Despite its stock being down right now, many are still bullish on Pinterest (PINS +1.16%) as a solid long-term investment. In this clip from "The Rank" on Motley Fool Live, recorded on May 2, Motley Fool contributor Matt Frankel discusses why better monetizing its international user base is a key area of opportunity for the social media giant.
Matt Frankel: Why is Pinterest down by, I think, about 75% from the highs? To be fair, there are good reasons. Let me share my screen real quick. Let me go through why Pinterest is performing so poorly. So this is their revenue. Don't read too much into the big drop from the fourth quarter to the first quarter. There's a lot of seasonality in the business. This is an advertising business. Advertisers spend more money during the busy holiday season. Totally expected that revenue's going to drop from the fourth to the first quarter. Decent growth year-over-year still, throughout the business. One interesting note that I'm going to mention a few times in this little pitch, is that this is the first time that Pinterest has broken out U.S. revenue, Europe revenue, and rest of the world. It used to be U.S. and international, so they're specifically calling out Europe now for the first time, which is interesting. Here's why they're down. The monthly active user base has steadily been declining over the past few quarters, and is still down 9% year-over-year. It picked up a little bit from the fourth quarter to the first quarter from, as you see, from $431 million to $433 million. But a lot of people were expecting a little bit more, especially with, the whole reason Pinterest surged during the pandemic is because people were stuck in their house with nothing else to do but look at Pinterest and get ideas for home remodeling and books to read and things like that. So with the Omicron surge in the first quarter, a lot of people were hoping the same thing happened. And it didn't to the extent that a lot of people were hoping. But if you look at this user base, about half of it is domestic, between the U.S. and Canada. Another 27% comes from Europe. Or, I'm sorry. Scratch that. 22% from the U.S. and Canada, 27% from Europe, and about half is the rest of the world. So 220 million users outside the U.S., Canada, and Europe. Why that's important: look at this average revenue per user. The average U.S. and Canada user made almost $5 in revenue per customer for the company in the first quarter. In Europe, it was $0.72, so about one-sixth of the average U.S. user. Look at the rest of the world number. Out of those 220 million users outside of the U.S., Canada, and Europe, the average Pinterest user brought in just $0.08 in revenue for the company. Almost nothing. But that is up 164% year-over-year. I've said many times in the show: monetizing their international user base is Pinterest's biggest opportunity. The end. And that's even more true now that you see the rest of the world number broken out. I mentioned Europe and the rest of the world used to be just lumped into the international category of these presentations. Now that you see just how little it is outside of U.S., Canada, and Europe, that's a massive opportunity. They're never going to narrow the gap. Like that $0.08 is never going to become the $4.98 that you see from the U.S. users, at least not any time soon. But there's a lot of room to narrow the gap there. If they can get that up to a dollar eventually, that would be a massive win. And I don't think that's outside the realm of possibility as they really start to scale up their international operations. So I'm a big believer in Pinterest long-term. I think they're of the best social media platforms in terms of management, in terms of mission. They're probably the least controversial of any of the major social media platforms. You know, there's no political discourse or anything like that.
