, I guess, to Tinder and maybe some of the other companies in Match Group, it's interesting to compare the growth rates, which kind of seem slower than what we saw with Tinder back when it was equivalent age. So talk to me about maybe the direction this company is moving in, and being kind of that woman-moves-first dating app, and how big that is in the space.

SARAH KUNST: Yeah, I mean, I think we can all relate in our personal dating lives, right? We want quality over quantity. And I think that Bumble's really been able to bring that. And they are offering a product that, while the UX might not be massively dissimilar from some of their competitors, the brand promise really is.

I kind of liken it to the Teslas of the world. Tesla did not invent cars. It didn't invent electric cars. It just brought a brand and a form factor that users really, really love. And I think that that brand loyalty is going to be something that we see on display here today in their debut.

AKIKO FUJITA: And Sarah, of course, we've seen with this online dating space it's not necessarily a zero-sum game, because users do in fact dabble in multiple apps that are out there. And yet, it does feel like there are a lot of apps in the market. When you look at a company like Bumble, as it looks beyond dating right now, what are some areas for a real opportunity, do you think, real growth beyond its core space right now?

SARAH KUNST: Yeah, I mean, Bumble has made some awesome moves in spaces like Bumble Bizz, which is focused on business connections. Bumble BFF, which is focused on friend connections. You know, it's really about empowering people to go out and connect with others in their lives.

And they're doing that across several different facets. And there is a lot of traction there. They even have the ability to download the app and to turn off dating so that if you are happily in a relationship but you want more friends, you want to meet people to talk with on a job front, you can do that. And so where do you want to connect with humans? Bumble can help you make those connections.

ZACK GUZMAN: That was an interesting question I had, and I'm sure we'll get into this later on when we chat with the CEO here on the show. But you think about BFF and maybe those business connections, I wonder how much more monetizeable that becomes. Because you know, dating seems to be one of those things that more and more people have been paying, if you look at a Hinge or Match Group, and the revenues on that side.

Seemingly easy to monetize. If it's guys out there, we know that men are more active on these apps when it comes to dating. And we know kind of the statistics behind that. So I'd be curious to get your take maybe on where monetization falls when we look at the last clip that they reported in their S-1 was not profitable.

SARAH KUNST: Yeah. And I think that over time, there's certainly a path to profitability in these kinds of companies. And to your point, dating is-- people spend a lot of money. It's digital goods. You're paying for a monthly subscription to get more features. You're paying for sort of immediate digital goods to tell somebody you really, really like them. They call it Super Swipe in the app.

And you know, it's similar to video game economics in that, you know, the cost of goods on a digital good is incredibly low, which means the margins are really, really high. And so you know, certainly in the core product, but then when you look at the other products-- if Bumble BFF is finding you a roommate, how much is a good roommate worth? How much is finding your new best friend worth? And the ability to monetize-- and recently, they were running a promotion for Valentine's Day around Airbnb experiences.

So if you layer in even some advertising revenue or affiliate revenue, there are a lot of opportunities. Most of the money we spend on experiences is with other people. And so if Bumble is helping you meet those other people, the ability to regain some of that income, I think, is pretty strong.

AKIKO FUJITA: Yeah. It's interesting if you look at the S-1 filing, because retention was one of the risks that was mentioned. And sort of the irony being here that on the one hand, Bumble gives you an in to dating. And yet they list as a risk factor, if you find a relationship, well, then you don't need the app anymore. So some of those avenues you pointed to certainly would seem to offer more traction with users.

But going back to just how crowded this space is right now, do you anticipate more consolidation there? Bumble sort of created their own narrative as female or ladies first, women first. But I wonder how many of these apps are able to survive on their own.

SARAH KUNST: Yeah. I think that historically, the narrative was there's only room for one. And that was not even Match. It was IAC inside of Match. And now we're seeing that there's certainly room for two. So in five years, will it be that there's room for three? Certainly seems like.

The vast majority of adults are in a romantic relationship at some point in their lives. The majority of Americans still get married, right? And we know that younger demographics are changing that a little bit. But the desire for connection hasn't gone away.

And you know, I personally much more enjoy being able to limit my dating to when I have a few minutes in an app versus spending an evening at a bar pre-COVID looking around to see, is there anyone there I should meet? And I don't think I'm alone in that. The success of Bumble, the success of Match as a standalone company says people are still out there looking for people to date. And we're increasingly moving online to do so.

ZACK GUZMAN: Yeah, I don't know. I mean, I'll interject with my own personal take here as well. I don't know if Akiko has anything to add. But using both Hinge and Bumble over the last couple of years, experience has just seem to indicate much more interaction on Hinge, you know, leading to actual dates. And I'm not sure how much of that stems from know the woman-first aspect of Bumble versus some of the other dating apps.

But I would be curious to kind of get your take on maybe some of the other things we've been talking about, specifically dating apps in a pandemic. And I think that's strange for the way in which we're seeing Bumble. The timing of all this is difficult for investors to kind of weigh this out, because they were profitable in 2019.

We've heard about issues of dating on these apps in the pandemic, the risks associated with it. It's kind of difficult to tease out the trajectory that Bumble has here because of that, I think. And what kind of boost might be there on the other side?

Clearly, a lot of demand. We saw Bumble up their price range for this IPO twice, and now the indication at $70. So maybe project out, if you can-- and I know it's difficult-- where this space goes in general on the other side of the pandemic.

SARAH KUNST: You know, when the pandemic is over, I think that the things that people miss-- most of us watching right now, we can still afford to pay our rent. We can afford to buy food. We miss having fun with other people. We miss touching other people. We miss going places. We miss a bunch of things that you kind of naturally aren't going to do alone.

And the other reality is that pandemics are really hard on relationships. And so we will also have, on the other side, a lot of people who are already coming out of it, or come out of it and look around and say, maybe that person that I was with during this pandemic wasn't the right one for me, so what's next? And so I think there's a ton of pent-up demand, because to your point, you know, it is somewhat risky right now to date during a pandemic. A first kiss could literally kill you, right? So that is a risk factor. On the other side of the pandemic, we're not going to have that.

AKIKO FUJITA: Yeah. That sounds a little scary if you put it that way. But Sarah, it's good to talk to you today. Sarah Kunst, CleoCapital Managing Director and Former Senior Advisor to Bumble. And we, of course, will be speaking to the CEO of Bumble, Whitney Wolfe Herd. She'll be joining us on this show a little later.