Pinterest, Inc.

to let you know where we are today. As of Tuesday, November 2nd, U.S. monthly active users were approximately 89 million, and global monthly active users were approximately 447 million. While the quarter-to-date trend suggests some stabilization of monthly active users, the pandemic unwind has distorted our typical seasonal trends, as we saw in Q3, So it's hard to predict exactly how the quarter will play out from here. On the revenue side, we expect total revenue to grow in the high teens on a percentage basis year over year. Please note that our Q4 revenue guide takes into account a few considerations. First, the macro environment remains challenging. For our CPG advertisers, supply chain issues are still front and center, and they're not sure when things will improve. Also, it's possible that the macro and supply chain issues will affect other non-CPG verticals more in Q4 than they did during the third quarter. Second, we're facing tough year-over-year comps this quarter. In the year-ago quarter, our investments in ads automation meaningfully drove year-on-year revenue. We had a very strong Q4 2020 holiday season, and we attracted ad spend for being a positive platform during the social media boycott in the 2020 election. Third, we continue to monitor the impact that higher CPAs could have on our more price-sensitive advertisers. There are some exogenous factors that appear to be resulting in higher CPAs, including overall demand for digital ads from advertisers. On Pinterest specifically, if engagement declines continue, we'd eventually expect to see some constraints on our monetizable supply and in turn higher CPAs. This is not something we're seeing today, and we are monitoring this dynamic. At the same time, we're investing in a number of opportunities to monetize our existing supply and help advertisers achieve their goals. Finally, as we scale the distribution of idea pins, traffic will increasingly shift to relatively under-monetized surfaces, such as idea pin streams and our new vertical video watch tab. These new surfaces will likely remain under-monetized in the medium term as we optimize the user experience to drive engagement. This investment will likely be a modest headwind to revenue in the future quarters, as it was in Q3 and as reflected in our Q4 guide. However, we believe that idea pins will be both engagement and revenue accretive over time. Finally, I'd like to touch on expenses. We continue to invest in the growth of the business in accordance with our key strategic priorities of inspiring content, the pinner experience, advertiser success, and shopping. Our non-GAAP operating expenses in Q3 grew 26% year over year. We expect Q4 non-GAAP operating expenses to grow in the low-teens percentage basis quarter over quarter as we continue to ramp investments in our long-term strategic initiatives and invest in our brand marketing campaign in the fourth quarter. Thank you to our teams at Pinterest, our advertising partners, our creators, and all the people that come to Pinterest to find inspiration. And with that, we can open it up for questions.

Certainly. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your touchtone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue. The first question is from the line of Ross Sandler with Barclays. You may proceed.

Hey, guys. Two questions. I guess one for Ben. The new creator tools and idea pins and watch tab, just all the new creator activity, like when you look out, you know, two to three years, what kind of uptake do you think, uh this could get and what kind of impact on on overall engagement are we talking iterative or could it be material any thoughts on that um and just how it's going in the early you know early days here and then todd the um the 4q guide actually looks pretty decent if you look at it sequentially kind of low 30s quarter on quarter uh pretty good considering all the moving pieces right now um i guess Any more color on, like, what's outperforming? You go into 4Q, what's underperforming aside from CPG? And can we get an update, just high level, on how big the kind of big three are, retail, CPG, and all other, in terms of, like, percent of revenue? Thanks a lot.

Thanks for your question, Ross. I'll start by talking about creators, and then Todd will address your second question. So on creators, maybe just taking a step back, I just want to remind everyone of why we're investing in this in the first place. And there are two principal reasons. The first is that Pinterest is fundamentally about inspiration. We've long inspired people with web-based images, but we think that video is a fundamental format for inspiration in the future. And today, mobile video is really still in its infancy. So you're seeing all these different platforms develop video products that play to their core strengths. Some are about entertainment. Some are about social connection. And at Pinterest, we see this opportunity to enable creators to produce videos that are really aligned with what people are there to do on Pinterest, which is get inspired and take action. And so we think that we have a unique value proposition in that space. So one strategic goal is to better deliver on our mission through rich, interactive video. And we think this will both deepen engagement over time and drive action such as shop behavior. The second goal, and you kind of suggest this, is to give our users more reasons to come back to Pinterest with greater frequency. Historically, people mostly come to Pinterest when something in their offline lives needs attention. For example, they might be planning a project such as a home remodel or preparing for a seasonal event such as back to school. And that means engagement tends to be episodic and driven by events that are exogenous to the service itself. But on the Internet, when people subscribe to content from their favorite creators and brands, they have more reasons to visit a service and engage more frequently, regardless of what else is happening offline. So integrating this publish-subscribe model into Pinterest can not only make the product more inspirational and more useful, but can also meaningfully change engagement. Look, it's still early days. It's going to take several quarters for these efforts in native content to kind of meaningfully move the needle. But I'm really proud of the team. You know, we invested significant resources off of kind of more conventional growth investments to build out a new watch tab, this ability to tag products, the new feature that we mentioned called Takes, and as you mentioned most recently, Pinterest TV. And we're starting to see those efforts gaining some momentum. Idea pins created daily grew more than 15x since the beginning of the year. The number of weekly active idea pins creators grew 30x. And the time spent on those pins has been increasing as well. All of that's to say we're really optimistic about it. We're going to continue to invest. We consider this a long-term priority, and we tend to go long on the things that we believe in. We did it with shopping. We did it with global expansion and performance advertising, and now we're going to do it with online content creation.

And then, Ross, I think the second question was about the fourth quarter guide, and I can give a little bit more color on that. So I know folks look at this in a variety of ways, but We often get the question on a stacked growth basis. I think it's in the mid-'90s. On a CAGR basis, over the last couple of years, we're in the mid-'40s, which is largely consistent with trend. So I think your point holds there. The color behind that is we expect that the CPG headwinds, which aren't unique to us, it's an industry-wide phenomenon, I would expect that that continues through the fourth quarter. The question is whether it broadens beyond CPG, but we haven't seen that yet. And I mentioned this a little bit before, but we had a lot of really compelling product improvements through our work on automation last year, auto bid, campaign budget optimization, and other things that had great results through the year. We had an especially strong holiday season last year. And then we had some election year benefits that persisted beyond Q3 into Q4. So we're lapping that. And then we're monitoring, as I mentioned, the impact of higher prices on the platform. But the strength is really around our larger retail advertisers, many of whom are buying consideration or traffic objectives right now, continued strength in international, and the benefits of our investments in a full funnel performance platform are working. I mean, that strategy that we've been talking about for the last couple of years is working, and we're seeing great success there. with our larger managed mid-market advertisers as a result, which means we're using our monetizable supply more efficiently. Does that answer your question?

Yeah, yeah, it does. I mean, I don't know if you guys are willing to give it out, but, like, you know, The revenue mix, I think, is something that comes up often in our conversations around, you know, CPG retail and other and just some of the, you know, moving pieces with those three. So any color high level on that?

Thanks. Russ, at the highest level, thanks for reminding me about that last bit of your question. We grew the business initially on the back of strength in larger retail and CPG advertisers, and that's been – a healthy place for us over the last several years. We've diversified, as you know, into other verticals and deeper into the mid-market, in particular the larger managed mid-market advertisers, especially as we've built out more automation in our ad stack and better serve their objectives. The arc of diversification has moved away on a secular basis, meaning the mix of non-CPG and retail has improved. We still have a lot of exposure to those two, And given the strength we saw last quarter in retail, we actually saw that kind of mix back toward retail in some respects. Our larger advertisers showed up in force last quarter.

Next question.

Thank you, Mr. Sandling. The next question comes from the line of Eric Sheridan with Goldman Sachs. You may proceed.

Thanks so much. I wanted to ask two questions, if I could. A lot of the other players in the industry have called out the need to build better internal mechanisms and tools around measurement and attribution and intent on the back of the privacy changes Apple has made. Can you give us a little bit of a sense of how you feel you're positioned in against broader privacy headwinds in the industry in the coming years and when investments might be key to you. And then, Ben, I wanted to ask, the company's obviously been written a lot about in the press from a strategy and strategic standpoint big picture lately. How are you thinking about the way Pinterest is sort of positioned against some of the broader industry trends around commerce and advertising and the creator economies you called out, and how much of that you can accomplish sort of organically by yourself? Thanks.

Sure, Eric. Well, why don't we start with your question on measurement? Look, we've been talking about being prepared for the shifts in the privacy landscape for quite a while. And so for, gosh, three or four quarters now, we've talked about investing in first-party measurement. Now, look, we don't believe that in Q3 we saw material results. But over the long term, we think that any loss of signal is not helpful in our effort to provide value to advertisers. And it's just early to tell the long-term revenue impact of Apple's policy changes. The reason we don't think we've seen as much of an impact is multifold. One is that historically, app install ads, which depend heavily on the usage of IDFA, have not contributed a meaningful amount of revenue. We deprecated that format altogether in 2021, so we didn't have much exposure to the loss of signal. Number two, because our users often have commercial intent and because our service encourages deep engagement, we do have a rich set of first-party data, and that makes us relatively less dependent on third-party signals to serve highly relevant ads. And so we think our models have been pretty resilient to the loss of off-site data. And then finally, as I mentioned at the top, we've been investing in our ad tech stack just to improve conversion visibility and enterprise-centric solutions. So that's kind of the mix. I think one area that we want to continue investing in, honestly because it makes the product better for users, is more and more seamless checkout. And that's another area where over time, as we see more traction there, it'll sort of help dampen the effects of some of those privacy changes. So that's sort of the first part of your question. Your second question is a little bit more about how we're thinking about the company strategically and how we're positioned. And I don't want to read between the lines, but maybe one question people are asking is, how do you feel as a stay-at-home business And I would say that I think that Pinterest is really well positioned for a few reasons. First, there's a significant audience that's coming to Pinterest for a really differentiated use case. They're not coming to connect with friends. They're actually coming to envision their future, to plan for it. And increasingly, we're enabling them to take action by connecting to the retailers and the products that can turn those integrations into reality. That's a pretty unique value proposition, and it's also a very differentiated brand position. We try to invest heavily to make sure that Pinterest remains a positive and inspiring place through both content safety measures, but also through policies which protect that ability for people to envision that positive future. Second, you know, Pinterest sits at this really interesting intersection of a few trends that are really secular growth trends in the industry. You know, one, as you mentioned, is commerce. And the part of commerce that large online players, say, on Amazon are really great at are showing you products that you already knew that you wanted. But when it comes to taste-based shopping, things like furniture, clothing, things where aesthetics really matter, people are looking for better tools, and Pinterest is the one place where they're going there expressly to save things that resonate, to explore possibilities across brands and across retailers. I think that puts us in a great position. It's a competitive space, but I think that the most important thing is that we have users coming with that specific intent, and then we're working hard to fill in the gaps in that experience through our shopping solutions. And then finally, look, the newest investment is an investment in a creator ecosystem in online video. You know, I said it before, but I think online video and mobile video, it's still in its infancy. You're going to see verticalization happen over time. I think Pinterest is really well positioned to pioneer new media formats that do both inspiration but also allow creators to facilitate action, providing different revenue models for them in the future. So that's what's underlayed our strategy for the last couple years. We've been pretty transparent about it. And it's been great to see progress in that strategy in the form of more shopping conversions, increasing traction with our new creator suite, which really just went to market towards the end of October, and just really positive sentiment from our users about Pinterest being the place that they go to to feel inspired and to plan really important parts of their life.

Thanks, Ben.

Thank you, Mr. Sheridan. The next question comes from the line of Brian Nowak with Morgan Stanley. You may proceed.

Great. Hey, y'all. Just one thought. I want to go a little bit more into the fourth quarter guide and the factors you helped us out with. Could you just help us understand a little bit? You mentioned the supply chain challenges for CPG, potentially going into other categories. What are you already seeing in October? Are you already seeing CPG companies pull back? Are you already seeing other categories pull back, et cetera? I'm trying to figure out what you're seeing in October versus what you're just sort of having conversations about so far. And then the second one, maybe it's for Ben. I always appreciate the stats about product searches being up 100% and the Gen Z ones up 200%, et cetera. Can you just help us out a little more, understand what percentage of the people who come to the platform, even high level, are coming on there and searching with intent as opposed to just browsing? I think it would probably help investors understand a little bit just the value of the social shopping opportunity. Thanks.

Thanks, Brian. So on the Q4 guide, I – would tell you that the guidance reflects what I know through this call about how we're trending into Q4 and what I see in terms of likely demand and delivery through the end of the quarter. So start there. I'm not trying to communicate anything that nuanced in that message. It's literally a continuation of the trends that we saw in Q3 that I haven't seen a bait thus far in the quarter in core CPG, in the core CPG market. And I'm reading the news as you do every day about supply chain challenges in that part of the market, and I'm not seeing anything that's unique to us at all with respect to their advertising demand. It harkens back a little bit to what we saw in the initial part of the COVID period where we saw pullback from CPG and omnichannel retailers who were either sold out or had stores closed. We're kind of in a similar dynamic in CPG where Advertising when you can't deliver product is challenging, and that's not a Pinterest-specific comment. There's nothing that's changed over the last few weeks relative to what we saw in Q3 that I would call out. And the caution I provided about extensions into other industries is just something that is on my mind, but I'm not yet seeing in the quarter. So hopefully that's a little bit – I'm not trying to communicate anything that's more nuanced than that.

Brian, on your question – Your question was kind of like how do we think about shopping engagement on the platform, how many folks are searching, and kind of what's going on there. You know, we don't disclose the specifics of the engagement breakdown, but what I can tell you is that search is one of the fastest growing areas of engagement on the platform in general. And what we try to do in our philosophy in shopping is to make it so any place that you're feeling inspired, we want to make it seamless for you then to connect to a shopping service. So in search, that means that we'll surface products. And then if you scroll down, you can see related products. Those are shopping surfaces. And over time, there's a lot of opportunity to grow the number of shopping ads within those surfaces. When you're just searching generally, we make it easier and easier for you to find individual retailers. That's been a big push by the team this year. And even when we talk about new inspirational surfaces, our long-term plan is to connect those to shopping as well. So we talked a little bit about IdeaPins and Pinterest TV. And we want to make sure that experience is great. But a lot of people want to do there is they want to eventually buy the things they see. And so we'll be experimenting ways to connect idea pins and story pins into their shopping surfaces. Our goal at all times is to make sure that Pinterest feels inspirational. No one wants to feel like products are being shoved down their throat. But at the same time, to make it really easy for you to pivot from that moment of inspiration when you see that perfect scene, when you see that perfect product, and make it seamless for you to eventually buy it. And so we're just starting to experiment with some of the seamless checkout work in partnership with a couple folks, including Shopify and Q4. We're hoping to learn. That's just an early pilot. But, again, it's about shortening the path from inspiration to purchase without disrupting the user experience at the same time.

Great. Thank you both.

Thank you, Mr. Nowak. The next question comes from the line of Rich Greenfield with LightShed Partners. You may proceed.

I'm taking the questions. I actually got a couple of questions, I guess. One, just to sort of add on to Eric's question to Ben, you know, I just, listening to you, I think the thing that a lot of people are thinking about is, you know, your ARPU is still really low versus your peer group, and you don't have connections. the ETP issues that many others have because of your first party data. So whether it's Q4, even thinking about 2022, I guess the bigger question is just like, why isn't advertising growing dramatically faster just given where your ARPU level is? Do you need different ad products? Do you need a different ad selling team? It just feels like there's a big disconnect between the size that you are and the level of monetization. I'm just curious how you think about that. And then, too, you know, we've heard about Facebook sort of changing the way Instagram looks and moving to a more video-centric feed. I was just thinking, like, as you think about Pinterest, does it need to shift as you lean into the creator economy and sort of video? Do you need a different sort of look and feel to how Pinterest just functionally works? Does it need to be more swipeable or more video-centric from the start versus sort of the historic pins on the main page as you go to it? I just love your view on sort of both of those issues, especially thinking about mobile.

Sure, Rich. I'll start with your second question first. And I think it's really about, like, are we continuing to evolve the user experience to keep up with changing user expectations and changing behavior patterns? And the answer is absolutely yes. So, you know, we launched a set of features in October 20th. For the first time, we provide things like the watch tab, which is sort of an immersive vertical scrolling format. We think that's something customers have become really accustomed to. And we think we can provide that format and then we can differentiate the type of content that really aligns to what pinners are there to do. And so that's just one example. But, you know, you'll be seeing us rolling out more and more new experiences that are all sort of principally designed to make it easy to be both a kind of browse inspiration, go deep when they want to, and eventually purchase the things they're looking for. So you're right to ask, and our teams are hard at work. and building those new experiences. I'm really excited, actually, to get them in front of more users that just started to roll out all over the world. Your first question was, why don't we make more money? Why is your ARPU so low? Yeah, there is a question. Let me say a few things. First of all, I'm actually enormously proud of the team. We are growing revenue really significantly. And we talked before about a few different significant opportunities that we see for further revenue growth. The first is international. So we continue to scale international revenue. We're opening up new geographies. And we're getting faster and faster at rolling out products, such as shopping, that are developed in the U.S. into markets that are earlier in the maturity. And we think that's a big driver of ARPU because, as you know, a lot of our users are outside the United States. Second, we have a couple high-intent surfaces that are not that monetized today. And one of the most important is shopping. And what we've been doing is really trying to build more automated ways to bring in more and more inventory. So we talked about catalog uploading. We've also added an API so we can get more and more products there. The thing about those shopping surfaces to remember is that relevance really matters. And what underpins relevance is the scale and the structure of the catalog. So that's been a long-term investment, and we're excited to keep driving that. If on top of that we then reduce the friction in checkout, we think there's a really significant opportunity there ahead. And, look, we're working hard, and I'm really pleased at the progress that we're seeing. The final thing is that the team, the ads product team, has really grown the efficiency of our ads by leaps and bounds. Todd mentioned it just briefly, but we've been on this path to improve automation in a number of different forms. And campaign budget optimization is one of the most recent innovations that we've seen really amazing returns on. We've seen advertisers see 20% to 30% lower cost per clicks, which signals to us that we can give more value to those advertisers, and we think that is a good thing. As that automation gets adopted by some of our larger advertisers, we think it gives an opportunity to democratize those tools for some of the mid-size and smaller advertisers over time. So that's a third opportunity for growth. I get the question, and we're working hard to grow a great business, and I think we have a lot of really great opportunities ahead of us.

If I could just tag on, as you think about 22, do we start to see some of these? You talked about a lot of things there, and I appreciate the depth of the answer. How much of that do we start to see as we move through 22?

Well, I'll let Todd expand on it more. I mean, I think improvements in things like automation, improvements in ad formats and measurement, those are things that are kind of always driving better and better efficiencies. And I don't think that we've exhausted all of those opportunities, and so we continue to work on that. International, we're investing pretty significantly, and Todd can speak more about new markets that we're opening. We're building out operational teams there. I think farthest away are probably the modernization of idea pins and idea streams. Those are brand new experiences. And what we like to do is really get those experiences working well. And we're willing to take a hit on short-term revenue to make sure that users are having a great experience and then find out how to fold in the right modernization opportunities over time. So Todd mentioned that that may be a headwind in the coming quarters. That's true, but I also think it's an intentional choice. We want to make sure that We're giving creators clear guidance on how to build the most inspiring content. We're growing our ability to show the right content to the right person so people feel like they're getting inspiration relevant to them. When those things are established and they're driving engagement, we'll find great ways to add revenue. We're beta testing idea ads. We're beta testing some really interesting partnerships with brands and creators, and I wouldn't expect those to be big revenue contributors in the short term.

Thank you, Mr. Greenfield. The next question comes from the line of Mark Mahaney with Evercore ISI. You may proceed.

I want to ask about MAU retention and reactivation strategies that you're thinking about. You obviously had a good number of users that came on, tried Pinterest, and probably had decent experiences, but maybe like your very first users. only saw it for one use case and may not have appreciated the breadth of use cases that one could find on Pinterest. How do you get those people who kind of were one and done for that COVID period, how do you get them to come back and look at broader uses, broader applications of Pinterest? Thanks.

Thanks, Mark. I think it's a great question. I mentioned it at the top, but I'm like, more social service where you engage with it almost daily to talk to your friends. Pinterest is something that you might come in, use it for a project, and then you may pause. And historically, we've seen a lot of our users use it for a period of time and then come back. Two answers to that. One is that we can do a better job at reengaging those users. And so we're continuing to invest in things like the taste graph and better personalization, which will enable us to do that more and more efficiently, and it's ongoing work to do it really well. The second answer, and this is longer term, is we'd love for folks actually to continue using it from the get-go. And so part of the reason why we're excited about building more of a published subscribe model is that people can find creators that resonate with them and visit the service more frequently. And again, we're early on in that, but think of those as the two approaches. One is resurrecting folks by showing them use cases that are relevant and doing that by improving the quality of our personalization and the quality of outreach. And the second is not letting people lapse in the first place because we connect them with creators and use cases that really resonate, and that keeps them using the service more and more often to do more and more different things in their life. Thank you, Ben.

Thank you, Mr. Mahaney. The next question comes from the line of Colin Sebastian with Baird. You may proceed.

Thanks. I have a couple of questions also. I guess, first off, regarding the commentary on new services as a near-term revenue headwind, I guess, what are your expectations in terms of timeframe needed for those to shift from a negative impact to a positive impact? If there are particular hurdles you're looking for, particularly if you're seeing cannibalization and usage away from legacy services. And then secondly, with respect to the loss of Gen Z users, just curious from what you can tell, is this part of the cohort that came on during the pandemic? or could this be a loss of attention to other platforms? Thanks.

Thanks. So a couple of things. One, Ben, I think, went into a fair amount of detail on what we're building around our creator strategy, which when we execute, we'll bring people back to the platform more frequently and give them a reason not to churn. So I'm excited about that publish, subscribe aspect and interest-based communities keeping people on the platform. All that said, we're in fairly early innings on all that. We just launched our series of products a couple of weeks ago, which are a great start. I think it will take us a few quarters to get that up and running in a way that builds a great ecosystem across the creator community and our user base. And the reason why I think it takes time is we're been started. We take a long-term investment philosophy on these big new initiatives. If you go back to What we did around international audiences and monetization, that was a multi-year effort to localize content, make sure the user experience resonated outside of the U.S. in the same way it does in the U.S. across the world, and make sure that that advertising opportunity is as robust relative to market sizing in those places as what we've seen in the U.S. So that has taken us a few years, and we're seeing great success. And going back to I think it was Mark's question around what does that mean? It means we're still opening up more Latin American markets next year, three more markets. We'll open up Japan next year as well. And so those things take years to unfold. The same was true with shopping. It was a two-sided marketplace where we needed dedicated, high-intent services for our users to find products, and we needed the merchant community to upload catalogs in a way that would provide it reached the opportunity for us to serve the right organic content or promoted content to the right user at the right time relative to that commercial intent. Our focus was on making sure the user experience worked first, and we're now monetizing that shopping experience better and better over time, but our first focus is on making sure the user experience is positive. The same will be true on these IdeaPen creator ecosystem investments we're making. I'm highly confident that will drive session frequency, depth of engagement around rich discovery opportunities. The publish-subscribe model will bring people back more regularly around interest-based communities, and I think that this will be a terrific platform for shopping over time. But it will take us, you know, this is not a next quarter you'll see a turnaround in engagement. This is a longer-term investment for us. On the Gen Z point, our best belief is if people went back to school in person, and relative to a year ago, that meant they spent less time in that Gen Z community on our platform. We also had, if you remember a year ago, we had an iOS update, and there was a fair amount of engagement around wallpaper. I think we called out 4 million users in the third quarter of last year, which was roughly split geographically similar to the way we look at our global audience. in terms of impact, and so that was a bit of a headwind in the third quarter. But the biggest thing that we're looking at is people just going back to school and spending less time on Pinterest in that cohort.

Next slide. Thank you, Mr. Sebastian. This will be our last question from a line of Rob Sanderson with Loop Capital. You may proceed. Mr. Sanderson, your line is open. Thank you, Mr. Sanderson.

I'm sorry, operator. Do we have Rob on the line, or should we move to close the call?

Mr. Sanderson did not answer. You can now conclude the call.

Great. I'll hand it over to Ben to end the call.

Well, I just want to thank everyone again for joining and for all the thoughtful questions. I want to thank again the Pinterest team for another quarter of great work. We look forward to keeping the dialogue going and enjoy the rest of your day or your evening.

That concludes the Pinterest third quarter earnings call. Thank you for your participation. You may now disconnect your lines.