Pinterest (PINS 2.37%) announced it has agreed to acquire The Yes, a fashion shopping platform that creates a personalized feed based on user input. This is the company's most significant acquisition in some time and represents the first signs of a serious pivot in its growth strategy. Here's what we know so far, and why it could be such a significant move.
Why is Pinterest acquiring a shopping platform?
One interesting point is that Pinterest doesn't actually want to own and operate The Yes. In fact, the press release announcing the deal makes it quite clear that Pinterest plans to shut down both the app and website soon after the deal is finalized.
The real reason Pinterest is acquiring The Yes is for its technology and employees. The Yes has proprietary algorithmic technology that personalizes the shopping experience. And perhaps more importantly, The Yes was co-founded by Julie Bornstein, who currently serves as its CEO.
If that name sounds familiar, Bornstein was previously COO of Stitch Fix and held e-commerce roles at several major retailers before that. And after the transaction closes, Bornstein will take over Pinterest's shopping strategy. The rest of her team will be absorbed into Pinterest as well.
Finally, it's important to mention that we don't know how much Pinterest is paying for The Yes. It isn't uncommon for deal terms to be withheld when a privately held company is acquired, but Pinterest has over $3 billion of cash and investments on its balance sheet, and it's fair to assume it is spending just a small fraction of this on the acquisition.
Why it could be a big deal
This is by far Pinterest's biggest move to capitalize on the e-commerce potential of its platform. The company started testing a personalized shopping feature called Your Shop this year, but it is still in the very early stages.
So far, virtually all of Pinterest's revenue has come from advertising, and this will certainly account for the bulk of revenue for the foreseeable future. However, using Pinterest as a shopping tool opens up tons of interesting possibilities.
In fact, Pinterest went so far as to refer to itself as a "shopping platform." Perhaps the most significant line from the press release was:
Pinterest is a shopping platform that brings together the unique commercial intent of its audience and the ability to visually explore products as you would in a magazine or catalog. In a world of impulse buying, Pinterest is designed to enable inspired shopping. It's like a catalog, personalized to your unique tastes.
This is a sharp contrast to how the company has historically referred to itself, even as recently as its 2021 annual report, where it said:
Pinterest is where over 400 million people around the world go to get inspiration to live their best lives. They come to discover and bring to life ideas for their daily activities like cooking dinner or deciding what to wear; for major commitments like remodeling a house or training for a marathon; for ongoing passions like gardening or fashion; and for milestone events like planning a wedding or a dream vacation.
In other words, this move could signal a major shift in Pinterest's focus from the typical social media model of relying on advertisers and toward getting people to buy what they're seeing on the platform.
How much e-commerce potential does Pinterest have?
It's difficult to say how building out its shopping functionality could affect Pinterest over the long run. E-commerce is a massive market, accounting for about $870 billion in transaction volume in the U.S. alone last year.
Pinterest's user growth has slowed in the past few quarters as pandemic-era restrictions have been relaxed. But the company has done a great job of growing its user monetization. However, there's still a massive gap between the per-user revenue of Pinterest and other social media platforms such as Facebook (Meta Platforms) and Twitter, and if it can successfully monetize its shopping vision, it could be a big driver of revenue growth (and user growth) for the company.