Grindr Inc. (GRND) Earnings Call Transcript & Summary

Both. And Grindr definitely historically has not been good at product marketing. Frankly, that's not been a muscle that we are very used to using. And for this launch, we want to be much better at it, and that is something we've been working on for the last few months. Like what will be the right marketing campaign for this product? I'm not going to announce what it's going to be here, but when we go live with it, I think it's going to be pretty special. It certainly will be a lot more product marketing than anything we've done in the past. That said, our AI now, we call it gAI, is actually really, really good. And we are pretty awesome at knowing which of our users are more likely to become subscribers to this new tier. And so obviously, we're going to do a lot more marketing targeting at those users than overall. But part of our view on Edge is that we want to create FOMO around it. We want people to want to be in it. And so you do want to market both to people who are more likely to convert to it as well as to everybody else so that it becomes a self-fulfilling prophecy that more people want to become part of that tier.

Okay. You did talk earlier about health and the importance of health to your platform but also to the community that you serve. Talk a little bit about the opportunity set that sits in front of you to be a provider of solutions, advertising, product, how health might evolve broadly for the platform?

So Grindr has always played a really big role in our users' health. I think not surprising to anyone that health matters a lot to gay men for a couple of reasons. Number one, we're just a lot more wellness conscious. We do a national survey of gay men every year, and one of the most striking data points that is usually when we ask how often do you work out, and over 50% of gay men will tell you that they work out 5-plus times a day, which is like 10x national average. And so wellness does matter to our users a ton. And then secondly, many people still have personal experience with how terrified they are of catching a sexually transmitted disease. And so from that perspective, health matters a lot as well. Grindr has always played a really big role in the latter. PrEP, which is a medication that you take to avoid getting HIV, had been around for years and hadn't been seeing the uptick that it needed to see until Grindr put it on the profile in about 2014, 2015 on whether are you on PrEP or not. And that one small change pushed PrEP from being kind of out there on the periphery to becoming central to how many gay men think about their sexual health. And now like being on PrEP is like a very common thing for so many people. And so people rely on us for a lot of information about health as a result. We, from all those data points, felt like health and wellness is a huge opportunity to expand Grindr and what we do. We entered health through a performance medication focus with Woodwork, which offers ED medications, GLP-1s, a couple of peptides. And we chose that as the first place to go to because it's cash pay. And so the regulatory component to being cash pay is a lot simpler. It was easier to launch with a third-party partner, open loop that does all the fulfillment and the prescriptions and the logistics of that. But for us, it was a learning moment of like, hey, we're going to do this, see what we need to do and how can we do better with health. And what do our users expect? Do they even trust us with things like this? But we really think of health as a 3-legged stool. The performance medications is one leg of that stool. STD transmission management and prevention is the second leg of that stool, and then clinical care and longevity is the third. And over time, we're going to build products and services across all 3. And we really believe that health care can be a huge opportunity for us. I'm not promising this, but I can envision a world where health care as a product set 5 years down the road is as big as core Grindr is today.

Got it. Okay. And then building on that answer with respect to health, you've talked about creating a wider sense of community and offerings around the concept of the gayborhood. And you've pointed out some examples around wallet share and purchasing habits. Talk a little bit about what you could stand up there directly or through partnerships that could create a more transactional or commercial nature to the platform over time as well.

When we became public and started talking to more investors, more analysts and frankly, talking to media as well. One of the things we realized is that most people still thought of Grindr in a very narrow sense of like, hey, this is a product for a casual connection, aka hookup. But in practice, a lot more was happening on Grindr than that, both in social connections but also in a lot of other ways. And so we wanted people to understand that we do so much more. Now 50% of currently existing gay male relationships in America started on Grindr. So yes, there are a lot of casual connections, but also half of the long-term relationships started here. And so how do -- we wanted a way to explain this to people and kind of creating this moniker of a global gayborhood was a way to do that. Those of us who live in large cities have the opportunity to walk into a gayborhood and we have a community around us right away. But for most people, that's not something they can do, and Grindr is that community. In a gayborhood, you have a lot of fun things to do like going to bars and going to restaurants. You also have a lot of businesses that cater to your community that understand you a lot better and you can buy from them. And so we felt that there's an opportunity to start expanding what Grindr offers and capturing more of the wallet of our users through those kind of services. We've tested one, which is health care, and the feedback is that clearly works, and we should double and triple down on that. We're doing some things in travel, whether it's in-app features like maps where we tell you where to go to when you're traveling and over time, adding things like what are the activities happening in those locations, what are the right hotels for you to stay at, what are the right bars to go to. So travel is another big opportunity. Two, perhaps content. We build a content hub on Grindr. We call it Grindr Presents in which we bring together Grindr-created content that people watch. And we have hundreds of thousands of people a month going to the content hub to consume that content. Perhaps over time, we start adding non-Grindr-created content to that content hub. So there's many different ways in which we want people to experience what -- Grindr and what they do on it. Today, users do a lot of things by hacking the product. And over time, we want to be able to build features for those hacks, so they don't have to be hacking the product.

Okay. You referenced a little bit earlier some of your initiatives around how AI is changing the platform. Can you talk a little bit about both what it's doing for your cost structure but also how you think it might change the consumer-facing aspects of the platform over the longer term?

Absolutely. One of the reasons I was excited to take this role was that Grindr has so much data. And this richness of data, 50 chats a day, 1 hour on the app a day, like that's an incredible amount of data that our users create, was creating a massive opportunity for AI. If you look at AI companies today, start-ups that is, most of them are an enterprise. There's very little consumer-facing GenAI that is being created. And the reason is that a start-up needs data to make AI work, and it's very hard to get the consumer data. But we don't have that problem. We have the data, and we can behave like a start-up in creating new experiences. To start with, just step back a little bit in terms of how we work. Our AI adoption has been incredible. Every engineer is now an engine manager of AI synthetics that are writing code. Our productivity has increased dramatically. Frankly, we need the tools to catch up in other parts of a business. The tools for products, the tools for design, the tools for finance using AI are nowhere near as good as the one for engineering. And that is actually now keeping the rest of our org behind. So we've been very focused in becoming AI native in how we work. My workflow every day has changed as well. I think I'm a way better CEO, frankly, thanks to AI now. I'm way clearer in direction that I give to my team. I am able to share what's happening in my mind and what I'm thinking about, way better with the team because I am constantly in conversation with ChatGPT primarily and Grok secondarily around what I'm thinking about and asking them to like do things like, hey, today, you're going to be like Elon Musk and you're going to challenge me on these things and critique me as if you are him. And it's really, really strong. Like it's a completely different way of working now. And the amount of stuff that I can get done is way higher. And I think that's true across everybody at Grindr. So I'm really excited about the world that's coming because this is all like super early days. And this is like 1996 for the Internet. And then in terms of the products we're building, we have created some really cool previously unimaginable experiences, all of which are now in Edge for our users. But the way we think of them is a little bit like a Tesla Roadster. Edge is like the Grindr version of the Roadster. It's designed for a few people who are going to go and test drive it first. But then over time, we will take these product features and democratize them by making them available to a broader set of users over time, aka create our version of a Model X and then a Model Y because we want every Grindr user to have a really awesome AI-native experience. My guess is that Grindr that will exist in 2 years as a product will be fundamentally different than the Grindr that exists today. It will be way more AI native and AI will be embedded into every single use case of what's happening in the product.

Okay. Understood. You've been on quite a journey with respect to your cost structure and investments because when you took the job and some of the earlier conversations we had were you found you could be more efficient as a company coming out of COVID than maybe you had thought when you'd first taken the job. And now there's a lot of things you want to invest in to make sure you don't miss the market opportunity. Talk a little bit about the investment and capital allocation journey you've been on as a CEO in finding the right balance between driving efficiencies but also not missing growth opportunities.

When I took this job, if I had to go back to 2022 and say like how big of an engineering team would you need today in 2026 to be doing all the things that you are doing, I would have said something like 300 to 350 people. And I remember meeting with the former CEO of PayPal, who is now the CEO of Verizon roughly in that time period. I think it was like early '23 and telling him this, and he's like, "No, George, you won't." And I'm like, "What do mean I won't? Like 300 people is not actually that many engineers." And he's like, "I'm telling you, you won't." And that was the first time I started to really think through like what will AI do to engineering, and he really challenged me on that point. And frankly, he was right and I was right. We are doing what it would have taken 300 to 350 people to do from technology investment perspective in 2022. But we're doing it with about 100 people, about 95 to be exact. And we are not even done with all the efficiency. So that's one bucket of what I learned. Number two, we learned that productivity at Grindr in 2022 overall across the entire business was nowhere near at the level that it needed to. And I think Grindr had hired a ton of people during COVID. All of them had been remote. It was really suffering from that remote environment because there was no unifying culture that was bringing people together and pushing us to go after audacious goals. And so the amount of hours people were working was nowhere near where it need to be. And so we were -- we decided to come back to the office 2 days a week. That forced a lot of people to make a choice and many of them chose to leave. And the result was, today, Grindr has about 185, 186 people. That's less people than where we peaked at in 2023 at 222. Yet in terms of revenue, we are nearly 3x more. And so per employee, revenue has gone up dramatically. What happened this year is we thought we'd end the year at like 220, 230. We're not anywhere near that. So clearly, we're not going to end the year at 220, 230. And the reason is that we are hiring at a much slower pace. Our bar has gone up, but because of AI, we don't need as many people. And so we are much more thoughtful about who we hire. We've not fired people because of AI, but we certainly have slowed down our hiring because of AI. I don't think we're not investing in anything we need to be doing. Our investments are fairly strong. I don't feel constrained in going after new goals and audacious things. But I think that being lean is a virtue. And quite frankly, I probably would have been more cautious about this in 2023 had Elon not taken over Twitter and turned a 6,000 organization to a 50-person organization. Nothing had happened. And I'm like if you can do it, I can, too. And the result has been pretty positive, I think.

Yes. Understood. We only have a few minutes left, but I always like to leave on some big picture dynamics of what you're most excited about over the next 12 to 18 months or frame it as what will we be talking about in 12 months' time. Lay out the path forward for us over the next 12-plus months and what you're most excited about.

Number one, I'm super excited about our premiumization efforts and launching Edge and what that will mean for the product as well as how AI will start being used by every other Grindr user. I think we'll have a lot more proof points of that in product, and I'm psyched about that. Number two, I'm really excited about health care and what opportunities lie there. And number three, I don't know what the answer is going to be, but when I sit with our Head of Engineering and talk to him about what he is conceiving to do, it feels like you're talking about science fiction. We had an engineer -- one of our lead engineers actually posted a note on Slack. I'm going to say 2 things. He posted a note on Slack a few weeks ago saying, I was walking my dog, and I got a notice in my e-mail of a bug that I had of data file -- it was a Saturday -- and so I went to Devin, which is one of the coding tools built by Cognition, and told Devin, can you look at this bug, replicate it, write code to fix it if it's actually real, and then let me know that you've done that. And he's like, before I got home, Devin had done all those things and sent me the full code that it had written to fix the bugs, saying it was ready to be checked in. And then I had to look at the code, review it and press one button and check it into production. And when you hear things like that, it's literally like watching Star Trek in, I don't know, 2001 or something and thinking of like, oh, yes, like computer, blah, blah, blah, and then the computer would do that. But that's actually real life now. And now we can't do that for totally new features yet. Like you do that for fixing a bug. But probably in a year, we'll be talking about that about new features. And not only engineers will be doing that, but product managers who had never written a line of code before will be engaging with a software tool that will be helping them be engineers. So like that is incredibly exciting to me, and I think the opportunity there is really massive. And then the second thing I'm really excited about is self-improving product development, where, today, we design tests, like a product manager and data scientist will sit together, design a test and say, okay, I'm going to launch an A/B test, product with these features, product with these features, and I'm going to see which one does better. But a world that we will be seeing soon will be where you won't have to design a test. The product itself will be agentic enough where it will conceive what it needs to be testing and then will self-improve and come back to you and tell you, hey, I experimented with this, with this and with this. And I think this is the answer, and this is what we should be doing. That, to me, is even more magical than the first thing, but it's coming. And I really can't wait for that because if somebody who's like a founder who has like 50 things I want to build and I don't -- can't do all of them, if the software itself can help me be building all those things, that's pretty amazing.

Okay. Well, there's a lot to talk about in 12 months' time, plus or minus, as we look forward. George, look, I always appreciate the opportunity to have a conversation. Please join me in thanking Grindr for being part of the conference this year.