Pinterest Saw Huge Q3 Gains as Ad Spend Shifted From Facebook

Pinterest Saw Huge Q3 Gains as Ad Spend Shifted From Facebook

During Pinterest’s third-quarter earnings call today, the platform showed a 58% year-over-year revenue surge after sales growth was just 4% in the third quarter. The platform pointed to its commitment to brand safety, citing recent investments in automation, international expansion and shopping as drivers of the impressive profits.

Average monthly users on Pinterest hit 442 million this quarter – a 37% year-over-year increase. The company also warned that some churn could be expected.

Ben Silbermann, co-founder, president and CEO of Pinterest, cited a late surge related to the release of iOS 14 that drew an estimated 4 million users to the platform as users searched for customization ideas for the iPhone background display.

Much like Snap, Pinterest benefited from its reputation as a relatively brand-safe environment for advertisers. This security is in contrast to Facebook, which was exposed to widespread advertising boycotts this summer for failing to contain hate speech on the platform.

The platform also attributed its massive profits to an overall rebound in demand for advertisers in general. Many of the major brand advertisers who paused spending on the platform in the second quarter returned to Pinterest in the third quarter.

Pinterest also recognized the increased use of ad automation to support small and medium-sized businesses. These SME advertisers have been looking for advertising opportunities to capture further international expansion and online shopping activity.

“Advertisers tell us that ads work on the platform,” said Todd Morgenfeld, Pinterest CFO and director of operations. “This is in large part due to the investments we have made in technology that will make it easier for advertisers to achieve their goals on the platform.”

That technology investment mainly focused on tools and automation of conversion measurement, Morgenfeld said. Ultimately, Pinterest’s ongoing ad automation offers are designed to simplify the ad sales process. The only requirement Pinterest wants to make of brands is that advertisers bring their goals, budget, and content to the platform – and let the Pinterest team do the rest. While the system isn’t fully in place yet, Pinterest says it has made significant strides in automating ad purchases and making the platform easier for small and medium-sized advertisers.

“What we hear is that the return of responsible performance formats that bring about measurable conversions in online sales – especially in the mid-market segment – is a sweet spot for us,” said Morgenfeld. “We made these investments.”

Pinterest has also seen the benefits of shopping on the platform. The company’s product purchase tool allows users to move from inspiration to shopping, to research, to closing the sale. Pinterest executives say they are providing brands with more opportunities to integrate ads organically into the platform. A case in point: The number of users dealing with retail space has increased by a whopping 85% in the past six months, according to the company.

Pinterest continued to see the benefits of its international expansion. About 16% of total sales now come from outside the US, up from 10% in the third quarter.

After the third quarter, the platform pointed to two areas of uncertainty that lie in the final quarter of 2020.

First, the novel coronavirus pandemic continues to create some uncertainty about user behavior. While Pinterest has seen a steady increase in user interaction on block orders and a decrease in the number of people canceled, it is impossible to predict when these blocks will take effect or how long the pandemic will last.

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