Smoke And Mirrors: How Snap And Pinterest Hide User Attrition

(See more on Snap below, which reports earnings today.)

PINTEREST – CAN’T MONETIZE GLOBALLY

One issue with looking at ARPU holistically is that not all regions are created equal. This is especially true for monetizing on mobile. The United States spends a lot of money on social media compared to other regions, while Europe spends a reasonable amount of money. Other regions, such as India, spend very little money and can actually cause a social media company to lose money as providing a free service to users who do not monetize well – by advertising or purchases – creates low to negative operating margins. (You may be able to tell that I am foreshadowing here.)

Pinterest has monetized the United States beautifully. The 80 million or so users in the United States generate $9 average revenue per user. We see evidence this is saturated, however, as the user growth has been stagnant for many quarters.

Venture capitalists like to see 10% month-over-month growth with mobile application users or website users. (Actually, the prefer to see 30% month-over-month growth). Pinterest has struggled to achieve 10% year-over-year growth in the United States with some declining quarters.

However, Pinterest has achieved a 10% QoQ benchmark globally – and this graph looks much better. But there’s a catch …

Here’s the problem. The international audience doesn’t monetize.The regions where Pinterest is growing are only monetizing at 25 cents per user annually, which is not enough for a profit margin let alone an operating margin.Compare this to the $9 average revenue per user in the United States, and you can see why the average ARPU for Pinterest drops significantly to $2-$3 annually.

To put it simply: the high average revenue per user regions have flat to declining growth (United States) of 80 million to sometimes 75 million, while the regions with adequate growth are not contributing to profits. If you are invested in Pinterest, you are either:

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Kurt Benson 2 years ago Member's comment

Nicely done. This is a problem that should get more attention. $PINS $SNAP