Q3 2024 Earnings Summary
- Strong Financial Performance with Increased Revenue Guidance: Grindr delivered an exceptional third quarter with total revenue increasing by 27% year-over-year to $89 million. They raised their full-year revenue growth guidance to 29% or greater. Adjusted EBITDA margin remains healthy at 45%. This strong financial performance indicates robust business growth and operational efficiency.
- Innovative Product Developments Driving User Engagement and Monetization: The introduction of new features like 'Right Now' and the Interest tab has significantly enhanced user engagement and conversion rates. The Interest tab led to an over 150% increase in user engagement with the Viewed Me feature and increased payer conversion. 'Right Now' is showing promising results with good reengagement in test markets, and there's potential for future monetization as the feature scales up.
- Increasing User Base and Monetization Metrics: Grindr's average monthly active users grew by 8% year-over-year to 14.6 million, and average paying users increased by 15% to 1.11 million, bringing payer penetration to 7.6%. Average direct revenue per paying user increased by 8% to $23.07. Indirect revenue also grew by 43% year-over-year to $12 million, driven by strong demand growth and enhanced ad formats. This demonstrates successful monetization strategies and growing user adoption.
- Technical debt may continue to impact user experience and product development. Despite recent efforts to address accumulated bugs through a two-week bug bash that resolved over 75% of issues, the CEO acknowledged ongoing challenges with the app's monolithic codebase. This legacy architecture can lead to unforeseen bugs when new features are introduced, potentially hindering the rollout of new features and affecting user satisfaction.
- Monetization shifts could risk alienating free users and impact user engagement. The company is actively moving certain features from the free tier to paid tiers, such as limiting the number of messages free users can send via the Explore feature. While these changes have led to improved conversion rates to paid subscriptions, there is a risk that altering the balance between free and paid offerings could frustrate users accustomed to a robust free experience, potentially affecting MAU growth.
- Reluctance to accelerate investment may limit growth opportunities. When asked about the possibility of accelerating investment and timelines in response to strong performance, the CEO indicated satisfaction with the current product roadmap and did not commit to increasing investment to speed up development. This cautious approach could limit the company's ability to capitalize on market opportunities and stay ahead of competitors.
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Pricing Strategy and User Sensitivity
Q: How are you balancing pricing changes with user sensitivity?
A: We maintain a robust free offering, which is essential as paid users want to meet free users. However, we're evaluating where to draw the line between free and paid features. For example, we reduced the number of messages free users can send through the Explore feature from three to one per day, shifting value to paid tiers, which significantly improved conversions. We believe there's more opportunity to enhance paid tiers while keeping a strong free experience. -
Direct Revenue Growth and Merchandising
Q: How much room is there for further pricing and merchandising improvements?
A: We see plenty of opportunity to continue optimizing pricing and merchandising. Simple changes, like suggesting a no-ads upsell after users see an ad, have led to increased conversions into XTRA weekly subscriptions. We're thoughtfully shifting valuable features to paid tiers without being overly aggressive. -
Indirect Revenue and Ad Monetization
Q: Could you update on new ad formats and indirect revenue progress?
A: Indirect revenue grew 43% year-over-year. Ads are a differentiator due to our robust freemium offering and high margins, as there's no third-party payment to app stores. We've addressed underinvestment by opening more third-party ad partners and enhancing ad formats, including native ads, rewarded video, and more interstitials that drive higher CPMs. We're confident we'll continue to see strong returns in ads. -
User Growth and MAU Drivers
Q: What are the key drivers of sustained MAU growth?
A: MAU grew 8% , driven by more countries becoming open and more people identifying as fluid. Focusing on a great user experience, including bug fixes and new features on our product roadmap, helps retain and attract users. -
Technical Debt and Infrastructure Improvements
Q: How much progress has been made in fixing technical infrastructure?
A: We've addressed significant technical debt accumulated over time. Since 2020, we've transformed our backend technology. We conducted a two-week bug bash, fixing over 75% of all bugs, which will positively impact user experience. We're continuing to invest in ensuring high-quality products as we evolve our mobile codebase. -
Product Roadmap and Feature Development
Q: Are there opportunities to accelerate investment and timelines?
A: We're happy with our product roadmap and aim to exceed targets. "Right Now" is in two markets, "Roam" is live globally, and we expect to launch 1–2 more features next year. We're also working on features not publicly disclosed. We'll be on track or ahead of schedule on public commitments and will launch more features we believe are important. -
Learnings from "Right Now" Rollout
Q: What are you learning from users as you roll out "Right Now"?
A: "Right Now" allows users seeking immediate meetups to indicate their intent and connect. Engagement is positive among a subset of users. Reengagement is strong in Australia and the D.C. area where we're testing. We're planning to add features like photo sharing in group chats, which users are requesting. Next year, we'll focus on scaling engagement rather than monetization for "Right Now". -
Weekly Unlimited Tier Conversion
Q: Is the weekly Unlimited tier driving higher payer conversion?
A: We've seen conversion rates continue to increase. Cannibalization from existing tiers is very low, so the weekly Unlimited tier is helping drive conversions without significantly impacting other subscriptions. -
Impact of iOS 18 on App Rankings
Q: Have you seen disruptions in App Store rankings due to iOS 18?
A: We've not noticed any issues with the new iOS launch. We track our ratings closely, and we'll take another look, but nothing has surfaced so far.