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Pinterest (PINS 1.02%)
Q4 2022 Earnings Call
Feb 06, 2023, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good afternoon. Thank you for attending today's Pinterest, Inc.'s fourth-quarter and fiscal year 2022 earnings conference call. My name is Hannah, and I will be your moderator for today's call. [Operator instructions] I would now like to pass the conference over to our host, Neil Doshi, head of investor relations.

Please go ahead.

Neil Doshi -- Head of Investor Relations

Good afternoon and thank you for joining us. Welcome to Pinterest's earnings call for the fourth quarter and full year ended December 31, 2022. I'm Neil Doshi, head of investor relations for Pinterest. Joining me today on the call are Bill Ready, Pinterest CEO, and Todd Morgenfeld, our chief financial officer and head of business operations.

Now, I'll cover the safe harbor. Some of the statements that we make today regarding our performance, operations, and outlook may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. In addition, our results, trends, and outlook for Q1 2023 and beyond are preliminary and are not an indication of future performance. We are making these forward-looking statements based on information available to us as of today, and we disclaim any duty to update them later unless required by law.

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For more information, please refer to the risk factors discussed in our most recent forms 10-Q or 10-K filed with the SEC and available on the investor relations section of our website. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and presentation, which were distributed and available to the public through our investor relations website located at investor.pinterestinc.com. Lastly, all growth rates discussed in today's prepared remarks should be considered year over year unless otherwise specified.

And now, I'll turn the call over to Bill.

Bill Ready -- Chief Executive Officer

Thanks, Neil. Hi, everyone, and thank you for joining our Q4 earnings call. I'm proud of our team's focus and execution over the past year and, in particular, Q4. We reinvested in our core product experience that led to deepening engagement and a return to user growth.

We built and shipped new ad tech and measurement solutions that resulted in improved returns for our advertisers. And we're just getting started. I have strong conviction that we will continue to innovate and deliver value to our users and business partners. We grew global MAUs in Q4 to 450 million, up both sequentially and year over year.

Our global mobile app users, which account for over 80% of our impressions and revenue, grew 14%. And our U.S. and Canada mobile app users grew 5%, accelerating from last quarter. More importantly, sessions continued to grow significantly faster than users, demonstrating deepening engagement per user as we focus on driving greater per-user monetization.

In Q4, we delivered revenue of $877 million, growing 4% or 6% on a constant-currency basis, roughly in line with our mid-single-digit guidance range. Strength came from large U.S. retail advertisers and international markets, excluding impact of FX, as these advertisers lean into our full-funnel platform during the holiday season. However, this strength was partially offset by CPG advertisers, as well as small and mid-market advertisers in the U.S.

who faced headwinds from the macroeconomic environment. For the full year, we generated revenue of $2.8 billion, growing 9%, or 11% on a constant-currency basis. We're pleased with our results this quarter despite headwinds from the softening ad market, which Todd will speak to later. We remain confident in our long-term strategy and our ability to execute and drive value for users and advertisers.

We're also increasing operational rigor and have taken actions to control costs in Q4. For example, we significantly slowed the pace of hiring such that our headcount was flat quarter over quarter. We reduced our infrastructure spend, which declined sequentially despite strong engagement volume increases, and we closed some of our smaller offices for future cost savings. These actions put us on the path to meaningful EBITDA margin expansion in 2023 and demonstrate our focus on generating strong cash flow.

As we build upon the solid foundation we set in 2022, we're laser-focused on our four strategic priorities: one, growing monetization and engagement per user; two, integrating shopping into the core of the product experience; three, improving operational rigor and, therefore, margin expansion; and, four, strengthening our leadership as a positive and brand-safe platform. First, as I mentioned last quarter, we're focused on growing monetization per user. Given that users come to our platform with intent to make, do, or shop, we are well positioned to achieve this by deepening user engagement, driving more intent to action, and helping advertisers better monetize our supply. On deepening user engagement, we believe that we have a large opportunity to grow the frequency of engagement from episodic users.

On top of our 450 million MAUs, hundreds of millions of logged-in users come to Pinterest episodically. In 2023, we're pursuing more ways to bring these users back more often and to find their next-use case by leveraging our machine-learning models and building new experiences for them. We're also continuing the work we began last year to serve more personalized, relevant, and, ultimately, more engaging content. This effort has already yielded results, including our return to MAU growth and double-digit growth in mobile app users.

However, we have more opportunity to leverage the unique first-party signal on our platform. Our users save and organize content to boards, an active human curation at scale that is unique to Pinterest. This gives us insights into emerging trends and product associations, as well as the ability to assist users when they have intent but have not yet decided what to buy. We're actively working to refresh the Pinterest board experience to make it easier for users to organize their interests, which should yield more and higher-quality signals.

This, in turn, enables us to deliver increasingly relevant and timely content recommendations. I'm particularly excited about the work we've done to bring new and emerging demographics onto the platform. In Q4, Gen Z was once again our fastest-growing cohort, growing double digits and accelerating from Q3. We're building an experience that resonates with this audience on Pinterest, specifically around video.

In fact, nearly half of all new videos pinned in Q4 were from Gen Z users. And in Q4, Gen Z sessions grew much faster than sessions from our other demographics. As I discussed last quarter, video also drives deeper engagement. We remain focused on growing our supply of videos from multiple sources, including creators, brands, and publishers.

Last quarter, we grew our supply of video content 30% quarter over quarter, and we recently announced a deal with Condé Nast Entertainment to create high-quality video content aligned with Pinterest's key seasonal and cultural moments like fashion month, wedding season, summer, and back to school. We believe high-quality and inspiring content will further deepen engagement, especially for Gen Z. Monetization per user should also be driven by our ads initiatives. Pinterest is unique because users come to our platform with intent, and we are one of the few places where people can go from seeking inspiration to fulfilling that intent through action.

And we've built a full ad solution that helps advertisers meet users in their journey across the funnel from top to middle to bottom. In fact, our revenue is roughly split across the funnel with one-third brand, one-third consideration, and one-third conversion. We've seen that advertisers who take a full-funnel approach see more success than those who are only active on one campaign objective. In 2022, advertisers who are adopting a multi-objective media strategy saw up to a 50% improvement and sales lift compared to those who use one objective based on our conversion loss study.

I believe ads, when relevant and personalized, can be highly valuable content for users, fostering authentic interactions between brands and consumers. In Q4, we launched ad load management with whole page optimization, which flexes ad load opportunistically in contexts where ads are most well suited for the user. In our initial testing, this drove double-digit improvements in ad relevance on search while simultaneously reducing CPAs for advertisers. We expect the whole page optimization will enable us to continue to improve the efficiency with which we monetize our platform over time.

In addition, we continue to improve conversion visibility through our measurement solutions in a privacy-centric way to demonstrate the value that Pinterest brings to advertisers. For example, in Q4, we launched our conversion API, and we recently integrated this API with Shopify so the merchants can use our conversion measurement tool. Based on our tests, for advertisers using our conversion API with the Pinterest tag, we found an average of 28% lift in the attributed checkout conversions and 14% improvement in the checkout CPA metric. At CES this January, we announced our new privacy-safe clean room solution with LiveRamp and Albertsons.

Pinterest's integration with LiveRamp provides a protected third-party space where brands can join their first-party data and Pinterest platform data in a secure, privacy-safe environment. Our second strategic goal for 2023 is to lean into the high intent that users express on Pinterest by integrating shopping into the core of the product experience. Based on surveys of our users, over 50% say they view Pinterest as a place to shop, yet we haven't made it easy for them to shop historically, as shoppable content was not integrated into core experiences. In our endeavor to make Pinterest the home of taste-based shopping, we're integrating shopping across our most trafficked surfaces, including home feed, search, and related pins, to show users products most relevant to them.

Over the long term, we also want to make every pin shoppable. To that end, we're making video content on Pinterest more actionable using the same playbook we applied to static images. Over the course of this year, we'll be deploying our computer vision technology across our video corpus to find products and videos and make them shoppable. To make Pinterest more shoppable, we're creating a more seamless handoff by taking the user directly to the product detail page on the merchant's app.

To this effort, we continue to deploy our mobile deep linking format, or MDL, on shopping ads. During the Black Friday-Cyber Monday period, MDL accounted for 40% of our shopping ads revenue, which grew 50% in Q4. People are shopping on Pinterest, and we are helping merchants find end-market consumers. Third, we're driving operational rigor and are committed to delivering value to our shareholders.

While 2022 started off as an investment year, we took steps to cut down on costs in this challenging macroeconomic environment starting in early Q3. And we are continuing to find ways to reduce our expenses so that we can meaningfully expand EBITDA margins. As I've said before, I'm a strong believer that constraints bring creativity, and I believe our teams will deliver more compelling products and experiences that set us up for sustainable growth long term. Furthermore, Todd and I have been evaluating our broad capital allocation strategy, including investing in the business, maintaining flexibility for strategic acquisitions, and options for returning capital to shareholders.

Given the significant cash balance at Pinterest today, combined with our robust ongoing operating cash flow generation, we're planning to execute a stock buyback program of up to $500 million, which we plan to commence this quarter to help mitigate dilution from stock-based compensation. Tom will go into more details on our buyback program. Finally, one of the biggest differentiators of Pinterest is that we are on an inspirational platform, and we're intentionally tuning our business to be a positive place on the internet. Pinterest's mission is to bring everyone the inspiration to create a life they love, and I believe, in an online environment that is increasingly full of toxicity, this is more important than ever.

Not only does it help our users, but also our advertisers as they look for more brand-safe environments to attract customers. From a user perspective, we've long been investing in being a more positive platform from products, like inclusive search, to important business decisions, like banning political ads, because we want our users to be in a positive space for inspiration and action. Users are noticing this investment. We have research confirming the positivity of our platform and emotional benefit to our users that we're planning to release in the coming weeks.

We're seeing this sentiment come through with our advertisers as well. Some of our latest research also shows that ads that appear in a more positive environment drive more purchases at every stage of the funnel. We believe the positivity makes people more open to brands, more likely to remember them, and more driven to purchase. As I mentioned in our last call, I value the communication, input, and feedback with the investor and analyst communities.

As part of that, we plan to host an Investor Day later this year, and we'll update you in the future on timing and additional details. Finally, as you may have seen in our press release today, Todd Morgenfeld, our CFO and head of business operations, will transition from the company to pursue new career opportunities on July 1st. Todd has been instrumental to Pinterest's growth over the last six-plus years and is committed to ensuring a smooth transition while we search for a new CFO. I'd like to take a moment to recognize Todd for his dedication to our employees, our Pinners, advertisers, and our shareholders.

Todd has made significant contributions to our business over the last six-plus years, including leading the company's IPO process, helping the company navigate the pandemic, advancing our revenue functions, maturing our business operations, and partnering with me when I joined the company last year. So, Todd, we thank you for your partnership and leadership. Everyone at Pinterest will be cheering for you and your future endeavors, and I intend to be cheering the loudest.

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

Thanks, Bill. I appreciate the kind words and the partnership. I also want to thank the entire Pinterest team and the board for the opportunity to contribute over the past six years. I look forward to watching the company continue to innovate, execute, and grow.

I'll now discuss our results. My remarks today, I'll talk about our Q4 financial performance and our preliminary Q1 outlook. All financial metrics, except for revenue, will be discussed in non-GAAP terms unless otherwise specified. And as a reminder, all comparisons will be discussed on a year-over-year basis unless otherwise noted.

In 2022, we made platformwide innovations that resulted in improving the user experience through more personalized content, showing more relevant products that fit users' tastes and preferences, and delivering increased value to advertisers through ad stack innovation, new measurement solutions, and more seamless handoffs to merchant sites. Even though softening demand lowered ad pricing across the industry, including on our platform, we grew revenue in the fourth quarter. Furthermore, we expect our 2022 investments in our ad stack to help deliver competitive cost per action as the demand environment normalizes in the future. As we continue to innovate on new products like mobile deep linking, whole page optimization, and improved measurement solutions, we believe these investments will drive better returns on ad spend for our partners.

As Bill mentioned, we remain focused on deepening engagement with our existing and episodic users, which should allow us to grow our revenue per user over time. From Q4 2019 to Q4 2022, our revenue grew at a compound annual growth rate of 30%, while our monthly active users grew at a compound annual growth rate of 10%. Our growth opportunities should continue to be robust as we improve frequency of visitation, make Pinterest more shoppable to satisfy intent to action, deliver more solutions for advertisers, and improve the relevance of our advertising to match our users' commercial intent. During the quarter, 450 million global monthly active users came to Pinterest, growing 4% year over year and 1% sequentially.

We believe that our investments in relevance and personalization are the primary drivers of our return to seasonal growth. In the U.S. and Canada, monthly active users were 95 million, back to year-ago levels. As we've noted before, our mobile application users are our most monetizable users and account for over 80% of our total impressions and revenue.

Global mobile application monthly active users accelerated to 14% growth, and U.S. and Canada mobile MAUs accelerated to 5% growth, after returning to growth for the first time this year in Q3 of 2022. Furthermore, global and U.S. and Canada sessions grew significantly faster than monthly active users and accelerated from the third quarter.

In addition, we saw growth in many of our core verticals, as well as some of our emerging verticals like travel, vehicles, and men's fashion. Turning to our financial performance. Q4 global revenue of $877 million grew 6% on a constant-currency basis, or 4% on a reported basis. Strength came from large retailers looking to drive sales during the holiday season, and we had solid growth from our international markets when adjusting for foreign exchange headwinds.

There was also resilience in our awareness objective, or brand ad spend, as advertisers continued to lean into the brand safety and positivity on Pinterest. Furthermore, some emerging verticals, including automotive, travel, and financial services, posted strong revenue growth. While we saw pockets of resilience from some CPG advertisers, many of our CPG partners and our U.S. mid-market and SMB advertisers continue to face some challenges stemming from the current macro climate.

In terms of revenue by region. U.S. and Canada revenue was 722 million, an increase of 5%. Total revenue from Europe was 123 million, growing 5% on a constant-currency basis, but declining 7% on a reported basis due to foreign exchange headwinds.

Total revenue from our rest of world region was 32 million, growing 33% on a constant-currency basis and 26% on a reported basis. Turning to our EBITDA and expense profile. Adjusted EBITDA was $196 million in Q4 with an adjusted EBITDA margin of 22%. This EBITDA figure includes several actions we took in the fourth quarter that we believe will reduce our expense profile for 2023 and beyond.

Most notably, this included a realignment of our resources against our shopping strategy, as well as reductions to our recruiting staff and closures of some of our smaller and less utilized office spaces. Collectively, these actions accounted for about 2 percentage points of EBITDA margin. I'd also like to provide more color on how these actions impacted some of our expenses. Total operating expenses were 508 million, up 17% quarter over quarter.

If you adjust for the costs associated with the actions I described during Q4, our operating expenses grew 13% quarter over quarter, in line with our guidance. These costs were spread across sales and marketing and G&A. More specifically, our sales and marketing expenses grew 29% quarter over quarter. The actions I referenced accounted for approximately 5 points of that growth, while our brand marketing campaign that I've referenced on past calls drove the vast majority of the rest of the growth.

G&A expenses grew 25% quarter over quarter. Over 80% of that growth was driven by the actions I previously mentioned, as well as increased taxes and bad debt expense. Excluding all of these items, our G&A would have grown 4% sequentially. Finally, we ended the quarter with approximately $2.7 billion in cash, cash equivalents, and marketable securities.

As we look ahead, while the macroeconomic environment remains volatile and we're experienced experiencing softer advertiser demand, we want to share our best judgment around our guide based on the signals we have today. For Q1, we expect revenue to grow in the low single-digit percentage range year over year. Quarter to date, our revenue growth is trending nearly in line with our reported revenue growth from Q4. However, similar to last quarter, we believe the error bars are a bit wider given the volatility in the market.

Our guide includes about 1 to 2 points of foreign exchange headwind. And we also expect headwinds to persist from our U.S. small and medium business and mid-market advertisers as they continue to face outsized challenges in this macro environment. While we've made significant progress in opening up more monetizable supply and reducing cost per action, these advertisers remain price sensitive.

For the first quarter non-GAAP operating expense, we expect a sequential decline in the low double-digit percentage range. First, we're not planning to invest in a brand marketing campaign in the first quarter as we did in the fourth quarter. Second, the net impact of the actions we took in Q4 and to date in Q1 related to expense reductions are reflected in the guidance. While these actions resulted in additional costs within these quarters, we believe they will contribute to our full-year goal of returning to margin expansion.

As you think about our operating expense cadence through the year, you should expect a meaningful deceleration each quarter and year-over-year growth in opex, especially as we move into the second half of the year as we will be lapping the significant investment and hiring we made into the business in the first half of 2022. On monthly active users, as you know, we generally do not provide guidance. We are encouraged that our investments in relevance and personalization brought us back to top-line MAU growth. And we're focusing on deepening engagement within our core and episodic users.

As Bill mentioned earlier, we're focused on providing long-term shareholder value, including through our capital allocation strategy. Our board of directors has authorized the share repurchase program of up to $500 million. We plan to commence repurchasing shares this quarter, and we intend to complete the program over the following 12 months. We believe it's important to have equity as a portion of our overall compensation program as it fosters an ownership culture with our employees.

And this share repurchase program will help offset the dilutive impact of this equity compensation. A repurchase program is in addition to an operational approach to mitigate dilution that we implemented in the second quarter of last year called net settlement, under which we, as a company, hold back shares to cover the taxes on employees' vested RSUs, where the company pays for the taxes from our own cash reserve on behalf of the employees. That settlement could amount to a use of cash of approximately 275 million in 2023, depending on a variety of factors, including the stock price and the number of grants that vest through the year. Finally, I want to thank our teams at Pinterest, our advertising partners, and all of the people that come to Pinterest to find inspiration.

And with that, we can open it up for questions.

Questions & Answers:


Operator

Certainly. [Operator instructions] We will pause here briefly as questions are registered. The first question is from Eric Sheridan of Goldman Sachs. Please proceed.

Eric Sheridan -- Goldman Sachs -- Analyst

Thank you so much for taking the questions. Maybe two, if I can. And first, Todd, you know, congratulations on future endeavors. I'm sure we'll probably have one more earnings call together.

Just wishing you best of luck in future endeavors. Maybe on the first question, you know, obviously, visibility remains low in the overall advertising environment. Can you give us your perspective on how you're managing through that sort of low visibility that you're seeing right now versus managing toward building what you want to build on the advertising side for the long term, and how we should expect the interplay of those factors in the coming quarters? And then, second, you know, as we exit '22 -- and you guys sprinkled a lot of this into your prepared remarks -- but how should we think about what the top priorities are for investment into 2023 and how, again, that maybe plays back against sort of the broader growth environment that you're seeing? Thanks so much.

Bill Ready -- Chief Executive Officer

Thanks, Eric. So, you know, if I step back and sort of, you know, address your questions on the broader landscape of sort of where we are in progressing along, you know, our objectives there, you know, first I'd say, you know, while 4% to 6% revenue growth typically wouldn't be something to write home about, we're actually outperforming compared to a lot of our peers. And we believe we're gaining share, especially with our larger and most sophisticated advertisers, where we're gaining more share of wallet. So, as we talked about, we have huge growth potential in front of us.

And I'll try to frame out that potential. So, when I came to Pinterest two quarters ago, analysts and investors had a few questions. Could we regain share with our core user base after the pandemic unwind? Could we compete in a world of more short-form video? And could we build a monetization engine at scale? After a little over six months, I'm more confident than ever that we can do all of the above. And we're focusing on our investments and employing operational discipline across the organization to get there.

So, on the first question can we return to user growth, yes, we've returned to year-over-year MAU growth. And better than that, we're seeing double-digit growth in our most monetizable and stickiest mobile app MAUs. And we're also seeing that our engagement, overall, is growing double-digit percentages. So, we feel really good about the growing sessions and the fact that sessions are growing even faster than users.

And that growth is accelerating. In fact, in our 10-K, which will be filed today, you'll see that our weekly active-to-monthly active-user ratio is at its highest level ever at 61%. That's clear evidence that we're deepening engagement, as we've been talking about for the last couple of quarters, and finding really good success there. Second, we can't compete in a world where our peers -- you know, the second question was, can we compete in a world where our peers are all in on short-form video? And I think we're answering that question with a clear yes as well but doing it on our own terms.

Our supply of content is growing. Video content is up 30% quarter on quarter. We're finding more efficient ways to get engaging content on Pinterest, serve the need of our pinners you know, from inspiration to action. And importantly, while we're seeing more than 10% of our engagement is on video, it's more than 30% of our revenue is on short-form video.

So, when we think about monetizing that short-form video, which I think is an open question, broadly, we're seeing really good success in the monetization of short-form video, which I think is unique and stands out. And so, further to that point, you know, the question of can we build a monetization engine to scale, absolutely. You know, I couldn't be more excited about the advancements we've made on our ad stack and how that's allowed us to grow monetizable supply north of 15% higher than overall engagement gains because of tech innovations like whole page optimization, which opportunistically increases ad load when a consumer's in a shopping mode or has a commercial intent. We're building solutions to help advertisers measure results on a platform like our conversion API and our new clean rooms solutions.

And while we're early in the adoption curve on those measurement capabilities and those new tools for advertisers, we're seeing that our best share gains, our best growth is coming from the most discerning advertisers that are implementing those tools. And the more they see visibility into our performance, the more we see that that performance is clear. And I think that bodes well for our future as more and more of those advertisers adopt those tools from us. So, while we remain in a demand-challenged environment, I think the improvements we've made to deliver advertiser value are paying off.

I think that's why you see us growing faster than many in the peer set. And while demand doesn't flip overnight, we think the setup that we have of deepening engagement, the supply on our platform growing even faster than the deepening engagement with innovations like whole page optimization are making sure we have really great relevance of those ads and allowing us to serve more relevant ads in commercial context. That, coupled with the progress we're making on measurement tools and the performance we're seeing there early in that adoption curve with discerning advertisers, we think all of that sets us up really well for the medium to long term, even as we're fighting through a lot of choppiness in the near term, just as everybody else does.

Operator

Thank you, Mr. Sheridan.

Bill Ready -- Chief Executive Officer

I think -- Yep. And, then one final point. I think, you know, Eric, you'd also asked about top priorities. I think I addressed many of these in the call.

So, I won't belabor those. But I think on each of these points, while we have really great progress, we continue to proceed forward on those. I talked about making sure that we're, you know, making our -- you know, all of our core experience are shoppable, as well as driving further improvements to engagement and our ad stack. We think we're early in those journeys so we're going to have really good proof points.

Those continue to be our priorities. And then, finally, the operational rigor where, you know, we've implemented a program around operational rigor, we're seeing good results from that. And importantly, even as we're employing more operational rigor, we're seeing really good product innovation. And so, the comments I've made, you know, multiple times around constraints leading to creativity, we're seeing that in action.

We feel really good about the progress on that.

Eric Sheridan -- Goldman Sachs -- Analyst

Thank you.

Operator

Thank you, Mr. Sheridan. The next question is from Ross Sandler with Barclays. Please proceed.

Ross Sandler -- Barclays -- Analyst

Hey. Just following up on the prior question on priorities and investment levels. So, Todd, if revenue -- I know we don't have a ton of visibility, but let's just say low single digits is what we see in the first half, and then, it improves to something higher than that in the second half of the year, what kind of margin expansion might we see based on the planned investment levels that you talked about for '23? And then, the second question, Bill, you guys have talked about using an ad partnership idea as a kind of a supplement to your direct ad sales, where you bring in demand from, you know, some of these retail media networks and DSPs and other third parties. So, could you just talk a little bit more about timing and magnitude of something like this? It didn't come up on the prior checklist, or was that more of a '24 event? And then, how do you -- if you do implement that balance, you know, the partnership idea with direct ad sales.

Thanks a lot.

Bill Ready -- Chief Executive Officer

Yeah. Thanks. I'll hit your second question first and give it to Todd to hit your first question. So, you know, we definitely think about, you know, sourcing ad demand as an opportunity for us.

You know, our first priority is always going to be our direct sales and the partnerships that we're driving there. And we feel really good about the progress that our sales teams are making on that and how we're winning with those advertisers that have implemented our latest tools. And, you know, the most sophisticated and discerning advertisers seeing our performance be the strongest. We feel really good about that, you know, first-party selling motion.

But we do believe there's an opportunity to augment our demand with third parties. And you mentioned one of those that we've done already around retail media networks. We think there's a lot more opportunity in those. And, you know, we also think that, you know, leveraging third-party demand has been an underutilized lever here, particularly compared to other platforms.

And so, that is something that we will continue to explore. While, you know, no specific updates on specific deals or specific partners or those kinds of things, I do think that is something that, you know, we'll look to take more action on. We're already taking action on it with retail media networks and something that will look to continue taking action on more in the near term. It is not something that, you know, I'd put into 2024.

It's something that, you know, we're actively exploring. And again, no specific updates or specific announcements on what we do there, but we are very much looking at that as a meaningful opportunity in the near term, you know, versus something that would be relegated to the medium or long term.

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

And, Ross, on your margin question, not to be too basic about it, but in a world where we have a volatile demand picture and some uncertainty on the year, generally from a top-line perspective, we know revenue needs to outgrow costs. We talked about meaningful margin expansion a few quarters ago, and that's something we're still committed to, and understand the levers, that are needed to get there. Ideally, we can grow as the demand environment hopefully normalizes given all the factors that Bill describes. Deepening engagement, that strategy is working.

We've opened up more monetizable supply at lower prices. We've built tools, including whole page optimization and mobile deep linking to better utilize that monetizable supply. And our measurement tools are proving that those ads are working better and better. So, I'm confident that we'll -- as the demand picture normalizes, we'll see some upside from a revenue perspective.

But we also know that there's another part of this equation that's on the cost side. And from a gross margin perspective, you saw in this current quarter that our cost of revenue declined quarter over quarter after meaningful expansion through the year. That's a product of more disciplined from an infrastructure standpoint and hope to continue to invest in further optimizations through the year, which creates a little bit more headroom for opex. And as Bill mentioned, we slowed hiring pretty significantly in the summer of last year.

We took some actions in the fourth quarter. We've taken more actions already, and we continue to evaluate other levers, including things like our real estate portfolio, to make sure we're on track to deliver that margin expansion. If I'm in your shoes thinking about modeling how the year unfold, you probably can sense from my guide that year-over-year opex growth for the first quarter is a huge step-down from the year-over-year growth that we posted in the fourth quarter on our opex. You'll see another meaningful step-down and further step down as the year unfolds because we're lapping -- in each of the four quarters because we're lapping a lot of headcount-related investments that we made in the first half of last year.

And then, we're lapping a lot of our brand and marketing campaigns in the back half of the year, including some creator rewards programs, which we would dial back and are discretionary. When you think about that from a modeling perspective, that means that we would be able to post much, much, much reduced opex growth through the course of the year. That should support even low levels of revenue growth, driving margin expansion.

Neil Doshi -- Head of Investor Relations

Operator, next question.

Operator

Thank you, Mr. Sandler. The next question is from Brian Nowak with Morgan Stanley. Please proceed.

Brian Nowak -- Morgan Stanley -- Analyst

Thanks for taking my questions. I have two. The first one, you've made a lot of progress around users and sessions and engagement. I was just wondering about any stats to share at all about clicks to advertisers, interaction with advertisers, or anything on transactions.

I know it's early, but just maybe we can quantify sort of some of the early progress you're making on your users engaging more with your advertisers. Then, the second one, well, I guess if you sort of look at your user behavior, as well as the key merchants and inventory you're putting on the platform, what are sort of two or three of the most important verticals of e-commerce that you think are going to really catalyze the advertising growth to materially faster growth over the course -- and over the course of the year into next year? Thanks.

Bill Ready -- Chief Executive Officer

Maybe on the first question, you know, on the progress we're seeing there, I mentioned there in my remarks, you know, shopping ads growing 50% year on year, as well as, you know, not only solving for shopping, but giving easier conversions, easier ability for the user to connect with the place to buy through our mobile deep linking capabilities. And so, I shared, you know, how significant the percentage of, you know, revenue from shopping ads is coming from mobile deep linking. I think that is an early indicator of just how much we can do, not only to make more of our content shoppable, but also our ability to drive that full-funnel engagement where we've historically been, you know, much stronger at the upper and mid-funnel. But, you know, at the lower end of that funnel, we're seeing that that low funnel conversion objective, you know, being about a third of our revenue overall.

And things like mobile deep linking, which, you know, we have not had that adopted, you know, across the board, but the early adopters of that have seen really strong performance. I mentioned that, you know, part of what gives me a lot of confidence in our future is much of our performance is coming from early adoption of new conversion tools or new measurement tool, like our conversion API, and new capabilities like mobile deep linking that, right now, have been adopted by, you know, a smaller set of our larger, more sophisticated advertisers. As we move along that adoption curve, I think that bodes well for how we can compete more broadly, particularly on shopping-type actions, conversion objectives, and these lower-funnel objectives. So, those are really good early indicators that, as we move along the adoption curve, I feel quite good about.

You asked also about, you know, which categories we think of. You know, shopping is pretty broad-based on our platform. There are some obvious ones that you would think about. Women's fashion and apparel and those kinds of things that, you know, are definitely places where we have very large engagements, significant opportunity.

You know, we have, you know, other -- you know, other large-moment engagement, things like, you know, weddings and home redesigns and these kinds of things that are meaningful user behaviors as well. We have some really interesting emerging behavior also. You know, Todd mentioned growth in things like autos and men's fashion, Gen Z being our fastest-growing demographic. So, we feel like shopping as a broad-based opportunity, while there are some categories that we will lean into first.

We see it as quite broad-based, probably more broad-based that many may appreciate on our platform. Todd, anything you would add to that?

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

Yeah, I mean, I think there's a different way of cutting it too. I think everything Bill said is absolutely right. The other way of thinking about it is just in terms of these joint business partnerships that we signed. So, if you cut the market by large versus small, as opposed to category of retail -- or category of shopping or marketplace, we've seen -- I think I talked about it a couple of quarters ago -- that we saw 25% growth in joint business partnerships first half of 2022 versus first half of 2021.

And we talked at the time about how that was a source of confidence in the ad stack and the experience. The full-funnel model here was working for the largest, most sophisticated advertisers. We ended the year up 27% year over year on joint business partnerships. So, we saw that tick up.

And so, from the standpoint of what Bill is describing, some of the largest, most sophisticated specialty e-commerce and specialty retailers are seeing great success on the platform. And that, you know, expands from brand through consideration, through purchase behavior. So, really high confidence and success being driven by some of these larger players through the cycle where there's been a lot more resilience.

Brian Nowak -- Morgan Stanley -- Analyst

OK. Thank you both.

Bill Ready -- Chief Executive Officer

Thank you. 

Operator

Thank you, Mr. Nowak. The next question is from Rich Greenfield with LightShed Partners. Please proceed.

Rich Greenfield -- LightShed Partners -- Analyst

Hi. Thanks for taking the question. Bill, how should we think about your comments around the time spent in deepening engagement? Mean, is there -- I know you're only reporting sort of -- you know, sort of gave us overview metrics, like you haven't gotten to DAU yet. But it does feel like -- I mean, is that a metric that you're sort of solving for is to get people to be using Pinterest on a daily basis? And, like, you know, you made these comments about sort of Gen Z and video.

And I'm curious, if a user touches a video pin, do they end up spending a lot more time on Pinterest if they create, you know, X number of boards? Like, I guess what I'm trying to understand is what's the unlock that gets someone to spend meaningfully more time? Is it engaging with video, creating a board? Like, what have you learned since you sort of took over Pinterest? Because I guess we're all trying to understand, like, what are you solving for that ends up leading to a far more engaged user who comes back -- you know, I guess I'm sort of curious, so is it like it's a goal daily, every few hours, every week? Like, what are you trying to solve for? I know that's a long-winded question.

Bill Ready -- Chief Executive Officer

Yeah. Thanks for the question, Rich. You know, as I mentioned in my remarks earlier, you know, we think there's a huge opportunity in moving Pinterest's users from episodic usage to more frequent usage. And certainly, when you think about something like shopping as a behavior, those become the kinds of use cases that can be more daily type use cases versus, you know, monthly or quarterly use cases.

And so, a lot of the progress you've seen from us over the last, you know, multiple quarters has been around using good AI and machine learning to get better recommendations, better personalization, and using that to, you know, provide better recommendations to our users. And we think there's a lot more opportunity to use those nudges to the user to help them find new use cases on Pinterest. And we've got some really good early evidence of that. Again, it's, you know, our personalization and AI capabilities behind that are a lot of what's been driving our improvements and engagement.

But, yes, we want to move people from episodic use cases to things that are, you know, weekly and daily use cases. And again, you know, we feel like we're well on our way there. We are by no means done. But, you know, to see things like, you know, engagement sessions and multiple measures of engagement at 10% plus, we feel really great about that.

I think the other thing that -- you know, I mentioned this before and underscoring it again, I think it's a big unlock, which is the work that we've done around whole page optimization and demonstrating that ads can be valuable content to the user. You know, if you think about the levers of growth in the businesses, you know, yes, we're going to grow MAUs. But, you know, more than that, there's so much what I would call leaked engagement from the platform where somebody couldn't satisfy their intent here, a monetization would occur someplace else. So, as we get more and more ability to take action on the things that people are already finding here, that's plugging a lot of leaked engagement, a lot of leaked monetization, but then also gives the user reasons to want to come back to us more.

And then, our ability to monetize that as we've made progress with whole page optimization that we launched in Q4, what that's really showing is that, in those commercial contexts, we can actually serve a lot more ads -- a lot more relevant ads in ways that are good for the user, helps them satisfy their intent, and very highly monetizable for us. So, I think that makes me feel really good about our long-term prospects is that we have multiple levers of growth there, like, yes, getting from episodic to more, you know, monthly, weekly, daily usage. But then, within that, playing a lot of that leaked engagement, playing a lot of that leaked monetization and actually being able to, you know, bring much more ad load -- a much more relevant ad load to the platform than what we've had historically. So, that's how I think about the way that unfolds over time.

And while we've got good early indicators, we're at the very beginning of the potential from that. And I think there's, you know -- if you thought about our monetization on these, you know, sort of commercial interactions, I think we're at a fraction of the ad load that you would see in a lot of other places that have these highly commercial intents. So, there's a lot more we can do, then we've set the foundation for how we can dynamically take that ad load up in a way that's good for the user, good for the advertiser, that's the foundation that will allow us to grow quite a bit more. And actually, tying back into the questions around third-party demand, what are the things you need to do first before you bring in more demand is make sure you got the supply to be able to serve that demand.

With our supply growing -- engagement is growing faster than users, supply is growing faster than engagement, we now very clearly have the supply and the ability to go serve that ad content in a way that's relevant and helpful to the user that we think lets us unlock a lot more potential in the ad platform going forward.

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

The only other thing I would add on that, so we -- I've had a -- you know, an aspiration over the last few years. Maybe think back to the IPO, we talked about bringing people back to Pinterest for more things in their life because we know that that drives stickiness with our user base. We invested a lot in personalization and relevance last year because we wanted to address deepening engagement. You've seen the results of that this quarter with growing MAUs, our mobile application user growth at 14% globally, up 5% year over year in the U.S.

and Canada. Bill referenced the weekly to-monthly active-user ratio at an all-time high, sessions growing faster than all of the above. So, the deepening engagement story is working because we were investing heavily in personalization and relevance. You saw that in the financials because our gross margins and cost of revenue climbed last year.

Why did it climb? It climbed because we built 100 times the size of our machine learning models last year to power that experience based on unique first-party signal. We're now seeing the results of that in the engagement figures, and that gives us a different foundation on which to deliver new use cases to our users going forward.

Neil Doshi -- Head of Investor Relations

Operator, next question.

Operator

Thank you, Mr. Greenfield. The next question is from Colin Sebastian with Baird. Please proceed.

Colin Sebastian -- Robert W. Baird and Company -- Analyst

Great. Thanks and good afternoon, everybody. Maybe first, just as a follow-up on that comments around the episodic users, I know this is in early stages, but what's sort of the time frame you'd expect where we could see an acceleration in MAUs above sort of the seasonal trends, I think, Todd, you talked about that you saw in Q4? And then, secondly, regarding features like Watch and Pinterest TV, which are gaining more visibility on the app, curious how these are impacting monetization or ARPU. Bill, I think you mentioned a stat around video and the portion of monetization growth.

I didn't quite catch exactly what that was, though. Thanks.

Bill Ready -- Chief Executive Officer

Great. Thanks, Colin. You know, so, on the -- you know, the shift from episodic to more frequent usage, I think you're seeing some of that reflected, you know, already the progress we've made, as Todd and I both mentioned, around greater personalization. Giving users more reasons to come back, I think, you know, that's part of why we're seeing engagement grow much faster than MAUs overall.

You asked about a time frame for MAUs to move beyond seasonal. Again, I would point the focus more toward the overall engagement and the revenue per user rather than MAUs. You know, as I mentioned in my prepared remarks, we have hundreds of millions of users that come to Pinterest, you know, that are not normal account. They come to us on an episodic basis.

And so, we're much more focused on how do we drive deeper engagement with the users we have. You can imagine we have a very good view as to where those other users are, which ones monetize well. If we wanted to chase, you know, MAUs as a vanity metric, we go chase it as a vanity metric, but they may not be the users that would monetize the best, you know, or where we need to go deep in our platform the most. And so, we're much more focused on, you know, deepening the engagement with the users that are in places where, you know, we know we need to compete most and where we also have the best monetization opportunity.

And so, I'd point your attention more toward the accelerating engagement and the accelerating revenue per user on where we go there. And on video, and specifically the monetization around video, I think this is a place -- it's one of the most exciting things, you know, that I've seen in our work here, is that -- you know, prior to my joining Pinterest, you know, I think a commonly held viewpoint on short-form video that I held as well was that the engagement is fantastic, but, you know, do the unit economics actually work and do you make money off of it in a way that, you know, more than outstrips the significant increase and expense was very much an open question. And, you know, to say that we have more than 10% of our engagement on video but more than 30% of our revenue on video, I think, just puts us in a very different place than many others in terms of having found that right balance of how to monetize short-form video and make sure it is driving both engagement and monetization. And we think there's a lot more we can do there, you know, because we're a lean-forward platform rather than an entertainment platform.

You know, the lean-forward nature of our platform, we think we have a lot of license from users to do much more with short-form video. So, the question I've been, you know, posing to the team is, in the same way the image has existed on the web before Pinterest and Pinterest brought new utility to those images, short-form video has existed independent of Pinterest, but we believe we can bring utility to those short-form videos in ways that others may not and others may not have user license to do because they have the user in a lean-back entertainment mode. We have the user in a lean-forward and tent mode, you know, where we think shoppable content, these kinds of things, would be much more well received by our users. And so, that's, you know, a big part of, you know, what comes next for us, you know, is that we're looking at how we make video shuffle.

We have a really great strength in our team on computer vision. You know, there's lots of talk about AI and how that's advancing. You know, one of the most exciting areas of the next generation of AI is around computer vision, and it's a core competency for us. And so, we're using computer vision to make video more shoppable and some really good early results there.

So, our new core computer vision model that has over a billion-plus parameters has led to an 8% increase in visual search shopping relevance. So, these are the kinds of things that we think we can do, that we think we're already doing quite well, in the balance of how to benefit from short-form video, drive engagement from that but monetize it well. And we think there's a lot more to come there. I hope that helps.

Colin Sebastian -- Robert W. Baird and Company -- Analyst

It does. Thanks, Bill.

Bill Ready -- Chief Executive Officer

Thank you, Colin.

Operator

Thank you, Mr. Sebastian. The next question is from Mark Mahaney with Evercore ISI. Please proceed.

Mark Mahaney -- Evercore ISI -- Analyst

Hey, thanks. When you talk about sessions growing faster than users, can you provide a little bit more color on that? Is that users spending more sessions, more time within the current categories that they're interested in? Or is there any -- is there evidence that they're starting to look across different categories? That's one question. And the second one, just in terms of you talked about meaningful margin expansion in '23. I know, in the past, you talked about opex -- non-GAAP opex growth in fiscal '23 would be slower than in '22.

So, I'm sort of hoping you could qualitatively or quantitatively talk a little bit more about what fiscal '23 looks like. Does meaningful margin expansion mean a couple of hundred bps of EBITDA margin expansion? Anything else there would be really helpful. Thank you.

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

Thanks, Mark. So, a couple of things. We -- when we say sessions, we're looking at what we consider to be a meaningful engagement with the platform. So, you're not just coming here and bouncing, but you're on for more than a minute in general.

And so, those are quality engagements, largely from people on mobile application, the mobile app, and even more impressions and revenue opportunity from those sessions than what we have seen from the kind of our web-based users historically. We've seen good engagement across a number of verticals, some of our core and verticals. But we've also seen, as I mentioned in my script, that there are some areas where we're seeing some cross-fertilization into some new areas. So, I'm highly encouraged.

In fact, one of the things I called out was men's fashion which, may come as a surprise to some on on the call, we're actually seeing some of that use case diversification into things like automotive, travel, which is something we started calling out as people went out and about post-COVID. And so, to answer your question, yes, we're seeing some use case diversification, not only across our core verticals, but also into some emerging ones, which gives us a lot of confidence in the kind of next journey toward use case diversification. On the non-GAAP margin, we had said a couple of quarters ago that we thought that could be, you know, around a couple of hundred basis points of margin improvement, and we're committed to delivering that. It's going to take us stepping down from where we were in the fourth quarter meaningfully in terms of year-over-year growth.

I think the year-over-year opex growth implied by my, you know, low double-digit sequential decline is probably in the low 20s on a year-over-year basis versus 40% growth from Q4. You should expect another big step-down in the second quarter, another big step-down in the third quarter, and another big step-down in the fourth quarter. So, when you do the math on what that implies for the year, it's not just a little deceleration from this year; it's a complete reset.

Mark Mahaney -- Evercore ISI -- Analyst

OK. Thank you, Todd, and wishing you all the best going forwards.

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

Thank you.

Operator

Thank you, Mr. Mahaney. The next question is from the line of Lloyd Walmsley with UBS. Please proceed.

Lloyd Walmsley -- UBS -- Analyst

Thank you. Two questions if I can. First, just kind of going back to that earlier comments around partnerships, around monetization with the likes of retail media networks or other DSPs, how much do you guys see that as an opportunity around, like, billing and ad coverage on certain categories, helping monetize new geographies, or even just on a pure pricing? Like, do you think you benchmark so low that using other platforms can drive up pricing? Anything you can share there would be helpful. And then, going back to the notion that you monetized -- I think you said videos, 30% of monetization, 10% of engagement.

Appreciate some of the color you've already shared, but is that SKU brand, or does that also kind of match your overall DR mix? Are you selling those ads, or are media partners, in some cases, selling ads on that content like -- or is it just a function of the ad creative working where, you know, you just get a higher click-through rate on those ads? Like, anything you can share there to help us understand that better would be great. Thanks.

Bill Ready -- Chief Executive Officer

All right. Thanks for the questions. So, you know, on partnerships, I mean, I think each of the dimensions you mentioned are part of the opportunity. You know, if you use the platform, you can see that, you know, there's an opportunity for us to drive increased ad relevance.

You know, I feel really great about the progress our sales team has made. Rather a smaller platform, you know, even really large, really dense auctions will augment their demand with third-party sources. And so, as a smaller player, as great as our sales team has done in driving, you know, first-party ad demand, which we are absolutely committed to continue to do, it's a real asset, we're going to continue to invest in that. If even the largest auctions benefit from augmenting demand with third-party sources, certainly we can as well.

And in doing that, that should give you greater relevance. I think, you know, I made the comment earlier around the sort of foundation we've laid with whole page optimization. That sets us up to think about, in an integrated way, how we bring ads to the user in a way where those ads are relevant content, which we think has a twofold benefit. One is, you know, drive engagement when it truly is, you know, in particular, in commercial context, where that ad could be relevant content for the user.

But then, secondarily, it lets us, you know -- it lets us serve more ads, you know, and take our ad load up from where it's been. And our ad load has previously been a fraction of what you would expect in other places with the kind of commercial intent that we have. So, ad coverage, increasing relevancy, ad load, these are things that we'll naturally improve these over time. But as we think about the benefits potentially of algorithm of third-party sources, retail media networks, or otherwise, you know, we think that's an opportunity.

Geographies can be an opportunity. And then, your final point on pricing, you know, I think one of the things that I think is hard to overstate in the progress we've made here is that, you know, the whole industry is going through a rewiring on ad measurement and moving from cookies to privacy-safe ad measurement solutions. And so, while the whole industry is going through that rewiring, you know, we are -- you know, we've provided our conversion API, we've launched a, you know, our clean room effort. And our early indications there are really positive, but we are very early on that adoption curve.

And as we think -- we move along that adoption curve, we think we actually are performing far better than many advertisers realize, far better than what they've been able to measure. And so, bringing that greater measurement is a real opportunity. Those are things that we're absolutely going to do first party. But those are also things that, as we think about the potential for partnership across the industry, there's multiple different ways that that can play out.

And you've seen us talk about some of those already, like what we did in our clean room efforts with LiveRamp and Albertsons. And we think we'll have more of those kinds of opportunities going forward that will help with measurement and, therefore, also help with pricing as advertisers have better visibility into the value we're creating for them. And then, on your other question on video, we're kind of breaking down quite to the level of sufficiency that you were asking for. But, you know, we're seeing good, broad-based, you know, engagement on video.

I'll give it to Todd if there's anything more he wants to share about video generally.

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

No, I would say we, you know -- in general that it tends to be more of an awareness opportunity. That's kind of where it started. We have built performance video and have seen decent returns there, but I think the opportunity going forward is, as Bill has talked about before, building a real full-funnel video advertising experience that takes people through conversion. I think there's a unique opportunity given the shopping mindset where more than half of the people come to Pinterest to shop.

Video advertising can take you through the full funnel in a super compelling way. So, I'm excited about the opportunity there.

Lloyd Walmsley -- UBS -- Analyst

OK. Thank you.

Operator

Thank you, Mr. Walmsley. The next question --

Neil Doshi -- Head of Investor Relations

Operator, I think we're actually at time now.

Operator

Thank you. That concludes --

Neil Doshi -- Head of Investor Relations

Operator, we're at time now. Thank you.

Bill Ready -- Chief Executive Officer

So, thanks again to all of you for joining the call and for your questions. We look forward to keeping the dialogue going and hope everyone enjoys the rest of your day. Thank you.

Operator

That concludes today's call. Thank you for your participation. You may now disconnect your line.

Duration: 0 minutes

Call participants:

Neil Doshi -- Head of Investor Relations

Bill Ready -- Chief Executive Officer

Todd Morgenfeld -- Chief Financial Officer and Head of Business Operations

Eric Sheridan -- Goldman Sachs -- Analyst

Ross Sandler -- Barclays -- Analyst

Brian Nowak -- Morgan Stanley -- Analyst

Rich Greenfield -- LightShed Partners -- Analyst

Colin Sebastian -- Robert W. Baird and Company -- Analyst

Mark Mahaney -- Evercore ISI -- Analyst

Lloyd Walmsley -- UBS -- Analyst

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