Pinterest future
I want to have conversation about the state of some of the private companies in the valley, but I can't really do it under my real name as I have friends at those companies and they wouldn't be happy with me. Curious if it possible to have a decent level conversation on Blind. First off - I like Ben. He is thoughtful, careful person who feels really responsible for the money he took from investors and to his employees. At the same time, strategic position of the company has been mismanaged. There was a long period from 2011 to 2016, where the founders were unsure of who their competition was. That is a sure sign of not understanding what business you are in. During that time Pinterest lost three most valuable verticals - home improvement to Houzz, travel to TripAdvisor and others, services to Yelp, Thumbtack, and others. Dedicated vertical services were able to gain momentum and scale in wedding services, hair and makeup, etc. Basically other companies attacked verticals in order of value while Pinterest just stood idly and ended up with least valuable, fragmented offering. From the other side Google and Facebook improved their advertising products tremendously over those 4 years setting really high bar on ROI for direct response advertisers. Brand advertising is going through a global period of weakness caused by decline in fortunes of packaged good companies, so Pinterest is forced to start in DR (with attempt in search advertising) that puts their ROI right against FB and Google. If Pinterest had locked up key vertical they would have had some advantage but as it stands they have huge scale disadvantage against the two market winners. FB and Google have tremendous amount of demand (advertisers wanting to advertise) and supply (slots in which to show ads) allowing for much more optimal placement. Further hurting Pinterest's chances is the fact that most of their growth has been international further reducing the amount of most useful supply (ad slots in US and WE). Amount of time spent is not a strength preventing future attempt to build brand advertising business. Summary of business state - unless Pinterest can find a completely new business, the company has no future. The founders should outsource the ad business to FB and Google, cut in house ads team, focus on cutting operational costs and staff, shift product focus on winning one or two key verticals. Part of the stagnation can probably be traced to hiring really poor engineering leaders. I am not sure about the current head of eng, but the previous two hires were poor. But the largest part is on founders and Tim K - they just didn't focus on building the business and caught in externalities (like diversity, or being nice) which are important if you have a business but will not help you otherwise. Really interested in rebuttal from Pinterest folks or investors.
Just want to shout out thanks for the read. Wish there more posts like this on Blind!
this is a good write up, would appreciate others. your last commen about getting caught on externalities, makes me think about Uber's situation, where we went for business over nicety first. maybe just a bit too much.
I think that externalities have caused a lot of self inflicted pain for the company. And the business generates a lot of free cash flow (similar to stripe) which makes it very different from Pinterest/Twitter/Snapchat/etc.
Followed your logic until you threw engineering into the mix? What does that have to do with poor product strategy
The execution of the engineering org was slow and uneven - I think that reduced ability to iterate on strategy and product fit in verticals.
I agree with the value of engineering execution. Quality execution at an engineering level can unlock a lot of previously unimagined potential whereas typically, lower quality engineering is only observed (by engineers) as technical debt. What is (usually) not observed by engineers is how that technical debt affects the ability to adapt to new ideas. Technical debt can be as a result of a positive decision to get a good idea out fast, but most of the time, it's just because it was more fun to write code before the purpose of the code was properly explored.
What are your thoughts abt lyft
If I do it - I will write about Uber/Lyft in the same post. Macro trends are similar for both businesses except Uber enjoys strong advantage with respect to scale and Lyft has nice short term tailwind from Uber's self inflicted injuries
Thank you!
Awesome post; P is trying visual search. Is that a potential business?
Aren't they more about discovery?
same, seems like vast majority of visitors are female. It is also very well liked by artists. What would happen if they go into fashion business. Maybe even e-commerce?
It's refreshing to see more serious and calm conversations on Blind, and it's a great read. Thank you for that, Facebook. I am going to offer some different opinions on the situation and I really hope this can lead to more insightful posts. Verticals: how do you quantify Pinterest is losing verticals to TripAdvisor, Houzz and other services? Is that from user growth perspective or from monetization? For user growth, I have not seen break away of users in these cohorts. Rather, more users come to Pinterest to find and save ideas on these verticals. On the other hand, I am not able to get many insights into these other services' user engagement, especially some of them are still private. Among the ones that are public, TripAdvisor was taking some beating for a while, and so is Yelp, though the later is seemingly more due to revenue rather than user growth. If the “losing” is quantified as missing direct purchase opportunities like TripAdvisor and Houzz, your opinion becomes more reasonable to me, and I agree they are necessary if Pinterest is to become successful in the long term. However if I have to pick either of them right now, I will still choose user growth over direct monetization. Not to say that this won't come bite back on Pinterest of course. Ads: I agree Facebook and Google are the behemoths in the room, and competing with them as a new player is a daunting challenge. The challenge is exacerbated by the belayed focus on building ads technology. Yes, DR ads are hard especially to improve efficiency. Engineering leaders in ads tech were far from ideal from the job, they might be smart people in general but this area, experiences play a far larger role. On the other hand this is a natural path both as an usurper and as ads tech maturation, every new service that looks to ad as a monetization avenue will have to go though the same. Growth: I would leave it for public announcements. As a company grows larger it’s natural or even the only way to go beyond US. Snap has most of users in the US, and when the growth slowed down wall street is not taking it lightly. Also unless US and WE growths go in reverse there is no “reducing the amount of most useful supply”. And finally on Ben and Evan, the two cofounders. They are careful persons for sure. I won’t easily put “thoughtful” on either of them though. And they failed to demonstrate the quality of ferocity which I see is very needed for competing in today’s environments. I don’t think they can change themselves, and in my heart it’s better for them to surrender their current roles.
Also I have to use neutral or vague terms to describe internal data. This is a public forum after all. Sorry about that.
Thank you for thoughtful reply. Verticals: I was defining losing by two primary trends - the conversations occurring on those sites/apps and the user journey is starting on those sites/apps (or including them) when the user is about to convert. In a number of cases the number of users starting the journey on these sites is high enough that providers have to be on them (TripAdvisor) and in other cases it is getting there (Houzz, Yelp, etc). Being part of the consideration stage far before the conversion is not as valuable for DR advertisers. For example, I have pinned a bunch of cool architecture pictures on Pinterest but when I needed an architect for remodel I went to Houzz and looked through their portfolios and picked one. That means that the amount of conversions a search for "cool modern house" will generate on Pinterest is for lower than same search on Houzz. Without conversion events or a path to them - user growth just increases costs. So I used a fairly narrow definition since I thought it was most meaningful from business perspective. Ads: You are complete right - every startup that believes their business model is advertising will face similar challenges with respect to achieving ROI. I think almost all of these startups will fail. In public market examples are Snapchat, Twitter, Pandora, etc. I think the problem is that understanding of digital advertising business was very basic when these companies were started or by the people they hired. A number of concepts we moved directly from TV advertising and a number of templates were copied from successful companies without understanding unique factors that made them work. For example, TV spots are bought on two dimensions - age and gender. So for TV ad buying young male audience - 18-25, male is valuable. However, that doesn't translate to digital advertising in the same way. If I am a gaming company buying app installs - I want users with high lifetime value (whales) and not random males who are 18 to 25. The difference between those two audiences is success or failure for gaming company. Another fallacy was user numbers. User growth is interesting as an indicator of if the company will eventually reach a state where almost every person can be reached predictably on its site/app. Almost no company will reach that state so for most companies user growth is not a metric that illustrates business health. For apps/sites which will not reach macro scale what matters is cohesiveness of their audience around intent and the nearness of the conversion. Ben and Evan: I still think Ben is very thoughtful. Every time we interacted - I walked away with that impression. As counter example Evan (Snapchat) is plenty aggressive and his advertising business is in poor shape. I am also not sure if them stepping away will save the company at this point.
How does the growth data look like for Pinterest? Has it slowed down and lost potential users to other products?
Yes, it has slowed down, and yes, we've lost many potential users to other products. Pinterest is a pretty niche product, so we rely heavily on core/loyal/high-engagement users. We are much more likely to lose the casual or new user to competitors like Instagram.
@s3JgY5 I would like to hear more of that. What's the data backing up your claim? You can pm me the relevant data.
Great post. Love the analysis
Companies that focus on verticals always have an easier time building better companies catering to their user base. The value add the bring will always be more than what a generalized service will want to invest in. For example, Houzz is willing to do the hard work of creating a network of builders/contractors and TripAdvisor will create a network of accommodations/travel services. Just because you have people pinning photos of houses or exotic places, doesn't mean you can win in those spaces. A dedicated focus is a large bit of leverage that enable people to win against larger player. The Valley has a history of that.
Nice, what's your thought on stripe?
I can write up stripe next week some time - very different situation. But I will probably only end up doing that if the discussion on this post is interesting or a number of people want a write up
a million times better than reading about thinning hair, getting a girlfriend as a nerd. I wish somebody wrote about the state of Saas and Enterprise software companies.