Pinterest’s plan to better compete with TikTok, Shopify and Instagram

Technology

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A banner for the online image board Pinterest Inc. hangs from the New York Stock Exchange on the morning that Pinterest makes its initial public offering on April 18, 2019.
Spencer Platt | Getty Images

In this weekly series, CNBC takes a look at companies that made the inaugural Disruptor 50 list, 10 years later.

Before Pinterest, if someone wanted to compile images of their favorite things, of a new idea, or plan out the visuals of their next aspiration, they had to turn to finding clips in magazines and re-pasting them to their own scrapbook or pinboard. 

In 2010, however, after reworking an earlier virtual catalogue app, founders Paul Sciarra, Evan Sharp and Ben Silbermann reimagined how to provide users with a platform to amass collections of favorite items and images, digitizing the scrapbook and pinboard process. Subsequently, Pinterest was born.

The app was designed as both an image sharing and social media service, which enabled the discovery and saving of pins — that is, images that had either been uploaded or linked from a website. Users could then upload their own pins, re-pin the pins saved on someone else’s board, make themed collections, follow each other, and ultimately, search for new ideas. 

The founders made their mission clear — to help people “discover the things they love and inspire them to go do those things in their daily lives,” which ranged from finding new recipes and parenting hacks to browsing fashion inspiration and travel destinations to visit on a next vacation.

Pinterest’s focus on the visual was particularly unique, as other social media platforms at the time were primarily text-based. There was Twitter for sharing messages, Facebook for finding friends, Reddit for writing about interests, and suddenly Pinterest for sharing and discovering photos.

The iPhone, iPad and Pinterest’s initial growth spurt

Despite only amassing around 10,000 users within the first year, the launch of the iPhone app, and later, iPad app in 2011, spurred a major growth spike for the company, bringing in an unexpected surge of new users. Within only a few months, Pinterest was attracting the attention of the tech world and popular culture alike. Pinterest won the Best New Startup of 2011 at the TechCrunch Crunchies Awards, and Time Magazine named Pinterest in its “50 Best Websites of 2011.” The company also attracted numerous investors during this period, including Jeremy Stoppelman of Yelp and Kevin Hartz of Eventbrite, bringing Pinterest’s valuation to $200 million by the end of the year.

In 2013, Pinterest raised another $425 million dollars in series D and E funding to invest in its engineering and product. This was also the year the company launched a major development — promoted pins— which were boosted to users based on their interests, behavior on the app, and history of visiting advertisers’ sites. The following year, Pinterest launched two more major updates, Custom Categories and Guided Search — three years before Google Images introduced the exact same feature into its own search function.

But while Pinterest focused on a seamless experience for users, the company was slow to successfully monetize the app and roll out buyable pins or marketing initiatives that would lead to the payout shareholders wanted.

In 2016, when Pinterest introduced support for video and built its own native video player, Facebook had already been monetizing video ads for two years and enjoying the strong revenue growth that accompanied it. Beyond video, advertisers were reluctant to reallocate their budgets to Pinterest’s largely untested features, like promoted pins, when they knew they could rely on the proven success of advertising options within apps like Facebook.

But while Pinterest struggled to monetize its offerings, the platform continued to attract new and loyal users by the millions each year. In 2019, Pinterest confidentially filed for an initial public offering (IPO). It officially went public in April 2019 at $19 per share, a $10 billion valuation, and closed its first trading day at $24.40 per share, indicating the market’s belief in the promise of Pinterest’s product. 

In the short-term, Pinterest’s value was proven, with the onset of the Covid-19 pandemic. Like many other online platforms that allowed users to explore their interests and shop while in lockdown, Pinterest users surged throughout 2020 and revenue increased by 48%, totaling in $1.7 billion by the end of the year. But as with many other e-commerce brands, the pandemic boom proved to be unsustainable. 

The reopening of physical stores and shifting consumer preferences led to a slowdown in e-commerce habits adopted during the pandemic. For Pinterest, this was coupled with the fact that many of its core use cases, including cooking recipes and décor inspiration, were particularly relevant while at home, but as pandemic restrictions lifted and people began to do things outside, demand fell. 

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Over the course of 2021, Pinterest users dropped from 478 million to 431 million, a decline of 47 million active users. This year has posed a distinct challenge for the company, which had previously maintained steady user and revenue growth throughout its first decade. Pinterest is faced with navigating not only declining users and a rocky e-commerce market, but the creator economy on platforms like TikTok which allow content creators to directly engage with users, a model proving to be increasingly important to advertisers.

At one point in late 2021, there were reports that PayPal was in late-stage talks to acquire Pinterest, but no deal ever occurred.

In the past year, Pinterest has attempted to address core business issues, rolling out features that make the app more attractive and accessible to creators, brands, and advertisers. Among these changes is the Creator Fund, which aims to support creators by monetizing their engagement and interactions on the platform. The company also launched idea pins, originally known as story pins, which mimic options found on other platforms like Instagram, can be viewed at the top of a user feed, and encourage creator activity.  Pinterest also has made it easier for companies to upload their product catalogs, list their products as shoppable Pins, and add product tags.

Pinterest’s bid for reinvention was reinforced this June, when co-founder Ben Silbermann stepped down as the company’s CEO, and was replaced by Bill Ready, the previous leader of Google’s commerce unit, a change in leadership that points to its continued post-pandemic effort to focus on e-commerce, online retail, and the creator economy.

Ready has his work cut out for him. Earlier this month, Pinterest again posted disappointing financial results, missing estimates for both earnings and revenue. Blaming weak advertising spend and a stronger dollar. In a message that has become common among social media companies including Meta, Twitter and Snap, Pinterest stated in a letter to investors that, “The macroeconomic environment has created meaningful uncertainty for our advertiser partners.”

But the latest user data wasn’t all bad. Despite global monthly active users declining by 5% from a year earlier to 433 million, Pinterest pointed to better than expected user retention — analysts were expecting an ever steeper decline. And the news that activist investor Elliott Management is now the largest shareholder caused Pinterest’s stock to soar in early August by more than 21%. 

“As the market-leading platform at the intersection of social media, search and commerce, Pinterest occupies a unique position in the advertising and shopping ecosystems” Elliott said in a statement. “And CEO Bill Ready is the right leader to oversee Pinterest’s next phase of growth.” 

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