Motley Fool Hidden Gems Investing - Grindr Goes Beyond Dating

Episode Date: April 7, 2024

How do you grow a business where a customer’s success often means they leave your product?   George Arison is the CEO of Grindr, a dating app and social media offering for LGBTQ+ individuals. Dylan Lewis caught up with Arison for a conversation about: Grindr’s growth story. Looking beyond dating for platform engagement. What companies can lose in a remote-only environment. Companies discussed: GRND, MTCH, BMBL, NFLX, SPOT, UBER Host: Dylan Lewis Guest: George Arison Producers: Mary Long, Ricky Mulvey Engineer: Tim Sparks Learn more about your ad choices. Visit megaphone.fm/adchoices

You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with the delicious Pret Organic Coffee? Starting with just one dollar, all day, every day, now until December 31st. You've got to try breakfast at A&W. At participating A&W locations in Ontario. Grindr has this very unique approach of a grid right so you come to Grindr and the first thing you see is a grid of people around you if you're a free user you see 100 people if you are a paying

user you see a 500 or unlimited number of people depending on which tier you subscribe to but that's kind of the core thing and it's very open architecture style you can message anybody on the grid there's no limitations there's no kind of matching that happens between people before you can communicate that's worked really well for Grindr that's why Grindr is as you know good of a product as it is. So we don't want to change that at all, but we do want to extend on that. I'm Mary Long, and that's George Arison, CEO of Grindr, the dating, social media, and entertainment app for the LGBTQ plus community. My colleague Dylan Lewis caught up with Arison for a conversation about how to build a dating product that keeps users for the

long haul, even after they found their person. They also discuss Grindr similarities to Uber, prioritizing product development, and the difficulties of building a culture in a remote-first environment. So as I look out, and a lot of our listeners look out, on the dating and social meetup market, we tend to focus on the publicly traded names. And in that space, it is Match, Bumble, and really you guys for the major players. How do you look out at the competitive landscape and how you're positioned? Totally. Well, we are a little bit of a unique product of those companies because we have a very different target audience, right?

Grindr is primarily used by gay and by men as a way to connect. And then secondly, the way we use it is also very different. Yes, casual dating and long-term dating are obviously the primary reason people are on Grindr. But when you do a survey of what do you use the product for, they give you a really broad list of things, actually. Friendships is really big. Kind of second-tier friendships is even bigger. So these are people you might go out and party with, but not necessarily like meet up all the time.

And then people also use Grindr for travel and local discovery. So I'm traveling to say Mexico City, what should I do when I'm there? So chatting with people in Mexico to try to understand what your options are, or what's happening in New York today. I'm in New York, but I just don't know what's going on. What should I do? That's a big part of the use case as well. And then beyond that, networking, health information, et cetera, is also used in the product.

And so because we're used in such different ways and in such broad range of ways, people's connection to Grindr is very different as well. We tend to like to say that we are the gayborhood on your phone, meaning people in real life move into in real life gayborhoods oftentimes either after college or when they turn 18 as a way to kind of figure out who they are, what their life would be like as a gay person, et cetera. And not everyone has an opportunity to do that. with Grindr, we actually enable you to have that same relationship with people, but on your mobile phone. So because this connection with a user base is so different, because people spend so much more time in the app than in other products, they're in it for an hour a day. I think our kind of understanding of the user base is very different than our other peers on the straight side. Although of course, it's also true that in the, you know, in the world, people use more than

one product for dating. We know that our users will also be using other products like a Tinder or a Hinge for dating as well. I saw that hour statistic cited in your investor deck. When you cite it, you also look at comps from the world of social media, meta properties like Facebook and Instagram, but you're also looking at monthly subscription spend as a comp, looking at places like Netflix and Spotify. It seems like in trying to understand your business it is kind of a hybrid of dating social and entertainment is that the right way to be thinking about it that's 100 right way of thinking about it and it's used for all those different ways right for dating alone you wouldn't be spending an hour in the product

but for all the connections that grinder offers you obviously that makes a lot more sense and yeah i tend to use this term window shopping which is in effect entertainment that people are doing in grinder as well and so look i mean it's like when i finished college you know in 2000 I moved to DC with a very clear view, like, Hey, I want to be around where there are a lot of other gay people. Cause I was still trying to figure out, am I gay or not? Am I going to come out, et cetera. And then I like very actively moved myself into Logan circle. Right. And so there's a little bit of that happening on Grindr with users. And that's why I think people have, we've been so successful at keeping the younger generations coming back to the product.

So whereas, you know, Facebook lost a lot of people to Instagram, Instagram, plus the people with Snapchat, et cetera. We've never had that issue in the 15 years that Grindr has been around. I'm curious, you know, so much of the associations with the brand are in the world of dating and casual hookups. And you clearly have ambitions for the business beyond that. What does expansion look like for you guys? Yeah, so we tend to think of it as an extension of the product rather than a change.

So the things we do really well, we want to keep. Grindr has this very unique approach of a grid, right? So you come to Grindr, and the first thing you see is a grid of people around you. If you're a free user, you see 100 people. If you're a paying user, you see a 500 or unlimited number of people, depending on which tier you subscribe to. But that's kind of the core thing, and it's very open architecture style. You can message anybody on the grid.

There's no limitations. There's no kind of matching that happens between people before you can communicate. That's worked really well for Grindr. That's why Grindr is as good of a product as it is. So we don't want to change that at all, but we do want to extend on that. And so I tend to compare us in that regard to something like an Uber, right? Uber started out with black cars as the primary product, then it added UberX, and that's all it did was black cars, UberX. But then over time, they built a separate app for food delivery, right, or restaurant delivery.

And initially, it was a big, like, this is going to be for food versus this is for Uber, the car. But they found that actually, you know, it's better if they extend the product, the main product, with a button to start doing restaurant delivery in the product. And that's worked really well for them. So it kind of almost changes the app feel when you go into restaurant ordering, but it's still the same product overall. And then since then, about busy added, you know, delivery of parcels, delivery of groceries, et cetera, is all coming into the product as well. So we tend to think of us in the same way. We are primarily for dating and for casual hookups today. And that's what people use us for primarily.

But they also use us in all these other ways that I spoke about a few minutes ago. And that all happens organically without us building features for that. Grindr hasn't built features for networking or for health information or for travel. Over the next couple of years, we want to build feature sets in these areas. We'll obviously start slow. We'll do one feature and then add more and ultimately extend into these other areas while keeping the core of the product the way it is. We think users will respond really well to that. Our general approach to product development is very user-focused, like understand what users want and then build those things.

And we are lucky because people are already using the product this way. So we're just kind of giving them what they already are doing in a better way versus trying to get their behavior to change. I'm glad you broke down the grid interface there because I think for folks unfamiliar with the app, it is a departure. It's a little bit different than what people expect with the swiping dating app interaction. You talked earlier about growth with respect to product development and use cases within the app. One of the other natural places that my mind goes when we're thinking about growth is just continuing to expand into the total addressable market that you guys have identified. You currently have 13 million monthly actives, just under a million paying users.

You have a pretty sizable total addressable market in your investor decks. What helps you capture more of that market? Yeah, so there's a bunch of things happening on that. We're obviously more penetrated versus TAM in the US and then in Europe, because we've been there for much longer than other places. And for a few other reasons, I'll get to in a second as well. But Grenda is in 190 countries. So it's pretty ubiquitous. There are very few places where we're not the number one product. In most places, we're the kind of number one product that people use. Although it varies based on specific country, where are we versus our competitors in those specific countries. One of the things that's happening in the world is that being gay or being bi is becoming a lot more accepted in a lot of places, right? Who would have thought that in India, where less than a decade ago it was illegal to be gay, now they talk about gay marriage. Now it hasn't happened yet, but the fact that this conversation is actively happening is already a massive change in that country versus 10, 15 years ago. Or that in Thailand, you'd have majority of members of

parliament be in a place where they would be voting for marriage equality. And so the world is changing in a very positive way in a lot of countries, not to understate the fact that there's still 60 countries where it's actually illegal to be yourself if you're gay. So there's that other challenge as well. But the societal changes really help us because it's easier for people to be out, which means that it's easier for them to be on Grindr. And so I think we'll continue to see a lot of growth internationally with the societal changes. Latin America has been a really great place for us. Asia's coming up as well. So that's one set of places where I think we'll see a lot of growth from the MAU perspective. But even in the places where we are a lot more ubiquitous,

like in North America and Europe, we still have a ton of room in terms of growth from that MAU versus TAM perspective. And so we still can capture a lot of users. The things we need to be doing well is continuing to get people to come into Grindr as they turn adults, right, 18 or post-college at 22 to kind of be using our product. And so we need to be always thinking about what do younger users and that kind of 18 plus range want. I'm going to underline the 18 plus because we are not, we don't allow anybody under 18 to use Blender. That's a zero tolerance kind of rule for us. And so when I say younger, that's kind of referring to 18 plus. And then, you know, secondly, with some of our more older users, 35 and older, they do want these dating

features. They want to settle down and want to have that option and kind of find a long-term partner. And so building those features, I think will really help getting those users to be very engaged as well. So we do have a lot of opportunity to grow our MAU a lot more. It's not something we kind of really are worried about. And the really remarkable thing is that we do that with very little marketing. Grindr spent virtually no money on marketing last year. We will spend more money on marketing this year, but it's still going to be a very small percentage of our revenue. it's none of it is performance driven marketing it's all social content creation to kind of drive engagement with the product and our social channels not at all to like specifically acquire

users because we just don't need to we're very lucky that grinder has very high name identification and it's actually unaided right like the numbers are 85 plus and then additionally people know that this is where the community is and so they kind of come back to it for that reason and so we're fortunate that we don't have to spend money on marketing, which actually creates a lot of leverage in our financials, obviously, as well. You mentioned that next generation of users and the new users that will continue to fuel the growth. I'm curious, there's been so much ink spilled on the differences between millennials and Gen Z. I feel like we see surveys, we see headlines all the time. As

you look generation to generation, I'm firmly in the millennial market, so I am also trying to understand the Gen Z consumer a little bit. Is there anything interesting you're seeing there? Well, I think for the higher level first, when I went back to Grindr as a product after they started to talk to me about this job, I had used it a lot in the past. Some of my closest friends I met on Grindr, but wasn't kind of using the product heavily since I got married. One of the things that was really interesting is how many more people were willing to openly say that they're buying. So if you go back to, you know, 20 years ago, that was not as common. And so that is definitely one thing that's changing with the younger generation is that they're much more comfortable adding themselves as bi.

That's one of the vectors in which you are seeing growth in that kind of LGBTQ percentage is people who say, yes, I'm bi. And I'm actually happy to say that I am. So that's something that we are definitely noticing. I think in other products, you know, the youngest kind of cohort, that Gen Z cohort, 18 to 25 right now, or maybe even 22, is somewhat different. We are not noticing that behavior to be that different inside Grindr versus before. So they're still coming back into the product. They're still engaging with users quite a bit. So none of that is an issue for us.

I think it might be more of an issue for our straight peers. But what we do notice is that whereas historically, based on data, just publicly available data, average age for a gay man to get married is about 38. I think with kind of the 18 to 25 range of users, that number is going to happen earlier. They're not yet getting married, but they're definitely thinking about that topic sooner than their previous generations were, Which is another reason why investing into dating features and getting them out into the product makes a ton of sense, right? Because that's going to be something that matters not just for older users, but for this 18 to 25 cohort also. Is that build out in terms of features and functionality maybe partially motivated by kind of wanting to continue to have a long-term relationship with the users that you bring on platform? I feel like when we look at Match, and I say this as a Match shareholder, it's interesting because if they're successful in what they do, they stop becoming a user, and that's a tough dynamic.

Yeah, and we don't have the dynamic as much, right? People continue using Grindr even after they meet somebody. That's just a different part of, frankly, gay culture and also how people use our product, right, on both sides. But yes, we obviously want to have that long-term relationship with our users. I think, frankly, there's a lot of good that comes out of that relationship. When in 2022, monkeypox became a real problem as an epidemic, you know, Grindr played a really crucial role in educating our users that, hey, you should go get a vaccine. Here are the places where you can get a vaccine.

We work with a nonprofit to build a widget to find a way you could find a vaccine availability. And over 2 million people in Grindr looked up where to get a vaccine through that widget, which like had a really massively impactful, um, you know, positive, uh, on getting that epidemic under control. And so that reluctant relationship really has a lot of awesome benefits and for the business, obviously, but for the user as well. And so we do want to maintain that for sure. Um, and frankly, uh, you know, our user base is only a small percentage of the world population, right? So you want to be around people who are like you in some ways. And so having Grindr there for you is, is very valuable. And, and we definitely want to continue to nurture

of that. You joined Grindr as CEO in 2022. What made the role interesting to you? Yeah. So I'm a company builder. I built three companies from scratch. I built my first company starting in 2007 when the idea of building a mobile app was like completely foreign to people. We put apps on BlackBerrys. When I said that to people, they're like, whoa, whoa, like you put an app on a BlackBerry. Like, I didn't know you could do that. Yeah. So, and then obviously we then put the same app on the iPhone and we're a big part of kind of iPhone growing. We grew with it. That's a company called Taxi Magic. You can still use it in New York as Curb. And so I've been in product development now nearly for 20 years. And I think that's what I love to do.

Never thought that I would go run somebody else's company after running three of my own companies. But what made Grindr so interesting is a few things. One was just the profile of this business from the financial perspective is just totally incredible, right? We have this amazing EBITDA margin in a company that's growing, that's very unusual. Most companies grow through investment dollars. And so their EBITDA margins are very bad in that sense, which is understandable because they are growth companies. Grindr is able to self-fund its growth while maintaining this really awesome, robust EBITDA margin, over 40% last year. And we gave guidance a week and a half ago of 40% for this year as well. So that's really powerful and really exciting. Very unusual to find

businesses like that. And obviously, I'm a capitalist. And so, from that perspective, I was like, wow, that's really incredible. Secondly, this really unique connection to the users that Grindr has was extremely appealing as well. And at the same time, you don't often see businesses that have been around for 15 years that are as mature as Grindr is from the user perspective, but they have so much white space from product development point of view. So, you almost kind of come into a business as like, yep, totally ready to be a public company from revenue growth and that maturity perspective, but so much opportunity, almost like a series B company from product development point of view. So it kind of met

these two really unique things that I love. I actually like being in a public company. I took my last company public and really enjoyed being a public CEO. And I think I do a good job engaging investors, et cetera. Yet I love early stage product development and we have so much opportunity to build products from scratch at Grindr while maintaining this really great margin. So those things are all super appealing to me. And then kind of overlaid on that was the fact that, look, I'm a, you know, I came to the United States as a 14-year-old kid from the Soviet Union. I know what it's like to live in a place where being gay is really difficult. Now, it's not Saudi Arabia. Georgia is not Saudi Arabia. And by any means, legally, you have most rights in Georgia as a

gay person. But de facto, you don't, right? Kind of society doesn't really accept you. And so I know what that's like as well. And I lived in America through 25 years or more of our rights becoming much more ubiquitous and not just our rights, but also just becoming a lot more accepted. I think the idea that if you had said in 1992, I'm going to be married as a gay man and have kids through surrogacy, that was completely unbelievable to most people. And yes, some people were adopting children as gay couples, but it was very, very uncommon. So I've seen society change in a pretty significant way and have enjoyed the benefits of that change in a significant way as well. So to be in a business where every day you have an opportunity through

being a really awesome business, have an impact on people's lives in such a positive way is also hugely appealing, right? Granta does a lot of work in public health and we help make our lives of our users better through that. And then we do a lot of work abroad in encouraging activists and working with them to promote rights for our users in a lot of countries where it's necessary. And so basically through our work, we're able to make a really massive change in making the lives of our users more free, more just and more equal. And that's really powerful as well as someone who has really benefited from other people's work to have that really fortunate life that I do in the United States. So have an amazing business that does so much good at the same time,

pretty tough to find, which is frankly like the value prop that I tell all the potential investors that I meet because there's so much good here that they should take advantage of. I imagine 2022 must have been kind of an interesting time to join a business, especially as an outsider. The pandemic and the post-pandemic years have kind of reshaped a lot of different things, especially for digital businesses. But looking at a company like yours that is so focused on how people interact with each other, in a way, it's kind of opened things up a little bit and moved people away from their immediate markets. So coming into the business in 2022 what did you learn and kind of how has the business learned from the pandemic yeah well

we definitely benefited from kind of with the world opening back up in 2021 2022 right because 2020 was a tough year for grinder as for any company that has to do kind of use virtual for in real life now obviously people use grinder for digital connections as well so that was working well but you know in real life was a lot more challenging and we kind of saw the benefits of that in 21. And to some extent in 22 as well, because, you know, internationally, vaccinations were behind the US. And so we kind of saw the people come out later. Of course, then in middle of 2020, we had the monkeypox epidemic, and that was a big kind of problem. And so I was not yet at Grindr, but just kind of understanding what Grindr did and knowing what Grindr did, because

I was on the board, was really powerful. It really demonstrated the power of this platform for the users. I think the other challenge kind of post-pandemic for many, many companies, Grindr included was the fact that we hired a lot of people, a lot of companies did as well. And frankly, people thought that this whole work from home thing could go on forever and didn't really understand and appreciate how challenging it is to build good culture inside a company in this virtual sense. Yes, virtual creates a lot of flexibility and we want to encourage that flexibility. I have two kids and I love being able to spend time with them at hours of the day that previously would not have been possible

because I work from home certain days. But at the same time, building culture totally virtually is really difficult. You don't see the full person. You aren't able to engage with them in ways that you would engage them in person. And frankly, users were also employees were saying things that were kind of indicating this,

but weren't putting kind of the pin on it, right? Like I'd say like, well, I'm unaware of the things we're working on. Well, one of the reasons you aren't aware of things you're working on is because you're not in the office together and are not engaging your colleagues during lunchtime or coffee breaks on what they're working on, right? So that's a big reason people don't know what we're working on.

So for us, a big learning was if we want to have a really high performance-driven culture where we go after audacious goals and achieve them by working super hard and where work does matter to us, like people who come to Grindr should care about their work. It's not something that you do kind of nine to five and you're done. It was very hard to have that performance-driven culture fully virtually. So we had to make a decision that we needed to come back to the office at least a couple of days a week. And we had to center around specific locations where most people in that particular team would be working on, kind of through the approach of Center for Excellence. And so that was a really big change for Grindr last year, because it was obvious

kind of quickly, and we had to make a lot of changes. And some people were okay with those changes and, you know, came along with them and some were not and are not with us. And so that was probably where a lot of the learnings kind of had to happen post-pandemic. That yes, pandemic allowed us to create a lot more flexibility for people in their work in terms of when they work, but being in the office on certain days and being together is also really crucial at the same time. Did that change at all the way that you look at what you offer to your users and what's available in the app? Not really, honestly, that kind of the things that we need to do in the product would have

been true, I think, regardless, pre-pandemic or post. But I think how we work definitely has changed quite a bit. So we're back in the office two days a week. We do a lot more teams getting together, right? So like my executive team and leadership team, more extended, just had an offsite on Tuesday and Wednesday. And, you know, that's, we try to do that once a month now, because even though we're back in the office, different executives are in different offices. And so we need to then bring

the executives together to kind of spend time together as well. So that's, I think, where I've noticed most of the change, less on the product itself. But what I have seen is people are really engaged when they want to go after really big goals. And so this world where you can bring people together on certain days in the office, but give them a lot of flexibility in other days is actually, in some ways, the best outcome for people in how they work, which I think results in much better product development as well. I know you have your company's first investor day in June of 2024.

I always love giving our listeners kind of a lens behind the scenes into what goes into some of the corporate communication that we see from companies. So what's the prep for that look like? It's a lot of work. And you're like, wow, it's four days, but I'm gonna spend like months and months preparing for it.

So for us, the opportunity is significant because we went public through a SPAC transaction And so it didn't have the kind of normal IPO roadshow that a lot of companies do when they go public. We have spent a lot of time talking to investors since we've been public. So we met a lot of people you would meet more than once even in the months since then. But we've never had a chance to kind of tell our story fully. And so for us, this is the opportunity to do that. And so we're going to do a pretty deep, deep dive into the business from really kind of three main perspectives.

One is the product and where we want the product to go. We'll outline a longer term vision for the product and how we are envisioning to accomplish those things. We've talked about it at a high level, even in this call, but actually I go down to like product levels or like this is what the product would look like. We have some really cool things we're going to show investors in that regard. Secondly, from the brand and storytelling point of view, Grindr has this amazing brand. But at the same time, there are some negative connotations vis-a-vis that brand. A lot of them originate in homophobia that people don't even oftentimes realize that they might have, but also historical challenges that the business might have had in terms of choices that it made that caused problems. but people still think those are true today, even though it was like years ago with two managements ago, et cetera. And so really kind of telling our brand narrative and talking to people about all the awesome things that this company does for its users, I think is really important. That's a core priority for us for 2024, but even beyond that. And so that'll be a second part of the investor day presentation. What's the vision, what's the mission and how do we go after it? And then thirdly, from the financial perspective, we think we're still

in early days of monetizing this product. We want to tell people where we think this will end up over the longer term and the midterm, what the financial metrics might look like, and really show them why we are so bullish about being able to drive monetization up, continue to grow our pair penetration while driving our mile growth at the same time.

So those are the three things we're focused on. You know, different teams in the company are working on each one of those and then bringing all that together, right? Kind of with me being the spokesman for a lot of that. And so it's a lot of work. But the good news is a lot of the work you're doing for the investor day is also what you have to do to run the business anyway, right? You have to have a long-term plan.

You have to have a lot of product tied to that plan, kind of how you're going to achieve that. And all the brand work that you're doing kind of goes into the story that you're telling. So it's not kind of extraneous to the business, but it is kind of on top of that because you need to tell the narrative in a couple of hours rather than over many, many days. And we are a very nimble team, right? Grinder ended last year with just over a hundred people working here. So a lot of people are doing a lot of work to make this happen, but we're really excited about it. And I think, I hope a lot of people come and listen and learn about how awesome of a business and product Grinder is. Well, we're looking forward to the mid-summer update. Until then,

George Harrison, thank you so much for joining me on Motley Fool Money. Thank you. I appreciate it. as always people on the program may have interests in the stocks they talk about and the motley fool may have formal recommendations for or against so don't buy or sell stocks based solely on what you hear i'm mary long thanks for listening we'll see you tomorrow Thank you.