As other social platforms continue to push random AI features that no one asked for and raise more questions about political content, Pinterest remains in business and, according to its latest performance update, is steadily growing its active user base and revenue.
But there are some concerning aspects to it that could dampen expectations about Pinterest’s overall potential.
First, on the user front, Pinterest added 4 million monthly active users in the second quarter, bringing its MAUs to 522 million.
Pinterest’s continued user growth bodes well for future opportunities, but it’s losing momentum, with user numbers down significantly this quarter compared to the past four quarters.
As you can see from the chart above, Pinterest went from gaining an average of 17.6 million new users per quarter over the past year to 4 million this time around. While this represents double-digit growth year-over-year, it’s also notable that the majority of growth is still coming from the “Rest of the World” category, while its core revenue regions are stagnating and losing users.
This is a concern when you also consider the following graph:
Pinterest relies on the U.S. and Europe as revenue drivers as it continues to build out its advertising business in other markets, and while revenue in these two regions is growing, the fact that usage in these areas is (as a whole) declining is not reassuring to market analysts.
However, Pinterest is increasing its advertising revenue, The figure for the current period was $854 million.
This suggests that Pinterest’s recent marketing efforts are having some effect, and that more brands are at least trying out Pin ads, especially in North America, where second-quarter revenue grew 13%.
But it also comes with higher costs.
As you can see from these charts, Pinterest’s sales and marketing expenses continue to increase, as does its investment in research and development.
As mentioned above, Pinterest is stepping up efforts to woo potential advertising partners with dedicated promotional campaigns, while also investing in its own AI technology, albeit one that focuses on the app’s main use cases.
Both are necessary investments, but again, this is an indicator that these aren’t good long-term investments for Pinterest. Pinterest also expects its operating expenses to continue to increase with these efforts.
So, is this a good report for Pinterest?
Well, overall, the core results are good in that they’ve been able to make higher revenue from fewer users in key markets, but the fact that they have fewer users in those regions is a concern, and overall growth has also slowed down, even though they seemed to have more pronounced growth momentum.
Given the significant AI development requirements and the fact that Pinterest’s system for matching users with the right products within the app is continually improving, I don’t think investment in the platform’s growth is that big of a concern overall. And while the signs here suggest that these improvements are paying off for brands, the concern is that if Pinterest is losing key audience share, it means it has to show more ads to fewer users, which could ultimately lead to a frustrating user experience.
But that might not be as much of a concern if Pinterest’s promotions were becoming more relevant. In fact, all of Pinterest’s overall recent growth has come from lower-revenue markets, so overall, the slowdown in growth isn’t a big concern.
But the decline in Europe is bad news, and if Pinterest can’t grow its U.S. users in the next quarter despite its marketing efforts, it could put a cap on the company’s growth and limit its revenue potential.
So while it’s a bit of a red flag right now, there’s still an opportunity for Pinterest if it can move all of its metrics in the right direction at once.
