Because of changes Apple made to its privacy policies by changing its iPhone data collection rules, Facebook forecast it will take a $10 billion hit to revenue this year as advertisers are no longer able to automatically track users across apps and websites. Pinterest, on the other hand, saw advertising revenue soar.
In its fourth-quarter earnings report, Pinterest easily exceeded Wall Street's top and bottom line estimates as revenue soared 20% in the period to $846 million, generating adjusted earnings of $0.49 per share, up 14% from last year. Both easily topped expectations of $0.45 per share in profits on $827 million in revenue.
Since virtually all of Pinterest's revenue is derived from advertising, it's clear Apple's privacy upgrade is not having the same impact on the social media platform as it is on Facebook.
A drag on user engagement
While CFO Todd Morgenfeld said there hasn't been a material impact on Pinterest's revenue from Apple's updates, it's not completely immune from the headwinds.
Lower engagement by users with advertisers could hurt the site's business, and last quarter monthly active users (MAUs) in the U.S. declined 12% to 86 million from last year. That had more to do with people returning to pre-pandemic lifestyle patterns and changes to search algorithms allowing people to discover the site than with privacy policies, but it ends up impact engagement nonetheless.
At the same time, Facebook suffered its first decline in daily active users in 18 years. Its results were specifically an outcome from Apple's changes and from people spending an inordinate amount of time on TikTok.
Pinterest also said users spending more time on competing video-sharing sites contributed to the decline in MAUs, but it is exploring adding more video components and augmented reality components to its own platform to energize engagement once more.
Those investments may cause a short-term hit to revenue, but in the longer term it should be beneficial because advertisers are looking for such improvements to help reach consumers.
A stark difference in outlook
The reason Pinterest was still able to win in an age of enhanced privacy protection -- and do so handily while Facebook can't -- is simple.
When you go onto Facebook, you're looking to connect with other people: your friends, family, people with whom you share a common interest. You're not interested in being bombarded with advertising and then have those advertisers creepily follow you around the internet, peering into all your activities.
On Pinterest, though, you're going there looking to spend money. Not directly, of course, but the ideas you're collating on the site and pinning to boards is with an eye toward eventually buying something. Whether it's for a craft, a redecorating idea, food to try, or whatever it is your collecting ideas for, you're going to spend cash on them at some point.
It's organically designed to attract advertisers. In short, they have to be on Facebook because of its size, but they want to be on Pinterest.
You can't ignore a platform with 1.9 billion users, so advertisers will gravitate toward Facebook. But one with 431 million users who have money burning a hole in their pockets? Advertisers will stampede to be there, and that's why Pinterest will continue as a growth stock to bet on.