Pinterest (PINS -3.41%) is having a challenging year in 2021. The company benefited at the pandemic's onset when millions of people largely stayed home for weeks or months on end. With few options for what they could do with their time, many people flocked to the image-based social media app for inspiration and lifestyle ideas. 

That trend is reversing this year. Billions of people have gotten at least one dose of a vaccine against COVID-19, and economies are reopening. Spending time outside and away from their various screens, engagement on the social media platform is falling. As a result, Pinterest stock is down 20% year to date and 29% in the last three months.

A  person looking at their phone while leaning on the kitchen counter and holding a cup of coffee in one hand.

Image source: Getty Images.

Rising prices for digital advertising

Fortunately for Pinterest, one of the side effects of reopening economies is ramped up spending among marketers. Facebook and Alphabet account for over 50% of the digital-advertising market, according to data from eMarketer. Each company also reports on various metrics for the industry, and in their most recent reports, the clear takeaway was rapidly rising digital ad prices.

Alphabet said its cost per click increased 31% year over year during the second quarter. Cost per impression also increased 63% in the same period. Similarly, Facebook said average price per ad increased 47% in the second quarter. The rise in ad prices and spending should be a tailwind for Pinterest.

Monetizing internationally 

Pinterest boasts 454 million monthly active users, down from 478 million in the previous quarter. Four in five of the company's users are now from international markets.

However, advertisers are still keen on winning the attention of U.S. users, who are worth a lot more than their non-U.S. counterparts to Pinterest. The company generates average revenue per user (ARPU) of $5.08 in the U.S. versus just $0.36 internationally. The company is still in the early stages of monetizing its international user base, only launching those efforts in Brazil and Mexico a few months ago, for example. The large gap between international and domestic ARPU should shrink over time as Pinterest builds out its various efforts overseas.

Innovative features 

To support its long-run growth potential, Pinterest is working on three features. First, it's investing resources to expand Idea Pins. This publishing tool enables creators to add content with lasting value.

Next, Pinterest is sustaining its creator code initiative, which helps ensure its site remains a positive and supportive environment. Finally, it's working on a feature that goes beyond likes and comments to foster community among its members and creators.

According to management, Idea Pins is taking off already with the number of Idea Pins expanding sevenfold in 2021. The features all work toward attracting people to the site and then getting them to participate in the community. Users are likely to spend more time on Pinterest if they're communicating with others on the platform. New tools and features keep consumers engaged and help support community-building efforts.

Overall, near-term results could be volatile for Pinterest as consumers adjust their behavior based on the state of the pandemic. The most obvious risk is that Pinterest continues to shed users over the next few quarters. Investors who have the stomach to handle the short-term volatility should consider adding this beaten-down growth stock to their watch lists.