Pinterest may have beat on revenue and earnings in the first quarter, but the company is not out of the woods yet when it comes to carving out a place for its service in today's competitive landscape. In particular, Pinterest is up against a credible threat with the rise of TikTok when it comes to social commerce. The idea that you could be inspired to shop by browsing media shared by others is an experience that Pinterest, in a way, helped pioneer, with its pinboard-style website where users often saved ideas of things they were considering buying or trying.
But these days, the more common refrain among influenced and inspired shoppers is “TikTok made me buy it,” not “I found it on Pinterest.”
That's a challenge the company understands it must overcome in order to establish its site as a destination for the next generation of online shoppers.
The company on Wednesday reported fairly solid earnings, pulling in $575 million in revenue versus $573 million expected, and delivering earnings per share of 10 cents instead of the 4 cents expected. But one troubling area was its decline in users. The company reported its global monthly active users decreased 9% from the same period last year to 433 million in the quarter, below expectations of 437.9 million.
Investors drilled into the user decline on the subsequent earnings call with a focus on better understanding how Pinterest was standing up to the TikTok threat.
Pinterest explained it's been investing over the past year and a half in its new video-powered features, like Idea Pins — a sort of video-first mashup of both TikTok-stye short-form video content and tappable Stories.
These Pins are aimed at attracting creators to Pinterest's site, allowing them to record and edit creative videos with common tools like voiceover recording, background music, transitions, and other interactive elements. But the Pins can also include pages of content where creators can add instructions, like the steps to perform a DIY project or the ingredient lists for a recipe. This makes the Pins more purpose-driven and actionable compared with some of the content on primarily entertainment-focused destinations, like TikTok or Instagram Reels.
Pinterest acknowledged it had to do a significant amount of work to catch up to where the market was headed with video, but believed it's now starting to see some traction.
The company said its shift in focus to video had come at the expense of some monthly active users in the short term, but it's taking the risk in order to get the new video-focused ecosystem off the ground. As a result, it's seen the number of video Idea Pinners increase 15x year-over-year, and noted the feature was attracting a more engaged audience. Pinterest also said it's seen over 25% growth in the save rate of Idea Pins quarter-over-quarter. And Pinterest users who follow multiple video creators on the site tend to visit Pinterest more often than those who do not, the company shared.
“This is also strategically important because we think video as a format is just fundamental to the way people get inspired and take action in the future,” noted Pinterest CEO Ben Silbermann.
Pinterest is also planning to further develop new publishing features for video, including by leveraging its most recent acquisition Vochi, which will help creators make better videos that are more likely to inspire action. It's said it's planning to expand its creator rewards, had launched a Pinterest API for shopping, and began beta testing a new feature called Your Shop, which offers a personalized experience to users by connecting them with products they may like.
But Pinterest also said it felt the impacts from lower search traffic and from “time spent by people on competitive platforms.” While the former was attributed to a Google search algorithm adjustment in the quarter, the latter was more of a veiled reference to TikTok, in addition to other social apps.
The company pointed out that the U.S. is its most mature market and one where a number of social media, entertainment, and news apps are competing for users' time spent on mobile devices.
“We called out [the] competition just because there is a tremendous amount of options for consumers on the phone at any given time,” said Silbermann, without specifically saying the word “TikTok.”
“That said…what we’ve heard from Pinners and what we see is that we have a pretty differentiated use case…that’s the use case of actually using Pinterest to plan, get ready for major events, and then, eventually, to make considered purchases. And that’s quite different from an entertainment and news use case,” he added.
But investors were clearly interested in understanding how TikTok, specifically, was impacting Pinterest's business, prompting a direct question about the growing threat of the short-form video giant whose mobile app just saw the most downloads worldwide in the quarter.
“We don't have exact fidelity into where people are spending their time,” Silbermann responded. “But obviously the story of the last couple of years in terms of time shift has been the rise of TikTok as a major place that people are spending their time,” he admitted, before reiterating that Pinterest's focus is on content that inspires action — not just entertainment.
“That’s going to have to be reflected in the way that we provide incentives for creators, but also the way that we rank content on Pinterest,” he said, before laying out the vision for how Pinterest will compete with TikTok.
“The reason that a feed on Pinterest feels different than a feed on a social network, or a feed on a pure entertainment network, is that the content is ranked taking into account how useful that idea will be to getting something done in the future,” the CEO continued. “As we think about things like creator rewards and roll out new ad formats, like Idea Pins that are sponsored, that’s the sort of central thesis behind it. And it’s in line with the central thesis of Pinterest overall, where this isn’t a platform to talk to your friends. It’s not a platform to keep up with the news. It’s a platform for you to articulate things that you want to do in your life [and] for us to help you visualize what that end state looks like,” he said.
Pinterest also said it will work to improve its home fee recommendation and search result quality, while making Pinterest easier to access and use even for logged-out visitors.
But the company stopped short of admitting its monthly active user [MAU] loss was due to TikTok or other competitive threats.
Instead, it largely blamed the global decline in users on the Russia-Ukraine war and lower engagement from other regions across Europe — an impact of about 5 million MAUs. Excluding that situation, Pinterest believed its MAU count would have been modestly up from earlier estimates.