Like bizzaro Facebooks, Tagged and Hi5 launched in 2004 to help you meet new people instead of connecting you with friends you already know. Through social games and paid dating features, they earned a surprising amount of revenue despite being relatively unknown. Tagged bought Hi5 in 2011 before branching out into standalone social app development and renamed the parent company If(we).
But after Tagged’s newer apps fell flat, it’s now decided to sell for $60 million in cash to MeetMe, a fellow social discovery network formerly known as myYearbook that went public in 2014. Tagged and Hi5 will remain their own distinct brands.
Tagged had originally planned to go public itself before the shift to mobile led to a precipitous drop-off of its desktop properties. If(we) managed to pull in $44 million in revenue in 2016, with mobile revenue up 56 percent in a year as it began to follow its users to smartphones. If(we) ended the year with 5.4 million monthly users. It says it’s still adding 18,000 users per day. The #startup had raised $28.7 million, including a $15 million round in 2012 from Lighthouse Capital Partners and Comerica Bank.
By joining forces with MeetMe, the combined company will have 10.6 million total monthly users, and nearly 1.1 million daily users in the U.S. MeetMe expects If(we) to add $9 million in adjusted EBITDA to its earnings over the next 12 months. MeetMe will fund the buyout with cash on hand, revenue, earnings and a $30 million loan from JP Morgan.
The markets responded favorably, sending its share price up 19 percent in after-hours trading to hover around $6.
“We believe this combination provides a clear pathway to $150 million in annualized revenue with adjusted EBITDA of $50 million for our combined company,” said Geoff Cook, CEO of MeetMe.
Greg Tseng, Tagged’s founder who stepped back from daily operations, tells TechCrunch, “They did a great job with the Skout acquisition so that gave us confidence in combining.” MeetMe bought the location-focused social discovery network Skout in June. He says MeetMe also plans to invest in live video.
Given that Tagged, Hi5 and MeetMe all try to turn strangers into friends or more, bringing them together rather than competing could save them money on product development and marketing.
“All three companies were/are doing similar things so it makes a lot of sense to combine — and the market is reacting very well to it,” Tseng concludes.