Looser app-store payment rules match group’s hopes for savings

Looser app-store payment rules match group's hopes for savings

online dating company match group Inc.

Apple is working to circumvent Inc. NS

And Google’s payment system followed moves by officials in the US and South Korea to loosen the tech giant’s grip on app-store transactions.

Dallas-based Match—the company behind Tinder, Hinge, and OKCupid—relies on the App Store to attract new users. Its dating apps are free to download, but users pay for subscriptions and other premium services, such as the ability to see if another Tinder user read a message.

In-App Fees for Apple and Alphabet Inc. NS

Google Match’s biggest expense is Google Match, Chief Financial Officer Gary Swidler said.

Apple and Google charge commissions for payments made through apps offered through their stores. To match, those fees represent about 30% of the revenue the company receives from such payments.

A federal judge in California ruled last week that Apple cannot prevent app developers from sending their users outside its App Store to make payments. The case was brought by the videogame company Epic Games Inc., the creators of “Fortnite”.

Separately, lawmakers in South Korea last month passed legislation that took effect Tuesday and requires Apple and Google to open their app stores to alternative payment methods. Earlier this year Match agreed to acquire Seoul-based social-media company Hyperconnect in a deal worth $1.7 billion. Hyperconnect’s business is affected by the new law, Match said.

Gary Swidler, Match’s Chief Financial Officer and Chief Operating Officer.


Match Group Inc.

“It’s a worldwide domino effect from my point of view,” said Mr. Swidler, who is in addition to CFO, Match’s chief operating officer. “We think other jurisdictions are going to follow. And so being a global business with multiple brands, we have to keep that going.”

Match expects to pay around $500 million in transaction fees to Apple and Google this year, he said. The company does not disclose the exact amount paid in such fees, which it books as cost of revenue, and declined to provide estimates for the previous year.

The online-dating company is working on an alternative payment option it hopes to introduce to Hyperconnect users in the coming months, Mr. Swidler said. Such an option could also be offered to Apple users as a result of California’s decision, he said. Match plans to offer discounts to users who pay directly to the company, but pricing details are still being ascertained, he said.

The amount of potential savings will depend on how many customers decide to change their payment methods, Mr Swidler said. The company had around 15 million paying customers during the quarter ended June 30, a 15% increase from a year ago.

An Apple spokesperson said the company is reviewing the California court’s decision. Regarding the new law in South Korea, Apple said it believes the measure could undermine users’ privacy protections, among other implications. “We believe that this legislation will result in a loss of user confidence in App Store purchases,” the company said.

“We intend to comply with Korean law, and we will continue to investigate options that allow us to maintain the service fees that keep Android free and maintain our investment in the ecosystem,” a Google spokesperson said. The spokesperson said the company plans to share more details with developers in the coming weeks.

By offering a 10% discount on subscriptions, Match may be able to persuade nearly a third of its Apple users to pay directly, providing the company with an additional $80 million in gross profit, according to a report by investment firm BTIG. Analyst, predicts Jake Fuller.

Mr. Fuller estimates that roughly two-thirds of Match’s app-store fees are paid to Apple and that Match will generate $2.2 billion in gross profit this year. Match, which split from its former parent IAC/Interactive last year Corporation

, said it does not break down the gross profit.

Match earned $140.9 million in net income during the three months ended June 30, an 88% increase from a year earlier. According to the company’s latest quarterly report, total revenue was $707.8 million, up 27% from the prior-year period.

Mr Swidler said that, in addition to offering discounts, Match plans to use any potential savings from payment changes to invest in new products or hire more people.

write to Kristin Broughton at [email protected]

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