Pinterest for Business

Samantha Joe | July 2020 Sprint - Runners

Facebook and Instagram have a virtual stranglehold on social media advertising. $69.6B (USD) of their total $70.7B 2019 revenue came from ads, with Instagram representing approximately $20B of that total.

With data privacy legislation growing, numerous government hearings on the schedule, a public image problem (and not just about about Zuck's liberal use of sunscreen) and past transgressions, Facebook is never far from our collective radar.

What does Pinterest have to do to take a bigger slice of the pie?

• Why Pinterest?

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Why Pinterest?

As a customer of self-serve advertising through supporting clients, I am asked often about the pros and cons of each platform.

Given that Facebook was able to achieve its $1T status on the back of advertising, can this be replicated by other networks? What does Pinterest have to do before throwing its proverbial hat into the ring?

It's important to note that Pinterest does not refer to itself as a social network, trying to hold true to its mission to be a visual discovery engine. However, there is an inherently social aspect to using with the platform (must have an account, can follow others, share content from others, etc.)

Notes:
I have no professional affiliation with, nor financial interest in, Pinterest, nor any other company in the competitive set mentioned throughout this report.

• T-Algorithm and Finances

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T-Algorithm on Advertising Services

¹Bundle by virtue of being bundled with Instagram, Messenger, Whatsapp
²Recurring revenue through data licensing product
³Vertical integration can be driven by the parent company, e.g. ByteDance in the case of TikTok

❤️️: Product positioning statements lead with connection with other people, creativity and inspiration
🧠: Product positioning statements lead towards practical aspects like fit for business and connection through sterile language (audiences, conversations, reach vs. people)

Pinterest's advertising revenue, in proportion to its total revenue, is in line with its other publicly traded competitors (P4). Below, 2019 expressed as billions in USD:

Pinterest has been able to post healthy revenue growth and gross margins, indicating future opportunity. Pinterest's gross margin is also in line with the industry.

To isolate for financial performance relative to user base, average revenue per user (ARPU) can also be reviewed. Facebook's dominance across distribution channels provides significant growth for its own ARPU, relative to competitors.

Twitter does not release ARPU, and has been calculated here by Canacord Genuity.

It's worth noting, however, that Pinterest's ARPU has fallen by 14% since then, due to falling revenues in the US. Given the state of the economy in the time of COVID-19, there are plenty of external factors at play.

Due to a lack of consistent statistics available, only Facebook and Pinterest can be compared for monthly active user growth, expressed below in millions. While it's unlikely Pinterest will hit Facebook-like numbers, the growth rate for Pinterest is tracking positively, indicating opportunity.

Pinterest is also not yet profitable. Many comparisons have been made to Twitter, especially pre-IPO where they focused on slow and steady growth (as compared to Snap which took the growth at all costs route.)

It took five years post-IPO for Twitter to post its first profitable year. Given that we're in the middle of an international pandemic, it's even harder to use Twitter as a roadmap towards Pinterest's profitability possibilities.

All financial and usage data gathered from MarketWatch and Statista, unless otherwise linked. As of writing this, Pinterest Q2 financial results have not yet been released.

• Areas of Investment

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Investment

Pinterest’s main challenge is generating money from users outside the U.S. Its domestic ARPU rate for the quarter was $2.93, but internationally it was only 13 cents. When asked about the ARPU number on the earnings call, CFO Todd Morgenfeld said “it’s mathematics,” because the international business is growing faster than the U.S. business.

“It’s still very early days around things like age targeting, region targeting, dynamic retargeting around our products, products ads and shopping ads,” Morgenfeld said. “That stuff is just table stakes for us to be successful.”

Todd Morgenfeld, Pinterest CFO, as published by CNBC November 1, 2019

Due to the competitive nature of sharing platforms as a whole (not only for advertising revenue, but for user time in app/on site, daily and monthly users, etc.) many of the characteristics of $1T firms are table stakes.

This leaves two active differentiators for Pinterest to deal with in the short-to-mid term:

Table stakes to be dealt with in the long term:

Long term, table stakes oriented strategies lean towards supporting the Pinterest business as a whole, and not solely the advertising arm, but the advertising arm would stand to benefit.

• Likeability

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Investment

Short/Mid Term: Likeability

Just as every feature casts a shadow in product management, every employee casts a shadow in public perception. Even if Facebook hired the kindest people in the world, they'd still be fighting an uphill reputational battle, given the current optics.

Pinterest has remained relatively impervious to scandals around fake news, inflammatory content, censorship and inappropriate data usage. This lack of content-driven scandal is a great opportunity for Pinterest to build trust with users and advertisers alike.

On the PR side of the coin, VPs and Heads of Revenue and Advertising across the P4 are fairly quiet, with the bulk of their corporate communication handled by official documents or company leaders, but Pinterest has doubled down on "being nice" from the top down.

However, public comments from prior employees, both named and unnamed, have outlined past instances where the culture took the turn from nice to passive-aggressive and reports of racial discrimination and toxic workplace culture have surfaced.

Despite this, is it time to extend the warm and fuzzies to the public? Ben Silbermann, CEO, (8en) is active on Pinterest, commenting on things he tries and sharing what he likes. He appears to be into bread, low-top sneakers and data visualization.

However, his off-Pinterest representation is sparse. His Twitter account has no Tweets, and his Wikipedia listing barely needs a scrollbar.

Below is a picture of Ben. He looks nice enough. Not particularly recognizable though.

Reccomendation: Make amends and get working. A memo obtained by Bloomberg outlines steps that are being taken. Being able to publicly walk this walk, along with being able to become a content platform people can trust, can help separate Pinterest from the pack and create a more desirable space for advertisers to be in. While reputation initiatives aren't a typical ROI driver, Facebook may be read as a cautionary tale of how not to be perceived.

• Shopping

• Likeability

Short/Mid Term: Shopping (Again)

To keep up with segment leaders, Pinterest should also consider expanding its on-platform shopping capabilities, especially given that commissioned studies have shown that 90% of weekly Pinners make purchase decisions on Pinterest. Additionally, weekly Pinners spend 60% more than those who don't use Pinterest.

via Pinterest

Unlike Facebook, Pinterest has not yet made the step towards accepting payments through the platform. Facebook takes a 5% commission from products sold through Facebook Shops; though this product is still in early stages, it's not outlandish to think that this could be a real consideration for a brand when they want to be truly omnichannel.

With its focus on visuals, the Instagram shopping experience is more robust, with the ability to explore shoppable products you might be interested in via Explore, shop the stores of the brands you follow, and receive recommendations for new brands. Though Pinterest has the ability to pull and display recommendations from a board, search and Pins, as well as build style guides, there's still an opportunity to integrate a more robust shopping experience.

Left: the central Shops page on Instagram. Right: the workflow to reach a shoppable list of products
Click to enlarge.

Recommendation: Explore opportunities to strengthen and monetize advertiser relationships by making it even easier for them to try social commerce.

Given the documented buying behavior of weekly Pinners, as well as the continual MAU growth, Pinterest will need to prepare to go down this road as both a way to draw even with Facebook and bolster revenue streams. Getting a start here would also help widen the gap between Pinterest and other social advertising platforms. (Douyin, TikTok's Chinese counterpart, is strong at monetization, and it may be only a matter of time before TikTok cracks the code.)

This type of product development requires heavy resource investment, but can be considered a natural progression from current functionality.

This type of integration was previously a feature (Buyable Pins) but was discontinued early 2018 due to being unable to attract the critical mass.

What's old is new again; with the observed MAU growth, improved analytics technologies and attitudes softening around social commerce through Facebook releasing a similar feature, there may be hope for this format after all. (This does assume, however, there was product of a certain quality.)

Facebook was able to drive this adoption by making it undeniably part of the UI of interacting with brands, particularly on Instagram — the View Shop button became much more prominent overnight, forcing retailers to adapt. Does Pinterest have the guts to do the same?

• Career Accelerant

• Shopping

Long Term: Career Accelerant

If a likeability campaign is actioned, there will be questions about what employment with Pinterest looks like, in light of previously referenced action.

Though there "traditional" career accelerant hallmarks (unicorn, urban offices around the world), there are also opportunities for employees of competitors to move over into to help Pinterest grow while capitalizing on past experience. Snap and TikTok, for instance, are video-heavy platforms whereas Pinterest visuals lean heavily towards static. Being able to bring experience in shopping is currently another plus, where 13% of total opportunities mention "shopping" in their description.

As an extension of career acceleration, the attractiveness of Pinterest would benefit the advertising arm, as 38% of the current job openings mention ads.

This is not so much a recommendation as it is a consideration connected to the short/mid term recommendation of capitalizing on likeability. While firmly entrenched in the "table stakes" category, the ability of Pinterest to act as a career accelerant acts as an barometer on reputation and optics. This is not necessarily a short-term play, however, as this is an area where competitors will likely continue to invest in as well.

• Visionary Storytelling

• Career Accelerant

Long Term: Visionary Storytelling

Pinterest is the visual discovery engine. Our mission is to bring everyone the inspiration to create a life they love.

Per Prof G, this falls into "kinda bullshit" — not quite Peloton levels, but it's no Zoom either.

via Reforge, eMarketer, click to enlarge

For Pinterest to be able to grow via the loop above, becoming a visual discovery engine will have to be realized. Notably, visual search and image-based shopping is being leaned upon in Google Image search, and does not require an account. Will its growth be hampered by requiring an account?

With many of the above features outlined in the eMarketer survey have already become part of the digital commerce experience, Pinterest needs to be able to integrate these features as part of the inspiration journey that their mission outlines. Their mission needs to be for partners and shareholders as much as it is for customers if they want to be able to turn a profit.

With that in mind, the mission of Pinterest and how it's conveyed needs to be more specific, to outline how specifically it delivers concrete value. While it doesn't necessarily have to get more tactical, knowing how Pinterest grows and communicating that is a good start.

Reccomendations:

• Finished!

Just in case you needed to remember what Ben Silbermann looks like.