Pinterest’s User Base Continued to Erode in Q2 2022

Pinterest reported revenue of $666 million for the second quarter, up 9% versus the second quarter of 2021 and 16% from the first quarter of this year. The company said in its letter to shareholders that revenue from shopping ads grew at double the rate of overall revenue year-over-year, adding that it saw strength from large online and specialty retailers and its international business, offset by lower-than-expected demand from big-box retailers and midmarket advertisers in the U.S., which throttled back ad spending due to concerns about weakening consumer demand. Pinterest added that consumer-packaged-goods advertisers also grappled with supply chain issues and inflationary pressures. The platform continued to bleed monthly active users, finishing the period with 433 million, unchanged from the previous quarter and down 5% year-over-year. MAUs slid year-over-year in all regions: They fell 8% in Canada and the U.S., to 92 million from 100 million; 4% in Europe, to 117 million from 123 million; and 3% in the rest of the world, to 223 million from 231 million. Pinterest said in its letter to shareholders, “This was due to a combination of factors, some of which are easier to quantify than others, such as: lower traffic from search (largely driven by Google’s algorithm update in November 2021) that has resulted in reduced new user traffic and resurrections; and the lingering impact from the pandemic unwind, particularly outside the U.S., which impacted our engagement as many countries started to open up in the year ago quarter. Other factors, such as the impact of competition for share of time spent from video-centric platforms, particularly in our more mature markets, also remained a headwind. We note that global year-over-year declines were most pronounced for our web users.” The company posted a GAAP (generally accepted accounting principles) net loss of $43 million in the second quarter, and adjusted EBITDA (earnings before interest, taxes, debt and amortization) of $92 million, compared with GAAP net income of $69 million and adjusted EBITDA of $178.2 million in the same period last year. Recently named CEO Bill Ready said in a statement, “Pinterest achieved 9% revenue growth year-over-year in Q2, or 10% revenue growth on a constant currency basis, despite the uncertainty facing our advertisers. We accelerated our investment in shopping and ecommerce this quarter, and I am thrilled by the dedication of our leaders and employees to continue to build a positive place on the Internet. Pinterest is uniquely positioned to tackle unsolved problems in our industry, capitalize on long-term digital commerce trends and help people go from inspiration to realization.” Insider Intelligence principal analyst Andrew Lipsman told Adweek, “There weren't a lot of bright spots in Pinterest's first earnings cycle with new CEO Bill Ready at the helm. Worrying year-over-year user declines persist despite some relative improvement versus last quarter, while its once-strong monetization appears to be stalling amid ecommerce headwinds and iOS challenges.” Pinterest said it expects mid-single-digit year-over-year revenue growth in the third quarter, taking into account slightly greater foreign exchange headwinds than in the second quarter. Lipsman said, “"Under Ready's leadership—and with a vote of confidence from Elliott Management's recent investment—Pinterest will need to prove that it can stop the bleeding on user growth, roll out Pinterest checkout to improve monetization with better first-party data and accelerate growth in promising international markets in order to realize the full potential of this unique advertising platform." Ready wrote in the letter to shareholders, “Given our strong foundation and the significant opportunities still ahead, I am confident that Pinterest will usher in a new chapter of growth and success. Having spent the majority of my career building and leading commerce and financial technology businesses from startups to large organizations, it’s clear to me that Pinterest is a very unique platform, having both inspiration and strong intent in the same experience. As we work to make it easier for users to act upon that inspiration and intent, we plan to make Pinterest an even more attractive forum for advertisers and content creators to engage with hundreds of millions of users while helping people accomplish their daily goals of making, doing and buying.” He concluded, “In my first few weeks, I’ve been listening closely to stakeholders—including investors, employees, users, advertisers and creators. From those conversations, it is clear that there is shared conviction and optimism for the Pinterest platform and community. It is also clear that the market is evolving rapidly, and we must do the same.”