Q4 2023 Summary
Published Feb 4, 2025, 8:51 PM UTC- Accelerating user growth and engagement, especially among Gen Z, enhances Pinterest's monetization potential. William Ready stated that Gen Z users now make up more than 40% of the user base, and they're attracted to Pinterest as a positive alternative to other social media platforms. Additionally, mobile app MAU growth is accelerating faster than total MAU growth, indicating deeper engagement.
- Strong revenue growth expected in Q1 2024, driven by growth in retail and contributions from third-party partnerships. Julia Donnelly mentioned that the acceleration is due to ongoing growth from retail and emerging contributions from third-party demand, such as Amazon Ads and the new partnership with Google.
- Increased adoption of lower funnel advertising products is leading to higher advertiser spend and improved performance. William Ready highlighted that they doubled the clicks sent to advertisers year-over-year, and large advertisers are shifting more performance budgets to Pinterest due to sustained performance improvements from lower funnel products.
- While Pinterest is experiencing strong international user growth, monetizing these markets remains a challenge, and significant work is needed to enhance monetization per user in these regions.
- The food and beverage advertising category is facing continued headwinds, which could negatively impact revenue growth in the near term as these challenges persist into Q1.
- There is a lag between creating value for advertisers through new products and capturing that value in revenue, as advertisers take time to adjust their models and budgets. This delay may slow down Pinterest's expected revenue growth despite increased engagement and ad impressions.
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Profitability and Margin Outlook
Q: Any changes to 2024 profitability and margin expectations?
A: Pinterest plans to expand margins again in 2024, but at a more modest level than the 660 basis points delivered in 2023. They are focusing on driving margin expansion and operating leverage, aiming for a low 30%-ish EBITDA margin in the next 3 to 5 years. Investments will increase in R&D, particularly in AI, and in sales and marketing, including expanding frontline sellers in international markets. -
Advertising Trends and Q1 Outlook
Q: How is the advertising environment affecting Q1 and beyond?
A: The ad market is stable to improving, with retail being the fastest-growing segment. Performance marketing is critical, and Pinterest has doubled the clicks sent to advertisers year-over-year. While there was a slight decline in the food and beverage category in December, Q1 is off to a strong start, and they are confident in the acceleration resulting from their lower funnel investments. -
Q1 Drivers and Acceleration
Q: What are the key drivers of Q1 acceleration?
A: Multiple factors contribute to Q1 acceleration, including improvements in lower funnel performance, international expansion, and emerging contributions from third-party (3P) partnerships like Amazon and Google. The acceleration is not due to mix changes or calendar timing but is driven by strength in the retail category and large advertisers shifting performance budgets to Pinterest. -
International Monetization and Partnerships
Q: How will partnerships with Google and Amazon impact international ARPU?
A: Pinterest is significantly undermonetized internationally, with 80% of users outside the U.S. but only 20% of revenue. The Google partnership aims to accelerate ARPU in unmonetized markets by bringing relevant and actionable content to users. The Amazon partnership is also scaling well and will help fill gaps in their auction, enhancing user content and contributing to revenue growth internationally. -
User Growth and Engagement
Q: Can you elaborate on accelerating MAU growth and Gen Z engagement?
A: Gen Z now represents over 40% of Pinterest's user base. Growth is driven by attracting new users, especially Gen Z, and increasing engagement with existing users through better recommendations and actionability. Mobile app MAU growth is accelerating faster than total MAU growth, and total impressions are growing even faster, indicating deeper user engagement. -
Retail Advertisers and Performance Budgets
Q: How are retailers shifting performance budgets to Pinterest?
A: Pinterest has transformed into a performance-driven platform, with two-thirds of revenue coming from the lower funnel. Adoption of performance tools is increasing; at the start of last year, only 2% of revenue came from advertisers using at least three lower funnel tools, rising to 23% by year-end. Retailers adopting the API for conversions are seeing year-over-year growth in the 30% range, while non-adopters are declining mid-single digits. -
Value Capture vs. Value Creation
Q: How will you close the gap between impression growth and revenue?
A: There's a lag between value creation and value capture as advertisers need sustained performance reflected in their models. Pinterest is driving more users with intent to advertisers, and as advertisers adopt privacy-safe measurement tools like the API for conversions, budget allocation shifts toward Pinterest. Advertisers who adopted the API are growing at approximately 30%, while non-adopters decline mid-single digits. -
Video Ads and AI
Q: How does AI determine showing video vs. image ads?
A: Video accounts for over 30% of Pinterest's revenue and is a bright spot in monetization. Pinterest's AI, with models 100 times larger than a year ago, improves relevancy and determines whether to show video or image ads based on user preferences. Gen Z users are very video-centric, and Pinterest is winning with this demographic by balancing video and still imagery. -
China Advertiser Spending
Q: What's the exposure to China-based e-commerce advertisers?
A: China-based advertisers contributed positively in Q4, but they are not the only contributors to growth. Pinterest is seeing strong, broad-based growth in the retail category, including several major retailers outside of China. They believe they are not as exposed to China-based advertisers as some peers may be.