Pinterest announced its first-quarter revenue forecast on Thursday, which was largely below Wall Street’s expectations. This indicates that the company is facing tough competition from larger social media players, despite the digital advertising market stabilizing. As a result, shares of the San Francisco-based company were down more than 9%. However, the losses were later pared in extended trading after CEO Bill Ready announced an ad integration deal with Google. This deal will allow Pinterest to serve ads via Google’s Ad Manager, which will help monetize several previously unmonetized international markets, according to Ready.
Last year, Pinterest partnered with Amazon.com, which analysts believed would drive significant advertising spend on its platform in 2022. “Third-party ad demand is scaling as we anticipated…and we are now seeing it contribute to our growth this quarter,” Ready said. However, Pinterest faces tough competition from the likes of TikTok, Facebook, and Instagram, which have become the preferred platforms for advertisers due to their extensive user base and higher engagement for targeted ads.
According to Jeremy Goldman, an analyst at Insider Intelligence, “Pinterest’s solid but unspectacular Q4 numbers should see some scrutiny from the market, which saw Meta blow out expectations just last week.” Ad spending in the shopping category, typically one of the largest advertisers in the holiday quarter, grew by less than 1% sequentially, according to market intelligence firm Sensor Tower. However, ad spend from software and gaming categories in the US saw sequential increases of 34% and 22%, respectively, in the fourth quarter for Pinterest, Sensor Tower added.
In the fourth quarter, Pinterest’s global monthly active users (MAUs) rose by 11% to 498 million, compared to estimates of 484.5 million. However, Pinterest’s revenue of $981.3 million for the fourth quarter ended Dec. 31 fell short of estimates of $990.6 million. Excluding items, the company earned 53 cents per share, beating estimates of 51 cents.