What goes up must come down and Pinterest is facing a declining user base as consumers are reengaging with the real world, driving its Monthly Active Users down about 5 percent from the 478 million it posted just three months ago.
Despite coming in ahead of analyst forecasts in many key metrics, that declining user base took Pinterest shares down by almost 20 percent in after-hours trading Thursday evening (July 29).
On the upside, earnings came in ahead of predictions at 25 cents a share instead of the 13-cent average forecast. Revenue was also better than expected at $613 million instead of $562.1 million as predicted. The average revenue per user also came in ahead of the $1.17 called for pre-release at $1.32.
All but one metric that the Street was looking at was inline or better than expected, save for Monthly Active Users (MAUs), which came in about 6 percent light, at 454 million versus a 482 million forecast. Pinterest didn’t just miss analyst forecasts; its MAUs dropped 5 percent from the 478 million the company reported just three months ago. And the declines were worse in the U.S., where the company said that, as of July 27, MAUs have declined by approximately 7 percent.
But Pinterest CEO Ben Silbermann noted that the decline in U.S. users was certainly not favorable news, but not an unexpected development. In the last year, he noted, they saw users flood to Pinterest for inspiration to reinvent their lives during such a difficult time.
“Now, as the world opens up, we’re seeing the similar effect in the opposite direction that impacted our growth, particularly because some of the core use cases we see on our platform are less common in 2021, and they were a year ago,” Silbermann told investors.
And in fact, Pinterest wasn’t the only social media player struggling with its user base, as Facebook and Twitter both logged slower than expected user growth in the second quarter of 2021. And like its counterparts in social media in Q2, Pinterest’s focus was on its expanding commerce ecosystem and shifting role in its customers’ lives. It is still a place to hang out and look at boards, but increasingly as a place where they can shop what they see.
Pinterest’s plan, Silbermann told analysts on the call, is to continue investing in helping pinners “shop for products they want at a price point they want,” and in helping merchants get discovered and connected to potential customers on the platform.
“While we’re still early in the journey to fully monetize our shopping engagement, we believe that we have the right sales coverage model, and we’re delivering conversions to advertisers, advertisers who are seeking sales on the platform,” Silbermann noted. Pinterest also noted its growth remains active outside the U.S. market — growing 5 percent internationally.
As for what comes next, Pinterest declined to provide Q3 estimates for its monthly active users — stating the impact of COVID-19 in its resurgent Delta form provides too much uncertainty. It did provide some Q3 guidance on revenue growth “in the low-40s” on a year-to-year basis and estimated in line with analyst predictions.
And though Pinterest was enthused by its continued evolution into a social commerce platform, the market was not. The firm’s stock was trading down 19 percent in after-hours trading.
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