Pinterest's (PINS 8.12%) stock soared nearly 400% over the past 12 months as its virtual pinboards continued to lock in more users. Its monthly active users (MAUs) increased 37% to 459 million in 2020, and its total revenue rose 48% to $1.69 billion.
Wall Street expects its revenue to jump 49% this year and another 36% next year. Two tailwinds will likely support that growth: its expansion into overseas markets, which already account for 79% of its MAUs, and the expansion of its "social commerce" business with more shoppable pins.
Pinterest enjoys an early-mover advantage in this nascent market because its pinboards are a natural fit for promoting products. Cowen & Company claims 48% of American social media users used Pinterest to find and shop for products, versus just 10% for Facebook's (META 5.10%) Instagram and 4% for Snap's (SNAP 9.19%) Snapchat.
That's why it isn't surprising that many retailers, such as IKEA, have uploaded their entire catalogs to Pinterest's platform. Pinterest also expanded its e-commerce features with Lens, which lets users take pictures to search for similar images, shoppable pins, and shoppable trends. It also enables Shopify's (SHOP 8.25%) merchants to upload their catalogs as shoppable pins.
Based on these facts, Pinterest seems like the best all-around investment in the social-commerce market. However, three other companies are making similar moves that can't be ignored.
Snap launched shoppable ads on Snapchat in 2018, and let its users search for products on Amazon (AMZN 3.60%) by taking photos.
Last month, Snap agreed to buy Fit Analytics, a Berlin-based start-up that helps online shoppers find the right sizes for apparel and footwear. Fit works with about 18,000 retailers worldwide, and it's developing a visual search technology that helps customers upload photos to find similar products.
Snap complemented that acquisition by buying Craze, the developer of an app called Screenshop, earlier this month. Screenshop also makes clothing recommendations based on uploaded photos.
All these moves strongly suggest Snap wants to turn Snapchat, which serves over 265 million daily active users (DAUs), into a social-shopping platform. More than 200 million of those users already access Snapchat's augmented reality lenses and games daily, so it might be easy to convince them to try on clothing and accessories with their cameras.
Snapchat remains the most popular social media platform for U.S. teens, according to Piper Sandler, so it could be a formidable rival for Pinterest in the social-commerce space for younger shoppers.
Facebook unsuccessfully tried to copy Pinterest with Hobbi, an app that only lasted a few months last year before being quietly discontinued.
However, Facebook's Instagram is a much more potent competitor for Pinterest. Instagram has over a billion MAUs on its own, and its streamlined visual format is comparable to Pinterest's pinboards.
To expand into the social-commerce market, Instagram added shoppable posts, in-app payments, and "collections" to bookmark posts in a fashion similar to how Pinterest's boards work.
More than 130 million Instagram users tap on a shoppable post each month, and it recently added shopping features to Instagram Reels, its short-video answer to ByteDance's TikTok.
During last quarter's conference call, Facebook Chief Operating Officer Sheryl Sandberg admitted that Instagram Shopping was still in the "really early days," but that both businesses and shoppers were having a "good experience" with the platform so far.
Finally, ByteDance's TikTok, known as Douyin in China, is another looming threat, with nearly 700 million MAUs worldwide. TikTok primarily hosts short videos, but it intends to launch new tools that will enable its content creators to share links to products and earn commissions.
TikTok is also developing live video-streaming tools that will allow its creators to host their own online shopping networks. TikTok previously tested out the feature with Walmart last year.
Just like Pinterest, Snapchat, and Facebook, ByteDance has also partnered with Shopify to enable independent merchants to advertise their products on TikTok. Its expansion could represent a threat to all three companies, since Piper Sandler recently ranked TikTok as the second-most-popular social network for U.S. teens after Snapchat.
The bottom line
Pinterest has carved out a comfortable niche in the social media market, and it should remain a top platform for advertisers that want to naturally promote their products via visual pins. However, investors shouldn't assume Pinterest will conquer this market unopposed -- especially when Snap, Facebook, and TikTok all have their eyes on the same prize.