Social Media Gets Even Less Pinteresting

Underwhelming top-line results can’t come as too big a surprise following

Snapchat

SNAP 9.73%

parent Snap, Inc.’s underperformance and bearish guidance. Similar to Snap’s daily active users in North America, Pinterest said fourth quarter monthly active users in its most lucrative geographies of the U.S. and Canada remained flat on a sequential basis, even as its worldwide users grew.

Meta,

meanwhile, reported its largest decline in sales on record last quarter, though it managed to grow Facebook’s daily active users across every geography. 

Fundamentally, Pinterest’s fourth quarter may not have been “something to write home about,” as Chief Executive Officer

Bill Ready

put it in an interview on Monday, but its modest revenue gains at least suggest the company is taking some share from competitors. Pinterest noted particular resilience in brand ads, a historical area of strength for Twitter, suggesting that may be one place where Twitter’s advertisers have gone. 

Pinterest may also be benefiting from Snap’s recent declines in some engagement metrics. It called out particular strength in Gen Z users—historically Snap’s bread and butter, noting that those younger users have become its fastest-growing demographic. Pinterest said it now has 10% of its total engagement happening on video, beloved by the Gen Z crowd, adding that ads on video now represent more than 30% of its revenue. 

For investors, though, the key for Pinterest will be its progress within shopping—a branding pivot for the company that still seems more theoretical than real. A little less than four years ago, Pinterest was a self-described platform for inspiration—a place “to come to discover ideas.” With Mr. Ready at the helm as of late last June, Pinterest now says it is a shopping destination, “akin to a personalized shopping catalog.” Mr. Ready said last year he is working to make every product consumers see on Pinterest shoppable. 

Certainly, there are some positive signs Pinterest is heading in the right direction: The company said Monday it is seeing 50% growth in direct response-like ads it calls “shopping ads,” adding that about a third of its business is now “bottom of the funnel” ads like these that are close to or lead to direct conversion.

But its continued investment in new staff and technology seem to indicate the company has a lot more work to do toward its own differentiation. While Snap and Meta announced meaningful layoffs last year, Pinterest said last week it would cut just 150 employees—or less than 5% of its workforce. Head count, the company said, was flat in the fourth quarter on a sequential basis; though it at least said it expects operating expenses to decline by a low-double-digit percentage for the current period versus the fourth quarter. 

Heading into its earning report, Pinterest’s stock was up less than 15% this year—significantly less than gains by peers Snap and Meta, which were up an average of about 45% through Monday’s close. Pinterest’s shares are now fetching just five times enterprise value to forward sales—down from about 20 times just two years ago.

Pinterest is trying to change some of that, announcing on Monday a stock repurchase program of up to $500 million over the next 12 months. But much of its discount looks deserved: Two years ago, it was starting to seem like everyone might want to try to shop on Pinterest. For the six quarters ended March 2021, Pinterest’s global monthly active users grew by an average of nearly 33% year on year. Since then, those users have fallen by an average of about 1% on the same basis.

Santa isn’t exactly backing up his sleigh for this one just yet.

Write to Laura Forman at [email protected]