Latest / Bloomberg Intelligence / Google Erases a Record $500 Billion as AI Eats Into Sales

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Google Erases a Record $500 Billion as AI Eats Into Sales · Bloomberg Intelligence

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  Speaker 2: We're looking at Alphabet shares falling as much as 14%. Paul,
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  Speaker 2: that is the biggest move ever on an intraday basis.
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  Speaker 3: It's just extraordinary.
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  Speaker 4: And again, what I think a lot of people are thinking,
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  Speaker 4: this may be a fundamental re-rating of the stock as
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  Speaker 4: it relates to the AI threat.
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  Speaker 5: Right.
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  Speaker 2: And it all comes down to the Google advertising and
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  Speaker 2: search business coming in weaker than expected when it comes
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  Speaker 2: to revenue. Because now when people try to Google something,
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  Speaker 2: they'll still do that. But you were telling me how
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  Speaker 2: when you Google a question in there or you post
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  Speaker 2: something in there, you're not clicking on anything.
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  Speaker 3: I'm not clicking through nearly as much as I used to.
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  Speaker 6: And that's how Google makes its money, right?
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  Speaker 2: Or people need to be clicking on those specific links
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  Speaker 2: and going into the businesses.
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  Speaker 6: But instead, you look at the summary, the Gemini summary,
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  Speaker 6: and you move on.
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  Speaker 2: And this is going to be... I mean, once we've
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  Speaker 2: hit this turn, you wonder how long... before more people
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  Speaker 2: do that and kind of opt out of clicking through
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  Speaker 2: everything entirely.
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  Speaker 6: Let's bring in Matt Bloxham right now.
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  Speaker 2: Matt is one of our senior media and tech analysts
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  Speaker 2: joining us from London to talk a little bit more
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  Speaker 2: about Alphabet as well as Microsoft. Matt, how are you
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  Speaker 2: thinking about what Alphabet told us? Do you get a
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  Speaker 2: sense that folks within that company as well are regarding
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  Speaker 2: this kind of as a turning point?
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  Speaker 7: I think we've been in this kind of transition period
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  Speaker 7: for a couple of years with Google. As you've been
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  Speaker 7: talking about then, that there is this big change in
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  Speaker 7: how people are interacting with Google's products and potentially using
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  Speaker 7: different products. And so there are two things that they're
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  Speaker 7: grappling with here. One is that as people move from
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  Speaker 7: just regular Google search to AI mode, there's this difference
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  Speaker 7: in monetization that they haven't quite figured out yet. And
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  Speaker 7: we've seen that time and time again across Google and
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  Speaker 7: particularly with meta as new products have been introduced. Initially,
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  Speaker 7: the monetization isn't that strong and they have to figure
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  Speaker 7: it out. And brands and media partners have to figure
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  Speaker 7: out how they're going to spend money against that and
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  Speaker 7: make it work. So I think to some degree, that's
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  Speaker 7: just going to take some time, but they will figure
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  Speaker 7: it out. And I guess what's reassuring, if you're a
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  Speaker 7: Google investor right now, is that Gemini has gone through
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  Speaker 7: a billion users. Engagement is going up. So hopefully it
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  Speaker 7: is a monetization opportunity. challenge that they can address. Obviously,
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  Speaker 7: the other big threat there is you've got the likes
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  Speaker 7: of Muse coming in from Meta, which is a rival
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  Speaker 7: to Gemini and another tool people might use rather than
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  Speaker 7: Google to search for things and to buy things. And
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  Speaker 7: so even if they figure out the monetization problem, you've
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  Speaker 7: got a market share problem. And so that, for me,
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  Speaker 7: is the kind of twin challenges that they've got and
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  Speaker 7: the slowdown in ad sales growth. It's still growing, but
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  Speaker 7: there was quite a big slowdown in this quarter is
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  Speaker 7: starting to make people feel a bit more that they're
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  Speaker 7: not fully on top of that. And even though their
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  Speaker 7: cloud business is growing and grow arguably a little bit
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  Speaker 7: faster than expected, it's nowhere near enough to compensate for
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  Speaker 7: the kind of the profit slowdown at their core ads business.
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  Speaker 7: And at the same time, they're investing $ 200 billion in
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  Speaker 7: capital spending this year, potentially $ 300 billion next year. So
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  Speaker 7: the sums don't quite add up yet.
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  Speaker 4: So Matthew, kind of at its core, most basic level,
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  Speaker 4: the advertising business for Google is clicks times cost per click,
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  Speaker 4: what they can charge an advertiser for me clicking on
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  Speaker 4: an ad. And simply put, I am clicking materially less often.
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  Speaker 3: So now the question is, okay, how do you solve
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  Speaker 3: for that issue?
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  Speaker 4: Has the company identified any kind of strategy there?
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  Speaker 7: Yeah, you know, I mean, the whole industry is moving
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  Speaker 7: away from search engine optimization to kind of engine optimization.
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  Speaker 7: And so both sides of the equation are trying to
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  Speaker 7: figure out the best way to kind of.
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  Speaker 7: Replicate that kind of monetization flow into a new environment. And,
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  Speaker 7: you know, we're not fully there yet. But certainly the
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  Speaker 7: industry is kind of on its way to kind of
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  Speaker 7: working that out. And also, you know, sponsored links has
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  Speaker 7: been a big, big part of it. So not only
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  Speaker 7: are they kind of getting revenue from click-through, they're getting
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  Speaker 7: revenue from people wanting to be at the top of
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  Speaker 7: that list. And again, that same concept applies in a
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  Speaker 7: a genitive engine optimization world, but the commercials of it
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  Speaker 7: are still a bit fluid.
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  Speaker 2: I feel like before AI became a thing, people were
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  Speaker 2: already kind of getting discouraged or annoyed with Google searches
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  Speaker 2: because a lot of the times you wouldn't be able
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  Speaker 2: to get what you wanted in the first screen. You'd
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  Speaker 2: have to page forward, page forward until you found what
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  Speaker 2: you needed. So perhaps AI kind of accelerated that. Let's
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  Speaker 2: talk a little bit, Matt, about Microsoft and what we
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  Speaker 2: saw from that company. It feels like Microsoft delivered everything
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  Speaker 2: investors wanted to see, and now it can take advantage
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  Speaker 2: of that by selling a boatload of debt.
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  Speaker 5: Yeah.
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  Speaker 7: So, you know, I guess, you know, the real focus
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  Speaker 7: with Microsoft has been their Azure business, which is their
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  Speaker 7: cloud business, a bit like Google Cloud. You know, that
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  Speaker 7: grew 48% year on year, which is a little bit
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  Speaker 7: better than the market expected. And, you know, it's kind
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  Speaker 7: of proven to be profitable and they didn't spend as
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  Speaker 7: much on CapEx as people thought they might in the quarter. Now,
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  Speaker 7: I think some of that is because a number of
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  Speaker 7: the projects that they were planning to spend on have
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  Speaker 7: got delayed. So I don't think it was necessarily a
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  Speaker 7: conscious decision by the company to spend less. It's some
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  Speaker 7: of the things they plan to spend on, just they
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  Speaker 7: can't spend on yet. But I think in the round,
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  Speaker 7: the combination of that slightly better than expected to zero growth,
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  Speaker 7: the fact that their kind of productivity suite of offerings
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  Speaker 7: remains resilient, that we didn't get a kind of new
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  Speaker 7: data point on cowork, but I think generally the sense
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  Speaker 7: is that overall that kind of Microsoft 365 environment is
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  Speaker 7: still proving very robust. The overall fundamental balance looked good,
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  Speaker 7: you know, and we're talking about fine margins here, you know,
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  Speaker 7: Google effectively in aggregate, you know, missed by less than
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  Speaker 7: half percent on revenue and profit and Microsoft beat by
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  Speaker 7: a couple of percent. And yet you see a hugely
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  Speaker 7: different reaction in the share prices and that just kind
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  Speaker 7: of shows you just quite how much people are extrapolating
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  Speaker 7: from kind of small directional shifts.
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  Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
• 7:07
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 7:22
  Speaker 4: A lot of news again today in the tech space.
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  Speaker 4: That DoorDash deal, Marvell Technologies is in talks to buy
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  Speaker 4: a company.
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  Speaker 3: A lot going on.
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  Speaker 4: But first, I need to talk to Mandeep Singh about Google.
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  Speaker 4: Mandeep Singh, Global Tech Research Head, Bloomberg Intelligence. Mandeep, we've
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  Speaker 4: been having this conversation all day. Just begs the question,
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  Speaker 4: Google down 11% here. Does last night's results, do they
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  Speaker 4: mark a fundamental change in the business community? trajectory of
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  Speaker 4: Google's revenue on the search business? Or is this not structural?
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  Speaker 4: Because it feels like AI may in fact be impacting
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  Speaker 4: their business maybe more than the street thought.
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  Speaker 5: It is certainly impacting the profitability.
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  Speaker 9: So look, this company grew 25% top line. When you
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  Speaker 9: are over $ 400 billion, 25% growth is mighty impressive.
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  Speaker 5: The problem is.
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  Speaker 9: A lot of that growth is in the cloud segment.
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  Speaker 9: and nothing can match the margins of the traditional search business.
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  Speaker 9: So if search shows any signs of a slowdown, which
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  Speaker 9: is if I were to compare just the Google search
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  Speaker 9: growth with.
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  Speaker 5: Meta's ad revenue growth, it was half of Meta.
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  Speaker 9: So clearly they have a problem when it comes to
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  Speaker 9: growing the ad side of the business relative to Meta.
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  Speaker 9: And that's where I think the streets response shows a
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  Speaker 9: negative reaction. But other than that, there was nothing wrong
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  Speaker 9: with the print.
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  Speaker 3: But you could say, other than that, How was the play, Mrs.
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  Speaker 5: Lincoln?
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  Speaker 3: I mean, that is Google from investors' perspective. It's search.
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  Speaker 3: It's the growth rate I'm associated with search. It's a
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  Speaker 3: profitability I associate with search. That's the story.
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  Speaker 4: So my question is, does the street need to kind
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  Speaker 4: of re-rate the story and say... Maybe I should be
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  Speaker 4: focusing more on the cloud business or something.
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  Speaker 5: It is.
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  Speaker 9: But even the search side has been re-rated already.
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  Speaker 5: A couple of times.
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  Speaker 9: So if you go back, you know, 18 months, the
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  Speaker 9: stock was down. Similar sentiment. Everyone was negative on search.
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  Speaker 5: Guess what?
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  Speaker 9: They released another model, Gemini new model. And it was
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  Speaker 9: at the frontier along with OpenAI and Anthropic. And the
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  Speaker 9: stock got re-rated and Google touched.
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  Speaker 5: An all-time high.
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  Speaker 9: Now they have missed out on the last few months
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  Speaker 9: in terms of releasing a new model, which is why
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  Speaker 9: everyone is suddenly concerned. And they have had some attrition
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  Speaker 9: in terms of their top researchers leaving. So suddenly everyone
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  Speaker 9: is concerned, are they at the frontier or not? And
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  Speaker 9: now in the last two weeks, they have released two
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  Speaker 9: new models. So there is a sense of urgency around
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  Speaker 9: releasing new models just to make sure that they are
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  Speaker 9: alongside Anthropic and OpenAI when it comes to what the
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  Speaker 9: frontier is. And Meta has released a new model, which
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  Speaker 9: is why the sentiment has changed completely on Meta.
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  Speaker 5: Why?
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  Speaker 9: Because they released Muse and it was powered by their
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  Speaker 9: latest model, which is at the frontier. So- Things change
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  Speaker 9: very quickly when it comes to these LLM rates, and
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  Speaker 9: that's what we are seeing. All it takes is a
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  Speaker 9: good new model release from Alphabet, and it'll be re-rated again,
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  Speaker 9: and we'll see the stock go back up.
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  Speaker 2: But as search as we know it, the way that
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  Speaker 2: we used to use it, not dead, but on the decline,
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  Speaker 2: I mean, will it ever go back to what it was?
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  Speaker 9: Well, I look at how these agent tech searches are built.
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  Speaker 9: They're built on Google's platforms. Every one of the agent
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  Speaker 9: offerings ties to Gmail. So why is the agentic search
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  Speaker 9: better in some cases? Because it can be more personalized.
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  Speaker 9: Why is it more personalized? Because it's reading off of
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  Speaker 9: Google's surfaces in terms of, you know, the intent that
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  Speaker 9: a user may have. And that's where I think Google
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  Speaker 9: has everything to make a good agentic search. It's just
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  Speaker 9: their models are not at the leading edge right now
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  Speaker 9: when you compare to Muse or Anthropix.
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  Speaker 2: Let's talk to you about some M & A deals.
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  Speaker 2: Marvell is apparently close to a mega deal for a
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  Speaker 2: laser maker called Lumentum. This is a potential all-stock transaction.
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  Speaker 2: How critical is this for Marvell? Who is it more
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  Speaker 2: important for?
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  Speaker 5: Clearly, Marvell, I mean, they are paying a lot.
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  Speaker 9: This deal will be definitely close to $ 100 billion if
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  Speaker 9: you think about the size.
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  Speaker 5: So pretty big deal.
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  Speaker 9: And, you know, when you're buying stocks at an all-time high,
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  Speaker 9: which is the case, you know, with potentially this deal,
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  Speaker 9: you always run the risk that, you know, the synergies
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  Speaker 9: or whatever they may frame at the outset may not
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  Speaker 9: come to fruition. There are execution issues. But with that
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  Speaker 9: being said, there is a clear trend in the semiconductor
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  Speaker 9: world with more systems type of approach. That's what NVIDIA
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  Speaker 9: is doing, end-to-end systems. Google TPUs, I mean, that was
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  Speaker 9: the bright spot. They're selling TPU systems. So small chip
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  Speaker 9: makers like Marvell don't have a choice but to go
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  Speaker 9: the acquisition route. And this is what they seem to
• 12:26
  Speaker 9: be doing here.
• 12:27
  Speaker 4: Boy, Lamenton's up 150% this year, so they're buying it.
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  Speaker 9: And there will be a premium on top of this 150%
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  Speaker 9: that the stock has already gone up.
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  Speaker 5: All right.
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  Speaker 3: The other one in your space here, DoorDash, Instacart. What's
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  Speaker 3: going on there?
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  Speaker 9: I mean, all of these companies are looking to consolidate
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  Speaker 9: because they feel agentic AI would change the interface.
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  Speaker 5: How people order their stuff. And the more they own
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  Speaker 5: the supply... which in this.
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  Speaker 9: Case, DoorDash would own Instacart supply in terms of the marketplace,
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  Speaker 9: that would make them stronger. Even if you're ordering through Muse,
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  Speaker 9: guess what? DoorDash owns the backend supply. So they have
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  Speaker 9: a lot more cloud compared to being.
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  Speaker 5: The smaller player. So scale and consolidation is the name
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  Speaker 5: of the game.
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  Speaker 2: So Paul raised a good question, which is, are regulators
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  Speaker 2: going to step in and allow DoorDash and Instacart to merge?
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  Speaker 5: I think there will be.
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  Speaker 9: And our analyst, Jen Rhee, who covers regulation, feels very
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  Speaker 9: strongly that regulators will look at this and say this
• 13:35
  Speaker 9: in the online space, even though there is competition from
• 13:38
  Speaker 9: Walmart and traditional retailers, they will not look at the
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  Speaker 9: broader market. They will look at just the online space.
• 13:45
  Speaker 9: And that's emerging number two and three. I don't think
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  Speaker 9: it'll be something that will get approved right away, even
• 13:52
  Speaker 9: though the Trump administration is pro M & A.
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  Speaker 5: So that's the reason.
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  Speaker 3: So you think there will be some regulatory pushback?
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  Speaker 5: Yes, there will be. She thinks there will be some
• 14:01
  Speaker 5: regulatory pushback.
• 14:03
  Speaker 6: Stay with us.
• 14:04
  Speaker 8: More from Bloomberg Intelligence coming up after this.
• 14:10
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
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• 14:25
  Speaker 4: Wanted to switch gears. Caterpillar reported numbers as well. In
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  Speaker 4: this story, you know, big equipment, backhoes, you know, bulldozers,
• 14:33
  Speaker 4: all that kind of stuff. That's kind of become kind
• 14:36
  Speaker 4: of an AI play because of their power business that
• 14:40
  Speaker 4: they also have.
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  Speaker 2: I remember when we first talked about this earlier this year.
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  Speaker 2: And at the time, you and I were saying, what?
• 14:45
  Speaker 2: How can Caterpillar be an AI play?
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  Speaker 4: Now maybe the flip side to some of that today.
• 14:50
  Speaker 4: Chris Chiolino, Bloomberg Intelligence Senior, U.S. Machinery Analyst, joins us here. Hey, Chris,
• 14:54
  Speaker 4: talk to us about CAT and the earnings release.
• 14:56
  Speaker 3: What did you learn?
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  Speaker 10: Yeah, you know, it actually was a decent quarter. Top
• 15:01
  Speaker 10: and bottom line beats reiterated the guide. But obviously in
• 15:05
  Speaker 10: this market, that's not good enough. You had, again, another
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  Speaker 10: strong quarter of orders. Backlog continued to set another quarterly record. But,
• 15:14
  Speaker 10: you know, their report comes on the heels of some
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  Speaker 10: pretty underwhelming earnings from some of the AI names last night.
• 15:21
  Speaker 10: And Cat, to your point, has certainly been caught up
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  Speaker 10: in this AI trade given their power generation and data
• 15:27
  Speaker 10: center exposure. And that growing drumbeat around the durability of
• 15:32
  Speaker 10: AI spending and power generation demand, that doesn't seem like
• 15:36
  Speaker 10: it's going to abate any time in the near term here,
• 15:40
  Speaker 10: even with what is still a pretty constructive outlook as
• 15:43
  Speaker 10: we look into 27.
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  Speaker 2: Chris, has the investor base of Caterpillar changed because it's
• 15:48
  Speaker 2: now more of an AI play than it used to be?
• 15:50
  Speaker 2: I mean, it was kind of a boring industrial that
• 15:52
  Speaker 2: was very much tied to the fortunes of the global economy,
• 15:56
  Speaker 2: and now it's seen as a growthier name.
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  Speaker 10: So that's one of the key debates, right? I mean,
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  Speaker 10: is this a secular growth story or is it you're
• 16:04
  Speaker 10: still traditional heavy manufacturer, a machinery producer? You know, if
• 16:09
  Speaker 10: you looked at the valuation earlier this year, Caterpillar was
• 16:13
  Speaker 10: trading north of 30, 35 times. You know, historically, this
• 16:16
  Speaker 10: thing will trade 16, 17 times mid-cycle. It was still
• 16:19
  Speaker 10: relatively elevated going into the print as well, north of
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  Speaker 10: 20 times. So I think that's also partially reflected in
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  Speaker 10: the pullback today in terms of some of the expectations.
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  Speaker 10: But it's been this kind of push and pull debate around,
• 16:32
  Speaker 10: is this still a truly cyclical company? Or is it
• 16:36
  Speaker 10: more of a secular play on the data center build out?
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  Speaker 10: I think there's there's aspects to both. And there probably
• 16:43
  Speaker 10: does deserve to be, you know, more of a premium
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  Speaker 10: multiple embedded in the stock relative to what we have
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  Speaker 10: seen from traditional machinery cycles.
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  Speaker 4: What is the company saying about kind of how they
• 16:53
  Speaker 4: view these the data center build out is because are
• 16:57
  Speaker 4: they seeing any delays in from their customers or any
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  Speaker 4: cancellations from their customers? What are they seeing on the ground?
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  Speaker 10: You know what? They've been very tight lipped and somewhat unsurprising.
• 17:09
  Speaker 10: You know, the pretty uneventful commentary from them on the
• 17:12
  Speaker 10: call that, you know, the data center inquiries and conversations
• 17:18
  Speaker 10: really haven't changed all that much relative to last quarter.
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  Speaker 10: I think the one encouraging thing to take away though
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  Speaker 10: from the print, the implied orders were up like 35%
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  Speaker 10: in the quarter, which is much better than we were expecting.
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  Speaker 10: So it does seem that the orders continue to come
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  Speaker 10: in on some of their large engines and turbines. They're
• 17:36
  Speaker 10: already taking orders out into 2029 and 2030. So there
• 17:40
  Speaker 10: is extended visibility here. There's going to be a lot
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  Speaker 10: of capacity coming on though in terms of power generation equipment,
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  Speaker 10: not only from Caterpillar, but a number of their peers.
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  Speaker 10: The concerns lie less about, I think, 2027 and more
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  Speaker 10: in 2028 and 2029 as we get toward the back
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  Speaker 10: half of the decade. And are we going to be overcapacitized?
• 17:59
  Speaker 2: When you look at Caterpillar and how it's become this
• 18:02
  Speaker 2: name tied to AI, is there any other industrial company,
• 18:06
  Speaker 2: machinery company that kind of follows the same path but
• 18:08
  Speaker 2: perhaps offers more value?
• 18:11
  Speaker 10: You know, it's an interesting question. I think probably the
• 18:14
  Speaker 10: closest comp in that aspect would be someone like a Cummins.
• 18:18
  Speaker 10: Right now, Caterpillar and Cummins both have very strong market
• 18:23
  Speaker 10: positions when it comes to backup power on the power
• 18:26
  Speaker 10: generation side for data centers. Obviously, Cummins has a much
• 18:31
  Speaker 10: greater exposure to the more cyclical heavy truck market here
• 18:34
  Speaker 10: in North America. And Caterpillar leans more heavily on construction
• 18:38
  Speaker 10: and mining. But, you know, they're both have been trading,
• 18:43
  Speaker 10: you know, well above their historical valuations, given the secular
• 18:48
  Speaker 10: growth opportunity that the data centers have presented themselves.
• 18:52
  Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
• 18:59
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 19:03
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• 19:14
  Speaker 4: One of the most read stories on the Bloomberg terminal here.
• 19:17
  Speaker 3: Has to do with dating. Gen Z. I'm not sure
• 19:20
  Speaker 3: who Gen Z is.
• 19:21
  Speaker 7: Anymore, but.
• 19:22
  Speaker 6: Young people?
• 19:22
  Speaker 2: I think you have some Gen Zs in your household.
• 19:24
  Speaker 3: Do I?
• 19:25
  Speaker 9: Yeah.
• 19:25
  Speaker 5: All right.
• 19:25
  Speaker 11: Very good.
• 19:26
  Speaker 4: Dating engagement improves as app use sentiment rise. Nicole D'Souza
• 19:31
  Speaker 4: joins us here at Bloomberg Intelligence. Internet and software equity analyst.
• 19:34
  Speaker 11: What's going on?
• 19:35
  Speaker 5: Doing it from my phone.
• 19:37
  Speaker 6: So it's interesting.
• 19:39
  Speaker 11: The dating survey that we did this year, the biggest
• 19:42
  Speaker 11: difference that we've seen is that Gen Z is actually
• 19:44
  Speaker 11: starting to date. Last year when we conducted the survey,
• 19:47
  Speaker 11: 44 Gen Z respondents said that they were single but
• 19:50
  Speaker 11: not dating. And that raised some concerns about the future
• 19:53
  Speaker 11: of addressable markets for dating app platforms. But this year,
• 19:57
  Speaker 11: only 34% said they were single and not dating, and 35%
• 20:00
  Speaker 11: said they were single and dating. So it looks like
• 20:04
  Speaker 11: these patterns are starting to change. Gen Z is getting
• 20:07
  Speaker 11: out of the house. They're going on dates. So definitely
• 20:11
  Speaker 11: a more optimistic survey this year.
• 20:13
  Speaker 6: Okay, so many follow-up questions.
• 20:16
  Speaker 2: Gen Z also likes to go to the mall now
• 20:18
  Speaker 2: and they're indulging in some, I guess, old school behavior.
• 20:23
  Speaker 2: They kind of like analog things right now. So why
• 20:26
  Speaker 2: have they started to become more open to dating apps
• 20:29
  Speaker 2: whereas before they were kind of avoiding it?
• 20:31
  Speaker 11: So I think dating apps have released a lot of
• 20:33
  Speaker 11: features that really appeal to Gen Z. So one of
• 20:35
  Speaker 11: them is in real life events. So they set up
• 20:38
  Speaker 11: events in real life where Gen Z can come, mingle,
• 20:42
  Speaker 11: meet people, and kind of look for a future partner.
• 20:46
  Speaker 11: And so these events were specifically created because Gen Z
• 20:49
  Speaker 11: was not swiping. They were not interested in staying on
• 20:53
  Speaker 11: platforms and talking to people online. They didn't like AI
• 20:56
  Speaker 11: in their dating apps. They wanted to meet in real life.
• 20:58
  Speaker 5: I didn't know where to go.
• 21:02
  Speaker 6: I'm sorry, we're showing our age in every way.
• 21:03
  Speaker 3: I'm just going to ask you, you and your cohorts,
• 21:06
  Speaker 3: what are you doing these days?
• 21:08
  Speaker 11: So right now, I would say the most popular dating
• 21:12
  Speaker 11: app in terms of growing users is Hinge.
• 21:14
  Speaker 9: Hinge.
• 21:15
  Speaker 11: So Hinge has been growing users. It is seen as
• 21:19
  Speaker 11: more of a serious relationship app. So for people who
• 21:23
  Speaker 11: are looking maybe to settle down or engage in a
• 21:25
  Speaker 11: long-term relationship.
• 21:26
  Speaker 6: What's the gimmick for Hinge versus the others?
• 21:29
  Speaker 11: Hinge, I mean, I think it used to be that
• 21:31
  Speaker 11: it was your Facebook friends, so you had kind of
• 21:33
  Speaker 11: friends of friends in common. Now I think it's more
• 21:36
  Speaker 11: just for people who are looking for relationships.
• 21:38
  Speaker 3: Okay.
• 21:39
  Speaker 11: Versus Tinder, which has always kind of historically been viewed
• 21:42
  Speaker 11: as like a short-term connections type of app. But they're
• 21:45
  Speaker 11: starting to kind of change that brand.
• 21:47
  Speaker 5: So....
• 21:49
  Speaker 4: Is this an advertising-based monetary model? Is that the economic model.
• 21:53
  Speaker 3: For these dating apps?
• 21:54
  Speaker 11: It's subscription.
• 21:54
  Speaker 3: It's subscription?
• 21:55
  Speaker 7: Yes.
• 21:56
  Speaker 8: Okay.
• 21:56
  Speaker 3: So are these things, are they good businesses?
• 21:59
  Speaker 11: So it's interesting. I mean, if you look at Hinge,
• 22:02
  Speaker 11: I mean, because I think people are willing to pay
• 22:04
  Speaker 11: for an app that will introduce you to your lifelong partner,
• 22:09
  Speaker 11: Hinge can charge a premium and it still grows users.
• 22:12
  Speaker 11: Whereas Tinder has struggled because people are less willing to
• 22:15
  Speaker 11: pay for an app that's a shorter-term connection.
• 22:17
  Speaker 2: But if you meet your long-term partner, then you don't
• 22:20
  Speaker 2: need Hinge anymore, and then you'll cancel, and then Hinge
• 22:23
  Speaker 2: loses a customer.
• 22:24
  Speaker 11: It's interesting because, yeah, this is a conversation we have
• 22:26
  Speaker 11: a lot with investors, which is what is the motivation
• 22:29
  Speaker 11: for dating apps to function well as in meeting your
• 22:32
  Speaker 11: partner and then also keeping you on the app.
• 22:34
  Speaker 6: Correct.
• 22:35
  Speaker 11: I think how we think about it is that the
• 22:37
  Speaker 11: addressable market is always growing, right? People enter relationships, but
• 22:41
  Speaker 11: they do break up. And then younger users are getting
• 22:44
  Speaker 11: to a point where they're interested in dating and meeting
• 22:47
  Speaker 11: a partner. So the addressable market will continue to grow,
• 22:49
  Speaker 11: even if people meet on the app and eventually delete it.
• 22:53
  Speaker 3: How do I invest in these companies if I ever
• 22:55
  Speaker 3: wanted to do so?
• 22:56
  Speaker 11: So Match is public. Bumble, which was public, was actually
• 23:00
  Speaker 11: just taken private. So it's no longer a publicly traded company.
• 23:04
  Speaker 11: And Grindr is another one that is public.
• 23:07
  Speaker 2: And I remember reading that Grindr was going to roll
• 23:10
  Speaker 2: out some more premium offerings because the premium customer is
• 23:14
  Speaker 2: still spending money. Is that an approach that we expect
• 23:17
  Speaker 2: to see more of these dating apps take?
• 23:20
  Speaker 11: So it's interesting. Grindr's new subscription is called Grindr Edge.
• 23:24
  Speaker 11: it's very AI focused. So a lot of the products
• 23:27
  Speaker 11: are utilizing AI to connect you with people that you
• 23:31
  Speaker 11: would have real interest in talking with, to kind of,
• 23:34
  Speaker 11: you know, tell you about the person that you're talking with,
• 23:37
  Speaker 11: give you kind of specific talking points, maybe resurface old
• 23:40
  Speaker 11: conversations for you to take another look at. And so
• 23:43
  Speaker 11: because of these AI premium features, there are people who
• 23:46
  Speaker 11: are willing to pay. It could be something, but that
• 23:51
  Speaker 11: other dating app platform's eventually maybe take a look at.
• 23:55
  Speaker 11: But we haven't really seen it yet. It definitely seems
• 23:57
  Speaker 11: to be kind of a grinder.
• 23:58
  Speaker 9: I see.
• 23:59
  Speaker 11: Premium at this point.
• 24:00
  Speaker 4: Is overall dating app usage still growing or is it pretty,
• 24:05
  Speaker 4: you know, full out?
• 24:07
  Speaker 9: I don't know.
• 24:08
  Speaker 11: I would say users, when you look at kind of
• 24:11
  Speaker 11: the total market, it is growing. I think it depends
• 24:14
  Speaker 11: on which specific dating app. So Tinder, which is the
• 24:17
  Speaker 11: largest dating app by users, has been losing subscribers for
• 24:21
  Speaker 11: for several years now, whereas Hinge, which is smaller, has
• 24:24
  Speaker 11: been growing because it kind of has a different reputation
• 24:28
  Speaker 11: as a more serious dating app. If you look at Bumble,
• 24:31
  Speaker 11: they kind of moved away from their core brand being
• 24:36
  Speaker 11: a woman-focused app, so they started allowing men to message first.
• 24:39
  Speaker 11: That didn't really resonate with users, so they started to
• 24:43
  Speaker 11: lose a lot of their subscribers. So it depends on.
• 24:48
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