Pinterest Shares Fall 9% on Slowed Revenue Forecast, Ad Competition

Image-sharing platform Pinterest projected a slower revenue increase for its third quarter. This forecast indicates significant competition for digital advertising, particularly from larger organisations such as Meta's Instagram. The announcement led to a 9% decline in Pinterest's shares during extended trading, according to Reuters.

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The company has deployed Performance+, an artificial intelligence powered suite designed for advertisers. This system aims to attract more marketers by allowing them to optimise and scale their campaigns with reduced manual input. Yet, the broader digital advertising landscape presents considerable challenges for the platform.

Rival platforms are also enhancing their advertising capabilities. Meta, for instance, continues to refine its Advantage+ ad automation tools. And Reddit has introduced a comparable product to its offerings. OpenAI is also increasingly focusing on advertising, suggesting a further intensification of market competition.

Google also entered this competitive space more directly. The search engine giant recently updated Google Images with new artificial intelligence powered personalised feeds and visual discovery features. These additions closely resemble functionalities already present on Pinterest, signalling a broader push for AI-driven search and shopping by Big Tech.

Pinterest's Chief Financial Officer, Julia Donnelly, cited specific pressures affecting the company's outlook. She stated that incremental pressure emerged mid-quarter from Asia-based cross-border retailers. These retailers were impacted by regulatory actions, particularly those implemented within Europe, a situation which is predicted to persist into the third quarter.

For the current quarter, Pinterest anticipates revenue to fall between USD 1.19 billion and USD 1.21 billion. This range represents a projected growth of 13% to 15%. Analysts had estimated an average revenue of USD 1.20 billion for the period. So, the company faces a period of adjusted financial expectations.

This forecasted growth rate is lower than the 18% revenue expansion recorded in its previous second quarter. The organisation reported USD 1.18 billion in revenue for the three months concluding in June, surpassing analyst estimates of USD 1.15 billion. But, this past performance did not mitigate concerns about the current quarter's projections.

Emarketer analyst Marisa Jones offered her assessment of Pinterest's technological efforts. She noted that the company's artificial intelligence tools have demonstrated early promise. However, Ms Jones observed that these tools have not generated the same level of market enthusiasm seen with offerings from rival firms.

Operational metrics from the second quarter showed some positive movement. Pinterest's global monthly active users increased by 11%, reaching 640 million compared to the same period a year prior. Average revenue per user also rose by 7% to USD 1.86. But, these positive operational figures must be considered against the backdrop of slowing revenue forecasts.

Earlier this year, Pinterest completed the acquisition of tvScientific. This strategic move aimed to broaden advertisers' reach beyond traditional social media platforms. It was intended to extend into connected television, thus providing Pinterest access to a wider pool of advertising budgets.

• Pinterest forecasts 13% to 15% Q3 revenue growth, a deceleration from Q2.

• Competition in digital advertising has intensified from Meta, Reddit, OpenAI, and Google.

• The company cited regulatory actions in Europe affecting Asia-based retailers as a pressure point.

• Despite slowing revenue forecasts, Pinterest reported increased global monthly active users and average revenue per user in Q2.

• Pinterest acquired tvScientific to expand advertiser reach into connected television.

Source: Reuters