Pinterest Report BlockBuster Q3 Earnings As Brand Advertising Rebounds

Key Points:

• The image-sharing service platform Pinterest witnessed a rebound in brand advertising after a difficult period owing to the pandemic.
  

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• The company’s blowout Q3 results indicate a revival in advertising demand which is a positive sign for the industry.
  

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• The company said that the spending accelerated from advertisers that boycotted social media like Facebook and Twitter.
  

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• Pinterest posted strong revenue and user growth. The company’s Q3 revenue grew 58% year over year to $443 million.
  

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• On Thursday, shares of Pinterest further soared more than 28 percent setting new records.

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With the pandemic, consumer behavior saw a shift towards online. Pinterest reported better-than-expected Q3 earnings that trounced revenue and income estimates and the stock price surged more than 28% on Thursday.

Why It Matters: 

As eCommerce rises in this pandemic, Pinterest surpasses Wall Street expectations and continues to add users and boost revenues. Helping boost the earnings is a surge in user base and resurgence in brand advertising.

In the investor letter, the company attributed the surge in growth to Covid-19.

“MAU growth was strong in both the US and international markets driven primarily by COVID lockdowns in many regions.”

By The Numbers:

Revenue: $443 million to $383.5 million expected.

Monthly Active Users (MAUs): 442 million to 436.38 million expected

ARPU: $1.03 to. $0.90 expected

Pinterest Takeaways:

• Pinterest saw an unexpected explosion in users- up 26 million from the previous quarter. This has been especially strong in users under 25 years who are looking for DIY ideas for new home -improvement projects during the lockdown. Pinterest explained,

People who began using Pinterest during COVID-19 continued to have high levels of engagement in Q3. In fact, users in the COVID-19 cohort had higher retention and higher engagement (defined as impressions, closeups and saves) than a cohort of new users during the same period last year.”

• International growth drove the majority of global MAU expansion and the social media platform has been an increasingly relevant shopping site.
• The company said that the release of iOs 14 also fueled user growth as approximately 4 million users used Pinterest for background filters and customization ideas.
• Pinterest saw a resurgence in ad demand from large brand advertisers of consumer goods along with mid and small-sized advertisers seeking conversions.

“We’ve seen a major impact just around brands, CPG [consumer packaged goods] advertisers and brand advertisers returning to the platform after a pause in Q2 and the return of retail, especially the larger omni-channel retailers that had paused in Q2.”

• The advertiser who joined during the Facebook boycott continues to use the platform as well as accelerate their spending. Pinterest executives also credited the boycott for their gains. Snap earlier echoed similar views in its Q3 earnings result. However, Pinterest also warned that it is unclear on the sustainability of the trend.
• Deployment of automated ads is working for Pinterest supporting small and mid-size businesses. SMB’s are more active as they look for new advertising avenues for international expansion and online shopping. The Pinterest product offering for automated bidding and measurement has significantly improved.
• Pinterest has also upgraded the features- Stories, Video ad units, shoppable pins that drive engagement, and high conversions.
• The company said it has benefitted from shopping on the platform. In the last six months, the number of users engaging with shopping surfaces has grown 85%. However, shopping on Pinterest is still in the early days and growth in its shopping tools is expected.

Pinterest Q4 Outlook:

The company forecasts its Q4 revenue will grow by 60% Y-o-Y but pointed out two areas of uncertainty. First, the pandemic continues to create a level of uncertainty in user behavior especially as the celebration of the holiday season is approaching. It is difficult to predict how will the shopping behavior change or how people will celebrate in the lockdown.

Second, the challenge is to understand brand spending and to what extent the appeal of Pinterest as brand-safe persists with advertisers even past election. Even though the social media platform benefitted from the July phenomenon but cannot bank on Facebook travail over the long term. CEO Scott Morgenfeld said,

“We continued to benefit from marketers who are prioritizing positivity and brand safety.”

“Advertisers tell us that Pinterest is brand-safe relative to other consumer internet platforms and we benefited from this in Q3, though it’s still not clear how sustainable this trend will be, particularly after the U.S. election is over.”

He further added that the top priority of the company is to focus on making the most inspiring and actionable content, engage users, built shopping inventory, and transform advertising.