Pinterest, the popular digital pinboard platform, experienced a decline in its shares during extended trading on Thursday. This drop came after the company released a weaker-than-expected forecast and reported disappointing revenue. However, there was a slight rebound in the stock following the announcement of a new partnership with Google.
The revenue reported by Pinterest for the quarter was $981 million, falling short of the projected $991 million. Additionally, the company’s earnings per share adjusted to 53 cents, which exceeded the expected 51 cents. Despite these numbers, revenue only increased by 12% compared to the previous year, reaching $877.2 million. Net income also rose from $17.49 million to $201 million year-over-year.
The platform’s monthly active users (MAUs) grew to 498 million in the fourth quarter, surpassing analyst estimates. However, Pinterest’s global average revenue per user (ARPU) came in at $2, lower than the anticipated $2.05. The company acknowledged the need to improve its monetization efforts, particularly internationally. Although 80% of its users are located outside the U.S., only 20% of sales are derived from these regions. Pinterest aims to leverage partnerships like the one with Google to address this issue and increase its presence in untapped markets.
During a call with analysts, Pinterest CEO Bill Ready unveiled the integration of a third-party app with Google, drawing parallels to the company’s existing Amazon partnership focused on third-party ads. Ready, formerly president of Google’s commerce and payments division, expressed enthusiasm about the potential of this collaboration to bolster international monetization. The partnership, which went live a few weeks ago, is expected to contribute to the company’s revenue growth in the first quarter and beyond.
The broader digital advertising landscape is also displaying signs of recovery. Industry giants like Meta, Alphabet (Google’s parent company), and Amazon have experienced double-digit growth in their respective advertising units. Following a cautious phase prompted by concerns surrounding the Ukraine-Russian war and high interest rates, businesses are now investing more in online promotions. However, not all online ad companies are reaping the benefits. Snap, for instance, saw a significant decline in its shares after reporting lower-than-expected sales growth and issuing weak guidance.
Pinterest’s Competitive Advantage and Future Outlook
Despite these challenges, Ready expressed confidence in Pinterest’s performance and its position within the ad industry. The company prides itself on driving superior performance for advertisers, which has become increasingly important. While prior to the earnings report, the Middle East crisis had disrupted some advertisers’ spending, Pinterest’s finance chief assured analysts that the impact was temporary. Moreover, the company saw a reduction of approximately 10% in costs from the previous year due to decreased sales and marketing expenses. This strategic move aligns with the industry’s trend of downsizing to optimize operations.
Looking ahead, Pinterest provided a first-quarter revenue forecast of $690 million to $705 million, reflecting a year-over-year growth rate of 15% to 17%. The midpoint of this range, $697.5 million, sits slightly below the average analyst estimate of $703 million. The company aims to further strengthen its partnerships, improve user monetization, and tap into new markets, particularly internationally.
Pinterest faces the challenge of overcoming disappointing revenue and strengthening its position in the highly competitive digital ad market. The company’s partnership with Google and its dedication to enhancing user monetization are crucial steps towards achieving growth. Despite the stock’s initial downturn, the rebound following the announcement of the partnership indicates potential investor optimism. With careful strategic planning and leveraging its unique platform features, Pinterest has the opportunity to bounce back and solidify its position as a dominant player in the digital advertising space.
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