As Pinterest looks to become an even bigger e-commerce player, the platform’s second-quarter results shed light on the progress it has made and where it’s heading in terms of content, ads and commerce.
The second quarter was rough for pretty much all of the ad-driven tech giants because of the economic climate and other factors. Snap, Twitter and even Meta had slower or declining revenue in the past three months. Meanwhile, Google beat analyst estimates but YouTube had its slowest quarter in two years with just a 4.8% increase in ad revenue.
The key numbers:
- $665.9 million in total revenue, up 9% year-over-year
- 433 million monthly active users, down 5% year-over-year
- $43 million in net losses compared to $69 million net income year-over-year
- $542 million in U.S. and Canada, up 7% year-over-year
- $22 million in “rest of world” category, up 71% year-over-year
- 92 million monthly active users in the U.S. and Canada, down 8% year-over-year
- 10% of time users’ time on the platform is spent on watching videos
- Average revenue per user was $1.54 globally, up 17% year-over-year
- Average revenue per user was $5.92 in the U.S. and Canada, up 20% year-over-year
For years, advertisers have said Pinterest hadn’t focused enough on the e-commerce side of the business, but the company has been quickly looking to change that perception. Revenue from shopping ads is growing twice as fast as overall revenue year-over-year, chief financial officer Todd Morgenfeld said on Monday during the company’s quarterly earnings call. He added that there are also now 1 billion shoppable products in Pinterest’s system thanks to partnerships with Shopify and WooCommerce.
Although there was “softening” demand from CPG brands, big box retailers and mid-market advertisers, Pinterest saw “strength” in demand from retail and international advertisers. Morgenfeld also noted that the company had 25% growth in spending commitments from joint business partners in the first half of 2022 than 2021, suggesting that the non-binding agreements were a sign that advertisers are seeing Pinterest as more than just an “experimental” platform.
Pinterest is also seeing momentum with its own pivot to video. Morgenfeld said 10% of user time on the platform is now spent watching videos through organic user content and paid partners such as Tastemade. Other key areas the company is looking to build out include more organic shopping experiences that marketers can buy ads for along with new capabilities for automating campaign-level marketing.
When asked for his thoughts as the newcomer on how Pinterest has fallen short in the past, CEO Bill Ready said the first 20 years of e-commerce were focused on “solving for buying more than shopping.” Now that more shopping is starting online, Ready said it’s no longer just about whether a sale is completed digitally or in a store. He said context and timing also matter, explaining that Pinterest is more focused on intent-based content than “entertainment” — an apparent reference to competitors like TikTok and YouTube.
“When we talk about going from inspiration and intent to action, there are a lot of different ways we can take people to action,” Ready said. “Some of the efforts I’ve seen across the industry can at times get hung up on did you complete a purchase on the platform.”
Pinterest’s second-quarter results also mark the company’s first major milestone since its June announcement that Ben Silbermann — the company’s co-founder and longtime CEO — would be replaced by Ready, a former Google and PayPal executive. Prior to leading Google’s payments and e-commerce efforts, Ready was chief operating officer at PayPal — where he also led commerce and product teams — and before that spent years as CEO of Venmo.
Pinterest has also been in the spotlight after news last month that Elliott Management had reportedly taken a 9% stake in the company, leading some to believe the activist investor could soon pressure Pinterest to make more changes.
Some advertisers say they’ve seen the appeal of Pinterest putting more focus on creators, search, trend predictions and various other tools. Others say it’s coming up less in conversations and that it’s still “too niche” or has a “lot of catching up to do” on the e-commerce front. However, the platform is still overall seen as relevant for content discovery, especially for fashion, food, home decorating and other categories.
So far this summer, Pinterest has made several shopping-related announcements including the acquisition of the AI-powered shopping startup The Yes and new ad formats for creators and advertisers. (On Monday, it also announced a new moodboard-making app called Shuffles.) Ready said content creators “appreciate the uniqueness of our platform” even if Pinterest doesn’t “match dollar-for-dollar with larger platforms.”
“I think it leads to different types of opportunities for how creators can engage on our platform and the kinds of content and user engagement that can come from that,” Ready said. “It also means we can play our own game on how we work with content creators.”
Media Buying Briefing: M&A shows no signs of letting up despite economic headwinds
Here’s a question: With inflation running rampant, interest rates surging and an economic downturn lurking around every corner, what will happen to the once-red-hot mergers and acquisitions marketplace in agency land for the rest of this year and into 2023?
Those who expected a cooling-off in M&A as a result of the darkening clouds were in for a surprise last week when The Brandtech Group put out a terse statement saying it’s entered exclusive negotiations with French investment firm Fimalac to acquire Jellyfish Group, a digitally focused marketing services agency run by Rob Pierre, in which Fimalac owns a majority stake.
Though none of the parties would comment on the proposal, it seems it’s not just private equity firms that are out to buy agencies in these challenging times. The Brandtech Group, run by ex-Havas leader David Jones, has assembled an interesting assortment of services to become, as Jones told Digiday back in June, “the Salesforce of marketing.”
But the company has been light on the media side of its holdings, which makes a Jellyfish acquisition seem smart, said an executive at a media consultancy who declined to speak on the record. “As much as they’d love to pursue the big global accounts, they’re not going to get anywhere near it because of their size,” said the exec. “With Jellyfish, they would have a very sizable, very scalable, global media offering, albeit digitally focused, to compete with the Stagwells and S4s, who they probably haven’t been been able to get close to. This fundamentally gives them scale and credibility in that media buying and implementational space.”
Beyond Brandtech Group’s surprising but smart move, other investment advisors argue this could be another strong M&A market. Last year, total M&A for agency and marketing services totaled over 400 deals for nearly $10 billion from strategics and PE firms, according to Michael Seidler, founder and CEO of M&A advisory firm Madison Alley. This year so far, Q1 totaled over 115 M&A deals for over $4.5 billion, and Q2 totaled 125 deals for $1.5 billion.
That activity has convinced Seidler there is a “trillion dollar market opportunity” for the broader marketing communications world, if you lump in consultancies and ad tech. “The marketing services groups only are about 10 percent of that,” said Seidler, listing consultancies such as Accenture or Deloitte as well multinational firms like Tata, Wipro or Infosys. “So we see a huge opportunity that plays out among the marketing service groups as they start to build their development capabilities, their custom software development and strategic digital transformation.”
Ryan Kangisser, managing partner of strategy at MediaSense, points to retail media as an area where specialty shops might be in demand. “We’ve seen the growth of retail media in the U.S. and yet the expertise around that is still quite scarce,” he said. “So if there are independent businesses out there that are able to gain traction with brands, clearly there’s going to be some some activity there.”
Mark Penn, CEO of holding company Stagwell, said after the company’s earnings call that it plans to continue acquiring — part of a long-term strategy to take on the traditional holdcos. “Our strategic goals are to expand more globally and to expand our technology footprint,” said Penn. “Foreign exchange is a big factor — the strong dollar means that you can go buy 30 percent more of…some company in another jurisdiction. So if you have a 20 or 30 percent reduction in [agency valuation] multiples and a 20 or 30 percent currency advantage, at least as a U.S. company as we are, I think that may create some openings for additional M&A.”
Then there’s the private equity world, which will not sit quietly, especially as several two-to-four-year-old acquisitions approach the flipping point (most M&A advisors agree that PE firms usually flip their acquisitions within five years). Seidler noted several independent agencies purchased in that time frame could be on the block before long, including Real Chemistry, Bounteous and Tinuiti. Even PMG, which just won a large chunk of Nike’s media duties, could be a target for acquisition, Seidler added.
One other consideration that’s just as important is culture, said Doug Baxter, head of Agency Futures, a London-based M&A consultant. “Are there dynamics, both culturally and from business services and synergies points of view, that allow the power of one and one to equal five?” Baxter asked. “That’s really what you’re looking to do, is to find people who really do share a common vision, but also have ways that they can integrate their business that makes sense.”
Color by numbers
As content becomes more targeted, advertisers looking to reach diverse audiences might want to consider in-cinema advertising. National CineMedia shared stats with Digiday that show broad representation in movie seats. Some highlights:
- “Jurassic World: Dominion” delivered a multi-generational audience comprised of 41% Caucasian, 25% Hispanic and Latino, 16% Black, 15% Asian and 5% other viewers;
- NCM says it’s seeing 58% diversity demos on average for opening weekends, generating higher reach than endemic players among the 18-34 age demographic;
- Compared to linear TV, NCM says movies have the second highest reach of Hispanic consumers 18-34, behind only Univision, while claiming to out-deliver BET on Black viewers 18-34 by more than two times;
- Compared to 10 years ago, movie audiences are now 30% more multicultural, 40% more Hispanic, 30% more Black and 46% more Asian.
Takeoff & landing
- Dentsu’s iProspect promoted two longtime executives to new positions, as the performance marketing agency goes full service in media: Michelle Snodgrass becomes executive vp, head of strategy, up from senior vp; and Rachel Starr becomes executive vp, head of planning, up from senior vp. Both will report to North American CEO Danielle Gonzalez.
- Social listening and analytics firm Sprout Social is adding Instagram Reels to its video management capabilities to help brands and agencies use the platform, after having signed up Tik Tok recently.
- Independent digital agency BAM Strategy, based in Montreal, picked up work for online grocery delivery service FreshDirect, for which it will build the brand’s first loyalty program.
“The strategic decision to make Gale a creative media consultancy — to bring creative and media together — [attracts] accounts that would have gone to two separate agencies in the past. They [brands] now realize that online marketing requires such greater coordination between creative and media, that I think we’ve hit a new sweet spot in the marketplace with this combination.”
Stagwell CEO Mark Penn in explaining how Stagwell agency Gale achieved 150% growth in the last year.
- In huge ad-tech news, Digiday senior ad tech reporter Ronan Shields, with help from senior news editor Seb Joseph, broke the news that Apple is launching a demand-side platform.
- Senior media editor Tim Peterson has also broken a lot of news around Instagram, first reporting that the Meta-owned social destination is paying media companies to post on Reels, and then that it is shutting down its affiliate commerce program on Reels.
- I wrote about two new tools designed to optimize client media spend: Max Connect’s Kudos product, which helps auto and other advertisers alter their ad flights, and Disqo’s Outcomes Lift platform, which helps clients see consumer action taken after seeing their ads.
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