BEIJING (TheStreet) --There are millions of reasons to believe in China's Internet industry as an investment target, and a lot of them are customers of the country's largest online matchmaking service Jiayuan (DATE) .
Urbanites looking for love across China are using Apple (AAPL - Get Report) iPhones or Samsung (SSNLF) Galaxys with China Mobile (CHL) accounts to access Jiayuan at home, work and while commuting in subways. These include young singles whose parents buy the service for them, and an increasing number of divorced women with the financial freedom to man-hunt while living alone.
That makes Jiayuan a good bet for any portfolio with Chinese Internet stocks. In fact, the company may be a better bet for future growth than online powerhouses with much bigger names that trade in New York such as Baidu (BIDU - Get Report) , Tencent (TCTZF) , JD.com (JD - Get Report) and soon-to-list Alibaba.
Unlike companies with multiple business pursuits such as Tencent and Alibaba, Jiayuan has a narrow focus and choppy financials. It reported a 9% decline in second-quarter earnings to $1.9 million from the same period 2013, but a 21% increase in revenues to $23 million.
Nevertheless, Jiayuan stands out from other Chinese Internet companies by directly profiting from huge demographic and social changes under way in the world's most populous country.
Jiayuan has a giant base of committed clients -- more than 5.7 million active monthly users and 110 million registered users - that's three times larger than either of its competitors, Zhenai and Baihe, Jiayuan Chief Financial Officer Shang Koo told TheStreet. Its partner-hunting clients use up 60% of all the time spent on all dating sites in China, he said.
Since launching a mobile Internet platform in 2011, Koo said, client access through handheld devices "has been growing quite a bit." Mobile users accounted for 65% of all log-ins in the second quarter, and some 31 million handhelds are now actively using its app.
Dating app use is growing along with the number of mobile Internet service users in China, which topped 500 million in May.
This ongoing shift to mobile Internet underscores a major social change working in Jiayuan's favor: urbanization. The company's mobile customers include blue-collar workers who migrated from towns to big cities in recent years but, unlike white-collar workers, don't work at desks with Internet access and would rather get online using a mobile device than a home PC.
Jiayuan also snags clients from among recently urbanized young women who will not be marrying boys from down the street or heeding recommendations from their aunts, as they may have in the past. These women are living on their own after migrating to big cities for work and they find online dating a practical way to seek a husband.
The new demographics of marriage in China helps online dating companies, too. Young Chinese are dating longer and marrying later, Koo said, while couples are divorcing after working up career ladders and putting money in the bank.
"Women have more of the ability to divorce, with more financial freedom," he said. "We see that as an advantage" for Jiayuan. "That will help us grow the high-end market."
The company is also targeting college-age Chinese as a future client class, Koo said, and premium-service users who don't mind paying pay extra for offline, one-on-one help. The latter client can sign up for a headhunter-like service and meet professional matchmakers at any of the company's offices in 80 cities.
At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates JIAYUAN.COM INTL LTD as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate JIAYUAN.COM INTL LTD (DATE) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity." You can view the full analysis from the report here: DATE Ratings Report