Here’s How Pinterest Can Drive User Growth

Pinterest was valued at over $12 billion in its most recent funding round, and reports suggest that it is likely to go public in 2019. However, its revenue growth has not met management’s internal targets set a few years back. Our interactive dashboard on Pinterest’s valuation examines its key valuation drivers, as well as a scenario on how achieving an average revenue per user (ARPU) comparable to Snap or Twitter could generate a significant revenue growth, and a high valuation, for Pinterest (see Can Pinterest Be A $ 30 Billion Company?).

Pinterest’s total revenues are a function of its active user base, and the average revenue it generates per user. While the company is working on several initiatives to increase its ARPU, its active user base is still smaller than the other major social media companies.  The below chart compares Pinterest’s user base compared to those of Snap and Twitter (note that it’s not a direct comparison for Snap, given that Snap reports daily active users rather than monthly):

In the past few months, Pinterest has seen rapid user growth.  Recent data suggests that the company now has 250 million monthly active users, an increase of 50 million since September 2017. Continued rapid growth in monthly active users would provide a boost to Pinterest’s revenue, and in turn its valuation.

Expanding User Demographics

Pinterest’s user base has historically been predominantly women who look for images for ideas around arts and crafts, home décor, and other items. In 2017, 70% of Pinterest’s users were women (the number has been around 72-73% since 2013), while most other social networks have a relatively equal mix of male and female users. With further user expansion in mind, Pinterest is now adding pins around articles and other content that could attract more men to the platform. The company is seeing solid growth in male users (as of September 2017, its male audience had grown by 50% year on year), but it will need to strike a balance between catering more to male users while maintaining its popular platform and its appeal to female users. An equal appeal to men and women would allow for substantial user growth over the coming years.

International Expansion

Markets outside the U.S. are also likely to drive Pinterest’s user growth – the company mentioned in September 2017 that more than 50% of its users are now outside the U.S., and more than 75% of new users are international. The company is aiming to provide a local experience to its global users, and has a specific focus on the Latin American market. While international growth can drive major expansion in its user base, it would likely put pressure on its ARPU. ARPU in the U.S. is much higher compared to most international markets. For reference, in 2017, Twitter generated around $20 per user in the U.S. compared to $4 per international user.

Pinterest has several avenues to expand its user base, but its strength will continue to lie in the impressive engagement levels of its users, and their high rate of converting searches into product purchases. This level of engagement is especially attractive to advertisers; assuming it can be sustained, it should drive rapid revenue growth for Pinterest.