What happened
Pinterest (PINS 4.04%) shareholders lost ground to the market on Friday, as shares fell 3% by 3 p.m. ET, compared with a 1.5% decline in the S&P 500. The downtick contributed to a wider decline for the digital media stock, which is down nearly 50% since the start of 2022.
Friday's slump arrived as investors worried about weakening conditions in the digital advertising space.
Image source: Getty Images.
So what
Part of Pinterest's drop might be powered by concerns about a recent acquisition it made, which was announced on Thursday. That purchase put a spotlight on Pinterest's challenges around user growth and profitability.
Buy the bigger factor driving shares lower Friday is investors' concerns about the digital advertising niche. Several peers, including Snap, traded lower on Friday after receiving downgrades from investing firms. Weakening advertising spending might be one reason why Pinterest is considering a deeper push into e-commerce.
Now what
Pinterest is losing some of its appeal to more video-focused apps like TikTok and Alphabet's YouTube. Not only are these browsing experiences more engrossing, but they offer advertisers more space to showcase products in a video format.
Pinterest needs to find ways to reengage users who have drifted to rival social media platforms before it can build a stronger advertising business. The wider industry is also facing challenges around the effectiveness of many digital ads due to privacy tracking changes by Apple and its peers.
Investors will get a big update on these trends when Pinterest announces its second-quarter results in late July. In the meantime, the stock could stay pressured on general concerns about the digital advertising market and broader economic growth trends.
