Match Group Hopes for Savings From Looser App-Store Payment Rules

In-app fees to Apple and Alphabet Inc.’s Google are Match’s biggest expense, said Chief Financial Officer Gary Swidler.

Apple and Google charge a commission for payments made through apps that are offered through their stores. For Match, those fees represent about 30% of the revenue the company receives from such payments.

A federal judge in California last week ruled that Apple can’t block app developers from sending their users outside its app store to pay. The case was brought by videogame company Epic Games Inc., the maker of “Fortnite.”

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

“It’s kind of a domino effect around the world from my standpoint,” said Mr. Swidler, who in addition to CFO is Match’s chief operating officer. “We think other jurisdictions are going to follow. And so having a global business with multiple brands, we’ll have to kind of keep rolling this out.”

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

The online-dating company is working on an alternative-payment option that it expects to offer to Hyperconnect users in the coming months, Mr. Swidler said. Such an option could also be offered to Apple users as a result of the California ruling, he said. Match plans to offer a discount to users who pay the company directly, but pricing details are still being figured out, he said.

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

An Apple spokesperson said the company is reviewing the California court ruling. Regarding the new law in South Korea, Apple said it believes the measure could undermine users’ privacy protections, among other effects. “We believe user trust in App Store purchases will decrease as a result of this legislation,” the company said.

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

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

Mr. Fuller estimates that about two-thirds of Match’s app-store fees are paid to Apple and that Match will earn $2.2 billion in gross profit this year. Match, which was spun off last year from its former parent IAC/Interactive Corp. , said it doesn’t break out gross profit.

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

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

Write to Kristin Broughton at [email protected]