WEBVTT - Pinterest CEO William Ready Talks User Growth

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<v Speaker 1>It's bringing CEO of interest Bill ready for more and Bill,

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<v Speaker 1>good morning to you. Thank you for joining us here

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<v Speaker 1>on Bloomberg Technology. Let's start with that guidance, get it done.

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<v Speaker 1>What were the factors behind the range, which again it's

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<v Speaker 1>below street estimates.

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<v Speaker 2>Sure, yeah, I mean if you look at Q two,

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<v Speaker 2>you know we put up record user growth.

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<v Speaker 3>We hit a new all time high end users.

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<v Speaker 2>We came in above our guidance on revenue twenty one

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<v Speaker 2>percent plus revenue growth with six himesred basis points of

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<v Speaker 2>margin expansion. So Q two is a really strong quarter.

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<v Speaker 2>As we look ahead to Q three, we have a

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<v Speaker 2>five point tougher comps. We're laughing lapping much tougher comps

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<v Speaker 2>and you saw that from some of our larger peers

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<v Speaker 2>as well. But when you step back from that, you

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<v Speaker 2>know we're growing faster than our larger peers that have

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<v Speaker 2>already reported. We're seeing our best product market fit in years.

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<v Speaker 2>Gen Z's our largest, fastest growing audience, and we're winning

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<v Speaker 2>share of wallet with some of the largest, most sophisticated

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<v Speaker 2>advertisers out there. So the fundamentals of the business are

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<v Speaker 2>all really sound and we feel great about those and

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<v Speaker 2>as we guided forward, it's relatively consistent growth with where

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<v Speaker 2>we've been once you adjust for currency fluctuations, despite the

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<v Speaker 2>fact that we have a five point tougher comp So

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<v Speaker 2>I think you saw that in some of the reactions

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<v Speaker 2>on our larger peers. I think you're seeing some of

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<v Speaker 2>that here as well. But if you pull back from it,

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<v Speaker 2>the fundamentals of the business have never been better for Pinterest.

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<v Speaker 3>Bill.

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<v Speaker 1>Something you told my colleagues at Bloomberg News is that

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<v Speaker 1>historically Pinterest is a great place for windows shopping. But

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<v Speaker 1>I think the quote is that all the stores were

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<v Speaker 1>closed helped me understand that.

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<v Speaker 2>Yeah, So you know, I came in two years ago

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<v Speaker 2>and at that time, Pinterest was primarily about browsing and

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<v Speaker 2>there weren't a lot of clicks and conversions to speak

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<v Speaker 2>of for advertisers. We've made tremendous progress in making it

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<v Speaker 2>so that users can actually take action on the things

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<v Speaker 2>they find on Pinterest, and this has been right at

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<v Speaker 2>the core of how we've accelerated user growth. Last time

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<v Speaker 2>I was on the show last quarter, we talked about

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<v Speaker 2>seven consecutive quarters of accelerating user growth. We put up

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<v Speaker 2>consistent performance to that on users again this quarter and

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<v Speaker 2>at the core of that is that actionability. And not

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<v Speaker 2>only do users love that actionability, you know, Pinterest is

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<v Speaker 2>where gen Z goes to shop, but it's great for advertisers.

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<v Speaker 2>This is our third quarter in a row of more

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<v Speaker 2>than doubling the number of clicks we sent to advertisers

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<v Speaker 2>year on year, which is why you see us gaining

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<v Speaker 2>share with the largest, most sophisticated retailers out there that

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<v Speaker 2>are increasing share of wallet with Pinterest. And we're seeing

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<v Speaker 2>that start to take hold across retail, which we cited

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<v Speaker 2>as a place of broad strength for us and a

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<v Speaker 2>driver of our really strong results in Q two, and

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<v Speaker 2>we're excited by as we look ahead.

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<v Speaker 1>Bill, just really quick because you're talking about your user base, right,

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<v Speaker 1>So we've just shown a graphic that shows the scale.

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<v Speaker 1>Forty percent of that is gen Z And there's always

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<v Speaker 1>a question about the actions that audience takes, right, do

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<v Speaker 1>they actually buy anything having spent time on the platform.

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<v Speaker 3>Yeah?

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<v Speaker 2>Absolutely, I think this is you know two things I'd

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<v Speaker 2>say about gen Z one. They're the taste makers for

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<v Speaker 2>you know, the next generation. So Pintress is really unique

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<v Speaker 2>and it's not just the people shop on Pinterest. People

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<v Speaker 2>curate their tastes on pinterests. It's a completely unique behavior

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<v Speaker 2>on Pinterest relatives to the rest of social media, where

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<v Speaker 2>people are planning outfits and planning what they're going to

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<v Speaker 2>buy long before they do it, and so that gives

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<v Speaker 2>us really rich signal to feed our AI for recommendations,

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<v Speaker 2>and so that taste making that happens is not just

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<v Speaker 2>good for gen Z, but they're the taste makers for

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<v Speaker 2>the next older generations where we deliver more relevant recommendations there.

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<v Speaker 2>And then to your point on gen Z buying, Yes,

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<v Speaker 2>Penterest is where gen Z goes to shop and we

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<v Speaker 2>see that same behavior that you know gen Z. Yes,

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<v Speaker 2>it spans teenagers, but also spans all the way up

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<v Speaker 2>through you know, recent college grads and people that are

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<v Speaker 2>in their first jobs and their first apartments, and so

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<v Speaker 2>we see a lot of shopping behavior there and it's

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<v Speaker 2>really consistent across demographics on the platform.

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<v Speaker 1>Bill Pinterest does not sell political advertisements, are you able

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<v Speaker 1>to kind of quantify the impact of that policy in

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<v Speaker 1>terms of a missed opportunity?

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<v Speaker 3>Yeah, it's a great question.

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<v Speaker 2>You know, we've done a number of things to invest

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<v Speaker 2>in the positivity of the platform that if you look

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<v Speaker 2>at them on a short term optimization.

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<v Speaker 3>You know, like political ads.

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<v Speaker 2>You could say, Okay, there'd be a lot of money

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<v Speaker 2>spent on political ads over the of the coming quarter. However,

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<v Speaker 2>we don't take that money because we see that that's

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<v Speaker 2>an investment in the long term health of our platform.

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<v Speaker 2>As we're winning with gen Z, one of the top

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<v Speaker 2>reasons gen Z sites as why they come to Pinterest

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<v Speaker 2>is they see it as an oasis away from the

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<v Speaker 2>toxicity they experience elsewhere on social media. So as we've

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<v Speaker 2>done things like making pinterest private only for under sixteen,

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<v Speaker 2>we've actually seen that come through and drive user growth

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<v Speaker 2>and engagement for us, and we're seeing it cut through

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<v Speaker 2>with advertisers too, where advertisers also want to be in

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<v Speaker 2>a brand safe environment. Brands are built on positivity, and

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<v Speaker 2>brands don't want to show up next to negative, polarizing content.

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<v Speaker 2>And so you know, yes, there'll be a lot of

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<v Speaker 2>money spent on political ads, but we're consciously choosing not

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<v Speaker 2>to take those because we think that's in the long

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<v Speaker 2>term interest of our platform for both users and advertisers.

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<v Speaker 1>Bill, let's talk about osificial intelligence, but I think some

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<v Speaker 1>granila is important. So which large language models or partners

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<v Speaker 1>and you're building on top of and then you were

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<v Speaker 1>able to give a sense of like the specific AI

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<v Speaker 1>spend that's related to kind of add targeting and add improvement,

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<v Speaker 1>bit pricing or something else.

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<v Speaker 3>Yeah, this is AI is a core competency for us.

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<v Speaker 2>I've talked about on prior earnings calls where when you

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<v Speaker 2>look at the fact that we're not only growing users

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<v Speaker 2>at record levels, we're actually deepening engagement per user. A

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<v Speaker 2>big part of that is on the increasing relevancy of

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<v Speaker 2>our recommendations, and so I shared on a prior call

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<v Speaker 2>that through large language models, we saw a ten percentage

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<v Speaker 2>point lift and the relevancy of our recommendations. That's really

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<v Speaker 2>really encouraging is why users are coming back to finding

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<v Speaker 2>more of what they're looking for on Pinterest. But to

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<v Speaker 2>your question on spend, we've also delivered really great margin

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<v Speaker 2>expansion this past quarter, even as we were investing in AI.

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<v Speaker 2>We delivered six hundred basis points of margin expansion and

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<v Speaker 2>you've seen that consistently over the last two years. And

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<v Speaker 2>the reason for that is that we're delivering great user

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<v Speaker 2>engagement from the AI, but it's user engagement that is

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<v Speaker 2>highly monetizable. More than half the users on pinchests are

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<v Speaker 2>there to shop, So we're turning that AI investment into

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<v Speaker 2>really great return through higher engagement. And then advertisers want

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<v Speaker 2>to meet those users where they're shopping, and that's driving

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<v Speaker 2>acceleration and AdSpend for us.

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<v Speaker 3>And so you've seen that in the results.

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<v Speaker 2>But we're really finding that we can deliver great return

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<v Speaker 2>on our AI investments, and we have really unique signal.

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<v Speaker 2>I think this is one thing that is underappreciated across

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<v Speaker 2>the industry, and so much like cloud commuting, much like

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<v Speaker 2>cloud computing, I think everyone have access to basic building blocks,

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<v Speaker 2>but who has really unique signal? And the curation of

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<v Speaker 2>shopping behavior on pinterest gives us really unique signal to

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<v Speaker 2>feed our AI bill.

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<v Speaker 1>The stocks down significantly in the session. It's down sort

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<v Speaker 1>of twelve percent year to date, that big year last year,

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<v Speaker 1>I think more than fifty percent gain in the stock.

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<v Speaker 1>You're two years into this job, So what's the biggest

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<v Speaker 1>action you've taken and one that you want to take.

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<v Speaker 3>Yeah, so it's a great question, and I think you.

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<v Speaker 2>Know, I certainly you don't like to see volatility, but

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<v Speaker 2>we've seen volatility before. If you step back from it,

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<v Speaker 2>we have consider distantly over the last two years demonstrated

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<v Speaker 2>steady progress and improving the overall health of the business

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<v Speaker 2>on on top line, on bottom line, on.

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<v Speaker 3>User growth and engagement.

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<v Speaker 2>You know, so the fundamentals have are sound and improving,

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<v Speaker 2>and we've delivered a say do ratio of one on

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<v Speaker 2>these things and we'll look to continue.

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<v Speaker 3>To do that.

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<v Speaker 2>The things have been the biggest drivers in the business,

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<v Speaker 2>I would say one really investing in AI uh and

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<v Speaker 2>the actionability on the platform via that AI so relevancy, actionability,

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<v Speaker 2>and then positivity in terms of delivering a safe space

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<v Speaker 2>for our users. State is simply you know, our users

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<v Speaker 2>go to pinterest because it's a place they can invest

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<v Speaker 2>in themselves without the sort of comparative performative nature you

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<v Speaker 2>know that they experience on the rest of social media,

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<v Speaker 2>and that's why they're there for that commercial intent. So

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<v Speaker 2>we're going to continue to invest in those things. They're

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<v Speaker 2>really working well for us. When you zoom out over

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<v Speaker 2>the multi quarter period, you know, it's been a fundamental

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<v Speaker 2>change introductory of the business and we're going to keep

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<v Speaker 2>investing those things that are working because again, our fundamentals

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<v Speaker 2>have never been healthier and what they aren't right now

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<v Speaker 1>Interesting CEO Bill Ready, thank you for coming back on

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<v Speaker 1>Bloomberg Technology