Shares of Pinterest (PINS 1.55%) plunged on Friday after rival company Snap (SNAP -0.09%) reported disappointing financial results for its second quarter of 2022. The two companies benefit from and are hurt by the same general factors. And this is why Pinterest was down 14% as of 12:15 p.m. ET, even though it didn't have news of its own to report. However, there's something important that the market appears to be forgetting.
Snap stock is down 39% today as of this writing. In Q2, average revenue per user (ARPU) was down 4% year over year and its profitability took a big hit. In short, it appears that macroeconomic conditions are causing a big pullback in mobile ad spend. And changes to privacy settings are making mobile ads less effective. And these general challenges apply to Pinterest as much as Snap.
Today's crash for Snap is very reminiscent to its crash in the first quarter. And Pinterest stock fell in sympathy then, too. However, Pinterest quickly calmed investors' fears when it reported financial results of its own. In Q1, Snap's ARPU was up 17% year over year. For comparison, Pinterest's ARPU was up a more robust 28% for the same time period.
I don't wish to suggest that Pinterest is immune to a potential pullback in ad spend. But last quarter, Pinterest and many other ad tech companies appeared to be more resilient to the challenges than Snap, which could be the case again now.
Pinterest's biggest challenge is attracting users. In Q1, global monthly active users were down 9% year over year. It's a trend shareholders would like to see reverse when Pinterest reports Q2 results on Aug. 1.