Meet Group, of New Hope, is a social-media company for meeting new people, but it's no Facebook.
Founder Geoff Cook wants you to think of it more as China's Momo, with its live streaming video chat. More on that in a minute.
But with revenues of around $150 million for the past four quarters, and a share price stuck below $5 since last year (down from previous highs above $7 in 2016 and $12 in 2011), Meet Group operates at a fraction of the size and visibility of market leader Facebook (last year's sales: $36 billion), or Match Group ($1.33 billion), which owns the popular dating app Tinder.
Cook would rather investors look East to compare: In 2015, the China-based, New York Stock Exchange-listed app maker Momo began offering live streaming video in its mobile-access social media accounts, enabling users to chat directly. Sales shot up, along with the company's share price. With $1.32 billion in sales, Momo is now worth $7 billion, more than 20 times Meet Group's value. Momo also owns Tantan, China's Tinder.
Cook's management team saw the growth and investor buzz around video chat live streaming, and put his developers to work; The company employs around 130 at its New Hope, Philadelphia and California offices and 100 in Germany, and plans to add a dozen this year, after filling 15 engineering and "community talent engagement" vacancies.
In April of last year, Meet Group introduced its own video chat live streaming, then added paid premium features last fall. Cook says live streaming on its Quick app now attracts around 850,000 of its four million paid and premium-feature free users daily. Those subscription and "gift" payments account for a quarter of Meet Group's revenues. Cook says that's poised to grow larger.
In an Aug. 22 report, analyst Michael Latimore at Northfield Securites in Atlanta amplified Cook's comparison, dubbing Meet Group "the Momo of the West" and projecting the stock will rise to $6 within the year. He speculated on a "similar growth trajectory" at Meet Group, though from "a smaller user base."
If you want to date someone, why would users pick a Meet app before the larger, better-known Tinder service?
The services are more complementary than competitive, responds Cook: "A lot of these dating and meeting apps will have an aspect of their product where there are not enough chats being sent. You might feel lonely if you are not yet making [Tinder] connections. That's when you can go into our live tab and meet someone realtime and chat.
"And live streaming video monetizes quite well," he added. "Our users can send each other virtual gifts," paid messages of approval. "Our top gift is Love Bear," said Cook. "He's a bear, holding a heart. We'll charge ten credits, about seven cents. We have a rose, 100 credits. Diamonds, 2,500 credits. The top is the yacht, 15,000 credits," or more than $100. "The bigger the gift, the more interesting the animation."
Result: "In the first quarter of last year, we had 90 percent of our revenue [from] advertising. In the second quarter of this year, we are 60 percent user-pays," referring to premium subscriptions and gifting.
This kind of revenue forms a stronger base for long-term growth, but the margins are far lower than ads, Cook acknowledged. "Transition from an advertising business model to a much more diversified business model impacts your margin profile." With ads, "every dollar of ad revenue is incremental. It drops down at nearly 100 percent to our bottom line." With video, after paying Apple and Google to put Meet Group apps on their smartphones, the profit margin "is about 30 percent. But it's profitable and it's a good business. We believe it can be much larger."
In its early years, MeetUp was among the services cited by local police departments as a medium of contact when they busted middle-aged men arranging to meet under-aged girls. Discouraging illegal use can be a major expense for social media companies.
"Forty percent of our workforce is committed to 24/7 safety and moderation,"Cooke says. "Anybody in social who is acting responsibly has a sizable commitment to monitoring. We use algorithmic and human monitoring for all our content streams. It's a constant monitoring."
By the end of the year, Cook says Meet Group plans to offer a new video product, Battle, that will enable two or more competing performers to register paid gifts as signs of favor from viewers, a kind of interactive mobile America's Got Talent.
Last year, Meet Group bought Germany-based Lovoo, a five-year-old, mostly European dating app funded by subscriptions, purchases and ads, for $70 million in cash, plus up to $5 million in sales bonuses. That purchase boosted Meet Group sales by $32 million. In 2016, Meet acquired IfWe Inc. for $60 million and Skout Inc. for $52 million. In 2011 it merged with Quepasa, a Latin America-focused, publicly traded social-media company.
If live streaming in chat accelerates, won't Tinder and other dating services just add their own and use their much large customer bases to dominate the market?