Pinterest Has a Chance

Everyone seemed to forget about Pinterest. Including the people running it. It should be one of the best businesses on the internet, but it has utterly failed to fulfill its promise. Look at all the things it has going for it:

• People explicitly go to the website with the intent to window-shop.
• Its product initially gained traction with the most valuable consumer demographic (women ages 20-60 who drive 70%+ of consumer spending).
• It boasts a wholly different engagement modality from other sites.

Despite all of these advantages, the business has been a dud. The stock price is down 8% since its public-market debut three years ago, the product has been fairly stagnant, and the company has churned many of the users that it gained during Covid.

Recently there have been signs of life. The company got a new CEO in June, its total monthly active users grew above its Q3 2021 mark of 445M, and a feed change generated a 6%+ increase in engagement. There may be a little bit of magic left. There may even be, dare I say it, an argument for optimism about the company.

However, it’s hard to be anything other than realistic about Pinterest. It should have been much bigger than it is, and while there are some encouraging signals, it is still a company that has failed to meet its potential. Is this latest improvement the last gasp of a dying unicorn, or the start of something new?

It’s funny to type, but this $15B company is an underdog. 435M users makes you a relatively minor player on the scale of the global internet. If they can figure it out, maybe other businesses can also figure out how to exist under the existential threat of Big Ad (Google, Meta, and Amazon). Pinterest has a chance to be a 100B company and they appear to finally be on the path to become one. 

What is this product?

Analyst reports on Pinterest typically position it as a “social media company.” It’s better to think of it as a factory that takes in raw goods and outputs a finished product. Users—ranging from Mormon mommy bloggers in Utah to sleek ecommerce brands in Brooklyn—upload pictures of their products or interests as inputs. The factory interacts with this raw material in two ways: It labels the content with metadata that allows it to be sorted on its website and rank well on Google’s Image Search. It then distributes the inputs as Pins within its internal content discovery engine. Inside the factory stand its 435M users waiting to sort these inputs into the appropriate digital scrapbook. Pinterest calls this a board. Crucially to the model of the company, all of this user labor is free.

The user experience is basically that of window shopping but transposed onto the internet. It is algorithmically optimized aesthetic browsing. For example, if I’m looking to build out a Lord of the Rings board (because it is the greatest fantasy series of all time) it would look something like this:

Within a board are both short-form videos and photos. There are native ads that are hypothetically tuned to me, but who are they kidding, serving an ad for “flexible financing for cosmetic care” on a LOTR board. I mean, I just started using a face wash for the first time at age 30. 

People use the board mostly for browsing, but there is also a a job to be done of uploading content. Creators and brands are looking to sell additional goods and use Pinterest as a demand aggregator. Remember how the Pinterest Factory tags all of the images and videos with metadata? That’s how the company grows its users and, subsequently, usage. Whenever someone searches for something on Google, Pinterest’s goal is that their images appear at the top of the results. It’s a self-reinforcing growth loop.

Pinterest isn’t a platform exclusively designed for slack-jawed consumption like TikTok or Instagram. It’s meant to be a place where you seek out a specific idea, cultivate those ideas into a board, and then, for now, go elsewhere to purchase the goods related to that idea. It has a concrete and specific utility. It’s sort of like scrapbooking consumerism.

Over the last few years Pinterest hasn’t created anything truly novel; instead, it’s been responsive to other trends in social media. The company has released new content formats that are amalgamations of Twitter’s short-form video and Snapchat’s Stories which have done OK. Last year it spent about $22M on creator economy projects that it recently admitted were a failure. All in all, I find myself uninspired. None of this screams a compelling growth story.

The temptation when analyzing a company that relies on user-generated content is to ascribe form factor as the determining factor of what a company is: Instagram is for photos, Twitter is for text, etc. The second, more advanced, level is to analyze it based on what type of graph the feed is determined. Is it a social graph based on who you follow, like Facebook? Or is it determined by what your interests are, like Reddit? The third, and most interesting of opportunities, is to analyze a company by the utility that it provides. Does it provide joy? (Tinder.) Does it provide crippling loneliness and depression? (Also Tinder.)

Pinterest is in the rare category of having a crystal-clear value proposition that it is clearly delivering for lots of people. This is a double-edged sword: it makes it far harder to add additional products (because it dilutes the use case), but it should theoretically make achieving business results easier. Why aren’t the business results following that utility?

Why can’t Pinterest build a winning ad product?