Pinterest, a social media application which allows one to search and pin pictures of one’s interests to digital notice boards, posted better-than-expected revenue, user growth and earnings for the third quarter.
Pinterest users scroll through a feed (like one does with Facebook or Twitter posts), but instead of news or updates on your friends or family, they provide images of topics in which you have an interest, like gardening, sport or cooking. Users can group images into portfolios called boards. Home decorating or planning a wedding are two such examples. Pinterest can help search, inspire, and store all your ideas. The company makes money by including targeted adverts (because they know what you like) in the user’s feed of digital imagery.
Revenue grew 58% to $443 million in Q3 with international revenues rising 145%. The company reported a net loss of $94 million, a 24% improvement. Pinterest says that advertisers who boycotted Facebook and other social media companies over hate speech and misinformation policies turned to it during the month of July instead. The company did warn that this trend would not be sustainable.
Global Monthly Active Users (MAU’s) increased 37% in the period to 442 million people. International user growth was particularly strong, rising 46% or by 108 million users.
Whilst the bulk of their revenue (84%) is generated by users in the US, international users now make up 78% of its total user base. This is seen in the average revenue generated per user (ARPU) where US users generate $3.85 per user, a 31% increase from the same period a year ago - whilst International users only earn them $0.21 per user, but that is still a 66% increase from last year. Their Global ARPU (US and International revenue per user combined) rose 15% to $1.03. Pinterest says user demand was buoyed by Apple’s new operating system (iOS 14) which saw 4 million users go to Pinterest for custom backgrounds for their iPhones.
The strong results from Pinterest helped lift shares of Twitter, Facebook and Snapchat in after-hours trade as a read through of what to expect in their results (which were reported this week). Pinterest expects fourth-quarter revenue to grow 60% year-on-year, but cautioned that the economic environment was still very volatile. Shares of Pinterest are up 225% year-to-date. The business model of monetising user data, and the time we spend on a digital devices has proven to be lucrative. We are holders of Facebook in the Cratos BCI Worldwide Flexible Fund in that space.