Pinterest (PINS 1.02%) reported fiscal year 2021 fourth-quarter results on Thursday, Feb. 3. The image-based social media app is experiencing continued losses in monthly active users (MAU).
Pinterest saw customer engagement and users surge at the pandemic's onset when billions of folks stayed home as much as possible. Now, however, as economic reopening is gaining momentum, Pinterest is seeing a reversal of that trend.
Pinterest is building a streak it's not happy about
In its fourth quarter ended Dec. 31, Pinterest boasted 431 million MAU. That's a decrease of 13 million from the 444 million it had at the end of Q3. Pinterest has now lost MAU in three consecutive quarters. It reached its peak level of users in Q1 2021 at 478 million.
CFO Todd Morgenfeld talked about user trends in the conference call following the earnings release on Feb. 3: "As we revert to our pre-pandemic use case-mix, we expect that the pandemic unwind will be a less meaningful engagement headwind as we move through 2022, particularly after mid-March when we will lap the widespread easing of lockdown restrictions. That said, engagement headwinds from search algorithm changes and from time spent on competing platforms are more persistent and could potentially disrupt normal seasonal trends."
Overall, Pinterest has shed 55 million users in the previous three quarters. Management attributed the losses to folks spending less time at home, decreasing the need for inspiration for at-home activities like cooking, do-it-yourself, and home decor. What's more, management noted increased competition from other entertainment options. In an attempt to counter this trend, it's investing in a new short-form video format for content creators.
Note, Pinterest is free to join and to use. The company makes money by showing advertisements to users browsing its platform. More users and more engagement from each user give Pinterest more opportunities to display advertisements.
The average revenue per user (ARPU) increased to $1.93 in Q4, up 23% from the same quarter the year before. Interestingly, Pinterest's ARPU is 13 times higher in users from the U.S. than internationally. Folks in the U.S. have, on average, greater purchasing power, so marketers are willing to pay more to influence their spending behavior.
Pinterest gives shareholders a sigh of relief
The rise in ARPU is a pleasant development that drove revenue growth of 20% in Q4. Investors worried that businesses facing supply chain disruptions would pull back ad spending. Indeed, there was some pullback. Consumer packaged-goods companies with difficulty fulfilling existing demand and facing rising costs in other parts of their operations pulled back spending on Pinterest. However, that was offset by a boost from retailers during the holiday season.
Pinterest expects revenue growth to stay in the high double digits, despite continued user losses and decreasing engagement. That forecast was a sigh of relief after rival Meta Platforms forecasted revenue growth of just 7% at the midpoint of Q1. After Meta's guidance, investors feared the worst for Pinterest. Therefore, the high-double-digit revenue guidance played a prominent role in driving Pinterest's stock higher by 11% the day after the earnings release.