Pinterest Is The Low Profile Winner Among Social Media Stocks

Pinterest IncPINS, the not-quite social network, is a fast-growing and nearly profitable platform for online image searches. And its stock price is up 44% since its successful IPO debut in April IPO. And we've seen such success stories quite rarely throughout this year that by no means unravelled as analysts expected. There's also Datadog Inc., DDOG a cloud-based software-management platform whose stock is up nearly 30% since its September debut, but also with limited losses. But since August, Pinterest has fallen 20%, however not due to company's actions but only due to the climbing interest rates trend.

The senior vice president of engineering already spoke of steps the image catalogue app is taking to become more shoppable. The company announced its new business profile format with "shop the look"collection ads. Shop the look pins were already launched in 2017 and expanded into business a year ago, with an advanced image process that allowed a launch of automated pinks back in February. The new format will allow brands to use videos and custom images in the heading section, with a shop tab and group messaging option that aligns with trends in the industry.

Competitive Environment

The social media landscape is constantly evolving and changing based on consumer preferences. And consumer engagement is what makes or breaks a platform. So, even the most popular platforms like Facebook IncFB is threatened by new inventions like Bytedance Technology Co.'s Tiktok. Although Mark Zuckerberg acknowledges the threat of its popularity, he thinks of Tiktok like "an explore tab they have on Instagram."And Facebook is getting its load of regulatory pressures which isn't making things easier. But Tiktok is about entertaining your audience by inventing characters, dressing them up, and not by what you are doing.

So unlike Facebook and Instagram that are about you, your friendships and making a memoire of your life, Tiktok is about amateur performers mixing everything and making new contexts. And with the resources being drifted away from new product development to paying the $5 billion FTC fine and settlement, no wonder Facebook is struggling to grow new apps. Tiktok is surely not another SnapIncSNAP that Facebook somewhat managed to cope with pushing its "good-enough clone"in countries where it wasn't popular yet. But slowing down Tiktok's growth is definitely more challenging. Fortunately for Pinterest, its users cannot look for inspirational ideas and photos on Twitter IncTWTR, Facebook nor Instagram in that manner, so it is less likely for it to lose users and is able to keep growing.

The Advantage Of Its Unique Structure

The platform has grown to 300 million active users on a monthly basis. Considering Twitter has around 139 million and Snapchat 190 million, this is impressive. Especially as it is a 30% increase from the same period a year earlier so no wonder that its stock soared when its quarter results were announced in August. And it didn't hurt its revenues increased 62% comparing to last year to $261 million.

But other than becoming one of the top social media platforms, it is structurally different from everyone else. And unlike everyone else, it sends people straight to products and ideas based on keywords. And by viewing, browsing, saving and sharing, it is like nurturing a potential purchase as it makes users more likely to buy that product at some point in time. And this is of great interest to advertisers. Especially since the average revenue per user grew at 29% globally, making Pinterest users even more attractive.

Outlook

Pinterest aims to be "a product-discovery platform"and along with its catalogue feature now going broader than US to France, Germany, Spain and Italy, Pin content is getting more shoppable. What better way to showcase your offerings and gain even more customers, and given the Pinterest users engage with the platform in a "shoppingspirit,"businesses will surely consider this platform for their marketing efforts. And let's not forget, Christmas is coming! And for the stock, it seems to be that social entertainment is what's growing, not necessarily social media.

So, whether Pinterest can build an effective advertising business around its international users will be a big determinant of its future success, along with improving its products for both consumers and advertisers. But, it's surely better off than its social media counterparts.

Pinterest Is The Low Profile Winner Among Social Media Stocks - Datadog (NASDAQ:DDOG) (2024)

Competitive Environment

The Advantage Of Its Unique Structure

Outlook