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Ok listen up you FAANGM simps, I’ve decided to drop some knowledge about Pinterest. 

$FB is the 800lb gorilla, $TWTR is the clown car in the gold mine, $SNAP is the popular kid in school, & TikTok is the disrupter, but here’s why you should be paying more attention to $PINS

Before I start I want to frame the discussion. I like situations where a co is fundamentally misunderstood, the r/r is skewed & the downside has sufficient protection. At present, uncertainty/skepticism regarding $PINS is high but I believe they’re nearing an inflection point

 If I’m right, the upside is significant. In fact, there are 2 recent/relevant examples that illustrate this: $TWTR in mid ‘16 and $SNAP in late ’18. If you invested in either at peak skepticism, you outperformed materially 

 Think those are hypothetical examples & nobody actually saw the oppty? Check out Slate Path’s 13Fs in early ’17 & late ’18. Former Blue Ridge guys who do exceptional work. If you do the work & develop a non-consensus view, you will be rewarded. Anyway, I digress…onto $PINS

So why is the stock down? US MAUs down -10%, rev decel from >70% to high teens in Q4 ’21, app data showing usage weakness, poor advertiser checks, GOOG algo change, IDFA concerns, increased investment in creators, indiscriminate selling of covid beneficiaries, etc. Not great! 

 But these issues are well known & if the biggest pushback is MAU weakness & intra-quarter ad checks, then we’re not playing the same game. & you’re missing the forest from the trees. PINS is transforming its business & if they execute well, all these concerns will be noise

High level, PINS isnt a social media co. For users it’s a visual search/discovery engine @ the intersection of generating inspiration & facilitating digital commerce. For biz it’s a full-funnel marketing solution that's more akin to a combo of GOOG/SHOP/EBAY than FB/SNAP/TWTR.

 Users come searching for ideas on everything from dinner recipes/clothing styles to major projects like home remodeling/weddings. Every idea is displayed as a “Pin” which is a visual recommendation (picture/video) that is personalized based on the user’s interests/searches 

Pins are UGC (some created by businesses) that always link back to the original source (primarily off Pinterest but that’s rapidly changing). They come in different forms & can be saved/organized into “Boards” which are collections about a topic (e.g., wedding shoes) 

Ppl often don’t have words to describe what they want, but know when they see it. When a pic/video is pinned it becomes discoverable by others, will be saved to thousands of boards w/many diffrnt names. Below is a visual ex of how this human curation leads to wider discovery

 PINS has changed at a rapid clip over the past yr…if you blinked you missed it. Their 2 primary goals are 1-deepen the level of on-platform user engagement, & 2-remove friction in the Idea->Discovery->Action process by moving down funnel & making the platform more shoppable

Why more shoppable? Bc PINS is an advertiser’s dream. Purchase intent is high, search is unbranded (better oppty to stand out), 70% of users are women (they drive 70-80% of purchase decisions/discretionary spend in US), 40% are 25-34 y.o & Gen-Z cohort is growing the fastest 

Data/surveys suggest that 25% of time spent on PINS is spent shopping (more than any other social media co), user basket sizes are 85% bigger, they transact more often, spend 80% more on retail than non-Pinners, & 85% of weekly Pinners have bought something due to a Pin

 Pinners embark on a discovery journey when they want to purchase but haven’t yet decided which product/service best suits their needs/tastes. Most consumer internet co’ are either tools (search, ecommerce) or media (newsfeeds, social networks). Pinterest a media/search combo.

 And while search helps ppl find a discrete piece of info quickly, it’s not a great tool if you dk exactly what you’re looking for, can’t describe it w/words or want something that is tailored to you. Visual discovery solves this problem & Pinterest is dominant in this niche

Given the visual discovery focus, it’s no surprise that PINS is usually one of the leaders in driving social referral traffic for big ticket items that require planning/customizing (furniture, home improvement, etc). 

In fact, some etsy sellers receive more traffic from PINS than all other social media sources combined. & Heap, a digital insights platform, shows that PINS stacks up favorably vs other social media co’s on metrics such as conversion rate for all types of customers 

So why are PINS ads effective? For starters, ads are content & relevance is powered by the same principles that drive organic recommendation. They do not compete with the content Pinners want to see bc they are native content. Below are some examples of ad formats 

 There’s an alignment btwn what consumers are on PINS to do (get ideas & inspiration) & what advertisers are there to do (enable them to act on that inspiration). So naturally, ads (branded content) are arguably additive to the experience. This means ad load can be very high

 re: innovation, in Sep 2020 PINS launched “Story Pins” which later became “Idea Pins” to give creators a way to use native on-platform video to create inspiring/actionable content. Think of it as IG stories/TikTok but videos are tagged w/searchable topics & aren’t ephemeral 

In July 2021 Idea Pins became shoppable via product tagging videos/pictures that link to product pins/catalogs uploaded on the platform. Creators/advertisers can sell products directly, earn commission through affiliate links, or post sponsored content w/brands. See below 

This is possible because in May 2020 PINS partnered w/Shopify to give 1M merchants (in US/Canada) the ability to seamlessly import their product catalog directly to Pinterest & create shoppable pins w/real time price/stock info. This allowed PINS to move down funnel into transactions

The partnership has gone well so in April 2021 they expanded the geographic coverage area to 27 new countries & 1.7M merchants. Shopify merchants also got access to dynamic retargeting for the first time, & multi-feed support (so merchants can customize language/countries)

 Because 97% of the top searches on PINS are unbranded & consist of 2-3 word queries, the majority of consumers are not typing a brand name into their searches. This means biz of any size have an equal chance to be discovered which is a unique & valuable advantage for SMBs on PINS

 PINS innovation doesn’t stop there. To enhance the shopping experience, in Oct 2021 they integrated their AR “Try-on” tech w/Idea Pins for lip makeup. Their “shop similar” feature uses visual search tech to recommend similar product pins which allows you to shop what you see

 $SNAP gets lots of love for their AR tech but PINS AR features are underrated. Here’s their AR Try-on for eyeshadow that was launched in Jan 2021. Early data suggests Pinners are 5x more likely to purchase a product w/Try-on enabled pins vs standard pins 

Here’s another ex of PINS AR tech:

 “Volkswagen ID.4 virtual test drive is the first of its kind on the Pinterest social platform. Pinterest users can virtually experience the ID.4 in various settings as a convenient first step in their car shopping”

PINS has also invested significantly in computer vision. 2 recent product introductions are Skin Tone refinements and Hair Pattern search. This tech is further effort by PINS to get the most targeted product in front of their users to drive engagement & ad conversion 

 Their computer vision & shopping efforts also allowed for the introduction of Shop with Lens, which allows a user to use their phone camera to take a picture of anything in real life or use screenshots, & search for similar shoppable products directly on Pinterest. 

 The move down funnel didn’t really start until mid 2020 w/the addition of “Shop” tab & “Shop Similar” capabilities that go beyond basic product pin ads. Product inventory is skyrocketing w/catalogs up 14x yoy as of Q1 ‘21 & still growing 50% qoq. This is great for conversion.

But the product catalogs & shopping abilities wouldn’t have been possible/effective w/out smaller things like the Verified Merchant Program (March 2020) & improved Creator Profiles (Sep 2020). PINS started small in 2020, accelerated in 2021 & now they’re going big into 2022 

 These Idea Pins/catalogs have led to clever new partnerships like Albertsons in Sep ‘21. A meal planning API will facilitate AI-powered “shoppable tablescapes” & recipes that enables customers to add all of the meal ingredients to their virtual cart in one click on Pinterest 

But this is just the tip of the iceberg. PINS hired Malik Ducard (former VP of content partnerships at Youtube) in Oct 2021 to a newly created position called “Chief Content Officer” which signaled their intent to invest in creators & deepen on-platform engagement

 This biz transition to focus on creators has been met w/skepticism & uncertainty. Concerns about margins going lower due to creator costs + PINS creating a “me too” product while going H2H against TikTok/Instagram w/far fewer users have weighed on the stock recently

 Some recent examples of this focus on creators to drive deeper engagement include: 

1) Content Claiming Portal, Creator Code, & Content Moderation Tools (4/21)

And in Oct 2021 alone: 

2) Pinterest TV

3) Creator Rewards

4) Creator Originals

5) “Takes”

6) TwoTwenty 

While the former are small changes intended to keep PINS safe & inspiring, some of the latter announcements are ambitious, particularly Pinterest TV. 

Pinterest TV is a series of live, original & shoppable episodes featuring creators on Pinterest.

It’s basically QVC/HSN. 

 Creator Rewards is PINS first attempt @ in-app monetization for creators & an initiative to incentivize producing on-platform content. This comes w/a new global Creator Hub in the US.

Pinterest is also providing micro-grants for projects that creators want to bring to life.