Today, Pinterest said it hit 150 million monthly active users, up from the 100 million it announced in September 2015.
However, as TechCrunch previously reported, Pinterest in 2015 was targeting that it would hit 151 million monthly active users by the end of 2015. We reported the story in October last year, and the information was used by Andreessen Horowitz to solicit limited partners to invest in a special investment fund for Pinterest earlier in the year.
With Pinterest growing by half this year, it looks like it may miss on its 2016 projections that it set earlier last year as well. Leaked documents reviewed by TechCrunch at the time also projected that Pinterest would end 2016 at 218 million monthly active users. The Wall Street Journal today also reported the company is expected to triple last year’s revenue to $300 million in 2016. That, too, falls below projected estimates of $663 million for 2016 from those leaked documents.
Again, these projections came in early 2015, and companies are constantly revising them as the years progress. Pinterest CEO Ben Silbermann, in response to those projections, told The Wall Street Journal that “there were some early projections when we were just a couple months into building the business, but we’ve learned more about it.”
“Start up life is dynamic, and years old projections aren’t particularly relevant to where companies are today,” Andreessen-Horowitz partner Jeff Jordan, who is on Pinterest’s board, told TechCrunch. “We’re thrilled with Pinterest’s performance — strong continued user growth, best-in-class user engagement, and an increasingly robust platform for advertisers that’s leading to rapidly expanding revenue. We’re very excited about what’s to come.”
Revenue of $100 million for 2015, and potentially $300 million for 2016, are enviable numbers for a consumer ad-driven startup that’s only 7 years old. This isn’t really a reflection of poor performance for Pinterest, it would seem — just that the expectations may have been set a little high. Many startups are sometimes valued, to some extent, at a multiple of next year’s revenue. While Pinterest’s valuation is likely also relative to the latent pent up marketing and user demand, as well as its growth and overhead, it would still seem the company needed to reset its expectations.
While these were early projections, they may represent a service that — while incredibly popular with certain demographics and very attractive to advertisers — will face some challenges as it continues to look forward. The company has traditionally been very popular with women, but Pinterest is saying that 40% of global sign-ups are men, growing at 70% year-over-year.
Last week, the company announced that it had brought on its first chief financial officer, former Twitter executive Todd Morgenfeld. But at the time of that, The Wall Street Journal reported that the company had generated $100 million in 2015, which fell below its projections of $169 million. To be sure, 50% growth year-over-year would be an enviable clip for any service with more than 100 million users (as in, Twitter), but there has always been a question as to what the upper bound of Pinterest would be beyond really powerful use cases like wedding planning or recipes.
There are a lot of potential reasons for this. With Facebook still immensely growing, scooping up new communications platforms and offering a wider array of advertising products, advertisers may be more inclined to simply stick to what they know. And the experimental budgets that these firms have, which previously may have gone to Pinterest, may be shifting to other emerging platforms like Snapchat, which has 150 million daily active users. Snapchat, a 5-year-old company, is already projecting revenue as high as between $500 million and $1 billion for 2017.
The souring on alternative platforms to Facebook and traditional advertising has been made increasingly apparent as Twitter’s valuation has dropped off a cliff. In recent weeks, reports came out that suitors have emerged (and slinked back, and emerged, and so on) to buy Twitter. That sent Twitter’s shares rocketing up, but it’s since cratered back to a market cap of around $12.5 billion. That’s not too far off from Pinterest’s valuation of $11 billion in its previous financing round.
Pinterest has increasingly offered an advertising tool that serves a larger funnel than other services. While Facebook — and likely Snapchat — are very effective at awareness and brand advertising, Pinterest has billed itself as a way for marketers to push users further and further toward conversion. It can get their attention at the awareness phase, their intention to purchase with search, and finally a conversion when they are pinning products or even purchasing them. For many kinds of products, particularly fashion, Pinterest is one of a very small set of marketing tools that touches users at every point in a purchasing life cycle.
That’s also why it’s been aggressively investing in tools surrounding visual search, including a tool that would allow users to search for products with photos from their smartphone cameras. Those sort of things are designed to capture the moment of an impulse purchase, increasingly offering alternative marketing products to its partners — and potentially to draw advertising dollars away from Facebook (or Snapchat).
In addition, Pinterest is also an online advertising service. Something like that might generally require little overhead, and to be sure, the company is generating a lot of revenue. It raised $553 million in its last financing round that valued it at $11 billion, so at face value it would appear that the company shouldn’t have any fear of running out of cash despite a lot of R&D investment and talent acquisitions — to go along with a healthy revenue stream.
What remains to be seen is whether this represents a more general trend for Pinterest. Will it being to see slowing user growth similar to Twitter, or more sustained gains like Facebook? The company’s international expansion appears to be going effectively, with 80 million of its users coming from outside the United States. There are of course different cultural quirks in different countries, but there’s clear demand for a service like Pinterest.