Pinterest’s (PINS) Unique Platform Traits Help Elevate It Above Its Beleaguered Social Media Peers
1:46 pm Friday, October 21st, 2022
Pinterest (PINS) defied the odds and surprised many by reporting a top and bottom line beat in 3Q22, emerging as a clear winner in the beaten down social media space. Not only did the company surpass quarterly expectations, but it also issued solid guidance for Q4, forecasting mid-single digit revenue growth, slightly beating analysts’ expectations. Following the dismal reports from Snap (SNAP) and Meta Platforms (META), it was expected that the same macroeconomic and competitive troubles would hit PINS’ results. To be sure, the company was impacted by the steep pullback in advertising spending, particularly in the mid-market and SMB areas, but a few main attributes allowed it to significantly outperform its counterparts.
During the earnings conference call, CEO Bill Ready credited the investments PINS has recently made in enhancing the user experience for the solid quarterly performance. For instance, the company has used machine learning to improve personalization, leading to customized recommendations for users. Importantly, unlike SNAP or META, users typically visit PINS for a specific purpose or to buy something. As an example, a user may visit PINS to discover fall home decoration ideas, which later turns into a purchase for a decoration item. This action-oriented behavior is enticing to an advertiser.
PINS has also added automation and measurement tools to its advertising platform, making its ads more permanent. Mr. Ready noted that approximately 90% of PINS’ active advertisers are now using automated bidding.
Average Revenue per User (ARPU) was higher by 11% to $1.56 and in the U.S. and Canada, the increase was even more impressive at 15%. This was driven by better-than-expected strength from large U.S. retail advertisers.
The main takeaway is that while PINS isn’t immune to macroeconomic volatility and the accompanying downturn in advertising spending, the unique attributes of its platform make it much better suited to mitigate the headwinds than its peers.
