Guru Gyan
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Guru Gyan

Advertisers’ New Found (P)interest

Companies moved from Facebook to Pinterest for advertising. So, why did that happen?

What Happened?

Last week, Pinterest announced its third-quarter earnings. The company’s Q3 revenue surged 58% year over year to $443 million and the global monthly active users (MAUs) touched 442 million, a 37% year over year jump. The average revenue per user grew 15% to $1.03. After the company announced its results, its stock jumped 30% the next day in Wall Street.

The company’s CEO and co-founder, Ben Silbermann credited the rise in part to factors such as a rebound in advertiser demand, positive return on investment (ROI) from advertising products and expansion to other parts of the world.

Leaving Facebook For Pinterest

We have all heard about the news of big companies refraining from advertising on Facebook. Starting in July, corporate giants joined over 1,000 businesses in deciding to boycott advertising in Facebook, dubbing the movement #StopHateForProfit. The campaign asked Facebook to analyse and end algorithmic bias and hate speech on its platform.

Even though this campaign didn’t affect Facebook’s earnings to a big extent, it has helped Pinterest as several companies moved from Facebook to the former for running ad campaigns. Apart from Pinterest, Snapchat has also benefited from it. If we look at the Q3 numbers of Snapchat, we could say that the report observed it correctly. The company posted a $679 million revenue vs. ₹555.9 million as per Refinitiv (Refinitiv is a global provider of financial market data and infrastructure). Post its earnings, the firm’s stock price jumped over 22%.

Snap hinted about the boycott campaign helping the company by saying that it used the third quarter as an opportunity to engage with brands who were looking “to align their marketing efforts with platforms who share their corporate values”, as quoted by CNBC.

The Bigger Picture

Even though it sounds like Facebook played a big part in the rise in Pinterest’s revenue, we would like to point out that the pandemic played a crucial role too. Since the pandemic pushed more people to go online, Pinterest saw a rise in its active users. This leads to the birth of an important question — If companies go back to advertising on Facebook, will Pinterest lose its momentum? You might say yes, but an article by Forbes begs to differ.

According to an article published in Forbes, Pinterest is anticipated to just about break even this year and the firm could see a surge in profits from 2021 onward. The reason for the jump in profits is the sharp increase in its ad revenues while the firm’s past investments in technology and product development will also begin to pay off, which in turn will lead to a surge in its profits.

The article also says that, as Pinterest’s business gains scale, it should be able to augment margins to levels of around 15% by around 2023. Forbes goes on to say, considering our revenue forecasts of roughly $3.5 billion and 15% margins, $525 million in Net income is a real possibility by 2023. Pinterest has a lot of potential and it is slowly becoming a force to be reckoned with, worldwide.

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