Does Pinterest know it can dominate the Metaverse?
As the Metaverse becomes more of a reality few platforms seem to be a natural fit in terms of migratory stature and fitment. Many have the user base, but the demographics may just not translate, others may have competing monetization interests, and others may be completely game-centric focused as they see it as a pure game-like world.
But beyond all this Metaverse is the place having 3 major layers consisting of experience, discovery, and the creator economy come together driven by a need to be inspired. These 3 layers are unlikely to become commoditized as they are driven by trends and the world of the visual to create better digital lives for the participants of these worlds.
So, if one views these 3 top layers as key components of the Metaverse there is one visual engine that can be the fabric of these 3 layers and that is Pinterest.
Pinterest is a place for people to plan and ideate about what they can do to enrich their lives. It is a place where we should visually optimize our content just like we optimize our normal text content in google.
Pinterest is a life designer as a place for people to deeply aspire to better design and build their own lives. Few tools give such detailed idea’s but Pinterest has built an ecosystem where everyone can feel like a designer and idea-generating machine.
It is a place where one can get more engagement and traffic back to their website by focusing on connecting content visually with people who are looking to buy stuff to complete larger projects that they have in mind.
The Recent Pivot of Pinterest:
The platform is going through transformation pivoting from a place for DIY (Do it yourself) decoration ideas and blogger craft projects into one of:
- Makers of a creator-driven ecosystem through Idea Pins
- Pinterest TV and content creation engine
- The digital shopping mall
Pinterest is building a video anchored content framework built around Idea Pins that can drive greater long-term engagement. Idea Pins allow recording of multiple videos, adding images, lists, and custom text into a single Pin so a set of products can be shown in a brand-new way or a story can be told. These Idea Pins can drive engagement by creating value for both Creators and Pinners because they are designed to inspire action rather than simply entertain.
The digital shopping mall is Pinterest pivot into commerce out of pure photo sharing. With many new partnerships, retailers can sell to Pinterest users directly on the platform without leaving the ecosystem whether it be West Elm or Albertsons, or Amazon. For example, if an idea pin connects with an armchair from craft and barrel, Pinterest commerce will connect the pin with the armchair in craft and barrel and ensure the whole transaction can be completed without exiting from the Pinterest platform. This bodes well for a Metaverse connection as the same armchair can be taken as a digital product and as a physical one multiplying its value across both worlds. This further drives ad revenues and physical/digital transactions within the ecosystem.
With partnerships across multiple product lines, Pinterest is becoming a platform or even a digital storefront that cuts across multiple retailers including Amazon. This combination of visual ideation, search (Described later), and commerce positions Pinterest to have a strong monetization model across many new-age industries.
The Monetization Model
Pinterest already has a robust monetization strategy. Their user base has been stagnant and slightly declining (Due to Covid — Explained Later) but their ARPU is constantly growing. (Rising 22% from Q4 2020 to Q42021)
Their monetization strategy is already built on a very high buyer intent as Pinterest is all about looking up and saving ideas on how to spend money. This could be things like building a board for furniture to buy or vacations to take.
The visual platform continues to build on this experience as they have also developed a seamless checkout feature on its commerce workflow. This high intent to buy and relatively low elasticity helps drive advertising revenue and improve ad integrations which further drives revenue.
Their financials and recent quarterly reports have shown their cash flow growth. Today Pinterest has no debt during its stage of growth and early monetization journey. They are also flushed with liquid or nearly liquid cash with 1.4 billion USD in cash, 1 billion USD in short-term investments, and another 650 million USD in receivables meaning they excess of 3 billion dollars available or right in the pipeline.
Revenues also continue to rise with a growth of 20% YOY growth between Dec 2020 and Dec 2021 meaning there is strong growth in earnings despite having a decrease in users from 459 million in Q42020 to 431 million in Q4 2021. This shows their ARPU is surging and a strong focus on monetization is growing on its user base.
In fact, one can even go out and say their revenue growth will be even greater than the 20% YOY rise, as they had an inflated user count due to the pandemic from June to Sept 2020 that temporarily increased revenue, Meaning real growth rates maybe even higher.
Pinterest’s Ability to Predict Trends:
The other facet of Pinterest that bodes well is its ability to catch onto trends by evolving into one of the world’s largest search engines processing 5 billion searches a month. With its Guided Search feature, Pinterest has now become a combination of search engine and targeted advertising tool; playing on the niche for people to search for inspiration. (This is different from Google whose model is built to serve with its core value: exact and fast information)
Pinterest search serves on the intent that users don’t want an exact answer, users only want to be pointed in the right direction so they can explore what else can be incorporated into their projects. This need to be pointed has created a natural outcome for Pinterest to be a real-time trend tracker in both keyword and visual analysis as the platform is able to connect this to the social commerce ecosystem to see which trends are being monetized.
With the Metaverse growing it is likely the number of custom designs ideas may grow. This will increase the need for users to look for more innovative design ideas especially if they want to change the décor of their virtual homes and meeting rooms.
This trend will bode well for Pinterest as users will likely visit the platform more frequently for design ideas and inspiration as the friction of changing the look of virtual rooms is less than it is in the physical world.