Pinterest, Inc. (NYSE:PINS) 51st Annual J.P. Morgan Global Technology, Media and Communications Conference Call May 23, 2023 10:10 AM ET
Company Participants
Bill Ready – Chief Executive Officer
Conference Call Participants
Doug Anmuth – JPMorgan
Doug Anmuth
Alright. Great. We are going to go ahead and get started. I am Doug Anmuth, JPMorgan’s internet analyst. First, Safe Harbor. Some of the statements that Pinterest will make today maybe considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements that Pinterest makes are based on assumptions as of today and Pinterest undertakes no obligation to update them. Please refer to Pinterest’s Form 10-Q for a discussion of the risk factors that may affect its results.
So Pinterest is a visual inspiration platform that people around the world use to discover ideas and turn inspiration into reality. It uniquely sits at the intersection of social and commerce. The platform has more than 460 million monthly active users globally with high commercial intent. We estimate Pinterest is on track for about $3 billion in annual revenue this year.
It’s our pleasure to have with us Pinterest CEO, Bill Ready. So Bill is coming up on 1 year at Pinterest. He was previously Google’s President of Commerce Payments and Next Billion users for 2 years. Prior to that, spent 6 years at PayPal, most recently as EVP and COO, he was the CEO of Venmo and Braintree prior to their acquisition by PayPal. So, welcome, Bill.
Bill Ready
Yes. Thanks for having me.
Question-and-Answer Session
Q – Doug Anmuth
Absolutely. Alright. So let’s see, you are approaching close to 1 year on the job. What has been your biggest learning so far?
Bill Ready
Yes. So I’d say 10 months in. Some of the biggest things for me have been – I would say just the headline is the biggest s on the business that I had a year ago as I was thinking about coming in, we made even faster progress than would have expected on those things. So a year ago, big questions would have been after multiple quarters of user decline, can you return to user growth? I think we’ve answered that pretty emphatically. We put up 7% year-on-year growth this past quarter. We now have multiple quarters in a row of user growth. So I think we’ve answered that one pretty clearly. The other question was can Pinterest compete in a world of short-form video? And a big part of what attracted me to Pinterest, especially from sort of the vantage point I had previously as you mentioned in the introduction is it unlike much of sort of the social space, it is primarily about entertainment. Pinterest has really great commercial intent. So most of social is about entertainment sort of in a lean-back mode, Pinterest has very high commercial intent, which historically had been pretty undermonetized at Pinterest and actionability was lower, but that was a big part of the opportunity is like, okay, can we lean into that commercial intent, help user shop and drive better monetization. And 10 months in, we have started to make really, really significant progress on that, obviously, a lot more to do there. But I think that progress has been quite significant.
And then I would say on the broader monetization opportunity, while the ad market has been choppy, we have grown consistently through that. I think we are probably the only ad platform that has grown consistently through it. And even as we are early on, we’ve been able to start to make some pretty significant strides on the broader monetization opportunity. So you’ve seen that in us making progress on things like – I mentioned shopping from a user perspective, where we are getting 30% plus year-on-year growth engaging with shoppable content, those kinds of things. But then from the advertiser side of this, we are seeing that the largest, most sophisticated advertisers, those that have adopted measurement tools are really leaning in and accelerating with us. And so there is a lot of puts and takes across the market, but those sort of hardest to please customers that in past life, I would say if you can make them happy, you can make anybody happy. We are seeing really great engagement and growth there, largely because as we bring users more actionability on the products they are discovering on Pinterest. Not only users engaging with it advertisers seeing it’s a great moment for them to engage as well.
Doug Anmuth
Okay, great. So you hit on a few of these, but you have outpaced the market for the past quarters from a revenue perspective, return to user growth, increased ad load, brought down pricing for marketers. But I guess when we think about all those positive factors and then your 2Q guide, which suggests more stable revenue growth. Maybe you can help us understand what you are seeing that gives you the view on some of the caution and just the stable revenue growth in 2Q?
Bill Ready
Yes, I would say there is a number of puts and takes there, right. So let me sort of decompose those a little bit. So I mentioned one already, which is around adoption of privacy safe measurement tools. So as we have started to create better tools for retailers and advertisers to get measurement of our performance and more product actionability for consumers, if you look at the cohort of advertisers that have adopted our measurement tools. We see that those advertisers consistently when they adopt our measurement tools see better performance than expected, 28% lift in conversions is what they tend to see. And their spend with us on average has gone up 30%. So if you look at those that have adopted our measurement tools, it’s 30% lift year-on-year in spend. But we are on an adoption curve, right. And so which of the advertisers have adopted? Well, it’s only 10% that have adopted so far. We just launched these tools, right. So again, 10 months in, we have just launched these tools. We just started the adoption curve. By number, only 10% have adopted. Now fortunately, those that have adopted the larger, more sophisticated advertisers, the ones with more spend. But that cohort, that 10% is adopted is growing revenue 30% plus year-on-year. If you then look at the other 90% that have not yet adopted, revenue from them declining mid single-digits year-on-year. So the net-net of that is what has had us in the sort of mid single-digit kind of range, which has outpaced the market for as many others are seeing year-on-year declines and those kinds of things. But we have got to continue managing through that adoption curve and get more. I mean we see this very consistently is what gives us a lot of confidence in the medium to long-term is that consistently when we take an advertiser from that column of not having our privacy measurement tools, where they are a mid single-digit decliner and move them into the column of now they have adopted, now they have visibility into our performance, they become a 30% grower. And so that’s what gives us a lot of confidence. As we move through that adoption curve, we will see continued progress.
And then importantly, we are working through that sort of by the ones, our sales team going in and doing that directly. But we’re also doing things to go accelerate that adoption curve. And really, that is about hooking into the places where a lot of those advertisers are getting – are already integrated to measurement tools. So LiveRamp and Telium are examples of that with clean rooms. And then Amazon deal – Amazon as ad platform is another example of how we’re hooking into larger platforms or other platforms that advertisers have already implemented measurement solutions. And so we think that can help accelerate some incur.
One final point, just back like the puts and takes in the market. It’s also the case that unlike some larger platforms that have a much broader, diversified base. And we’re going to skew more towards things like retail. And then even with that, we have categories like fashion and home goods that will be quite noteworthy for us. And if you looked at just the retailers, just the retailers that are, I would say, distressed. And by distressed, I mean, not the broader map, I mean distress isn’t like bankruptcies, having trouble raising funding, things like that. Those are two full points of headwind for us. So when you sort of look at all those things, the thing that I’m looking at that gives me a lot of confidence in the medium to long term is that as we see retailers and advertisers adopting our measurement tools, consistently, we see they’re seeing better performance, 28% growth in attributed checkout, 30% growth in year-on-year revenue on average. And it’s just a matter of moving that adoption curve and getting to the other 90% that having it adopted as they go from mid-single-digit decliners to 30% growers.
Doug Anmuth
Got it. Okay. Alright. We’re going to hit on some more of that. Amazon partnership, very interesting. But at the same time, I think a lot of people actually expected to deal with Google, just kind of your background. Can you talk about the strategy behind partnering with Amazon?
Bill Ready
Sure, yes. Well, obviously, as in my background, I’ve got a lot of partiality. There is a lot of great things happening at Google. But we did what we were very confident was the best first deal for us. I’ve been very consistent in saying this that in a future state, we’ll have – we were one of the only major ad platforms that wasn’t ingesting third-party demand. And if you look at how this tends to work, even the largest – auctions in the world will complement their auction with third-party demand. And we see an instate where we’re going to ingest that from many sources. But we felt very confident that Amazon was the best first deal for us. One, because not only are we solving for ingesting third-party demand, we’re solving for a great shopping experience, right? That’s a huge part of the opportunity on our platform, more than half the people on Pinterest there to shop. But historically, actionability has been low. People find a lot of what they’re looking for in Pinterest, but they couldn’t take action on much of it. So it was stated very simply, Pinterest sort of solved digital window shopping, but all the stores were closed. So a big part of the opportunity for us is as we open those stores and make it so that not only do you find the thing you’re interested on Pinterest, but you can take action on it. You can click. Even if it’s clicking to some place to go buy it, that becomes an event that deepens engagement from the consumer side. And is very highly monetizable from an advertiser perspective, and actually pays much better than the sort of impression-based advertising and things like that. And so Amazon clearly brings great shopability, a very robust catalog that can turn a lot more of the content that we have into shoppable content and with a great buying experience. And it’s a major platform approaching $40 billion in annual revenue as an ad platform, growing roughly 20% year-on-year. So we are growing our supply 30% plus year-on-year, which, by the way, is a massive change from where the business was a year ago. A year ago, Pinterest was a supply constrained ad platform. Users were declining, supply was constrained. Now we’re growing supply of 30% plus year-on-year. The broader demand environment has softened, but we’re growing supply 30% plus. So in a constant demand environment, this would have been a 30% plus growth quarter for us, right? It pushes where fishes, right? But that gives us confidence that we’ve got the supply to go monetize, we need to marry that with a place that has excess demand. So as you look across the major ad platforms, clearly, Amazon has excess demand, given they’re growing 20% plus, in a really great buying experience for the consumer. So that made them a great first partner. And again, we’ve said this consistently that an end state for this is that we’ll have multiple partners. But given the marriage of sort of excess demand on their side and excess supply on our side as well as the great shopping experience, made them a great first partner.
Doug Anmuth
Okay. So what’s the process through which Amazon will be kind of allocated inventory and like slots on your platform?
Bill Ready
Yes, maybe a good opportunity to sort of give a little more sense of how I think about the opportunity overall. So when I say Pinterest has been significantly undermonetized, which it has been, there is sort of two components of that. The one component is if you look at just from an ad load perspective, in a commercial context, the opportunity to take ad load up much higher is significant. So – which, by the way, is back to is a really important difference between Pinterest and other social platforms. In an entertainment mode, you have a lower ceiling on the ad load that you can show a user, right, because you’re just trying to watch a video, watch a TV show. And so there is a lower ceiling on how much ad load you can have. In a commercial context, if you look at the other analogs out there, you would see oftentimes, you can count the slots on the page, 60%, 70% ad loads in the commercial context because as long as the ads are relevant to the user, then the user is sort of indifferent as to whether it’s an ad or organic. And in many cases, if you look at like our case, what would the user have been seen before where there’ve been a lot of user uploaded content.
So what was better content for the user? Like the user uploaded picture of that pair of Nikes or like the great Serena Williams, LeBron James were in those Nike, as long as those are the pair of shoes that you want. In many cases, the advertised content can be even better content. So if you look at it that way, from an ad load perspective, when I think about what’s the theoretical ceiling on what our ad load could be, we tend to be in that, again, count the slots on the page. Even in the commercial context on Pinterest, you see roughly 1 in 5 would be as of 20% theoretical limit on that would be 60% or 70%. So when I came in, my view was like, okay, you could never sign another user, never get another unit of engagement and you can multiply the business several times over just by getting the proper monetization per unit of intent. And there is a second lever on that, even so you could theoretically triple ad load provided you have the right relevant content. Then there is a second lever on that, which is as you’re shifting from upper funnel impressions to more lower funnel conversions, those lower funnel conversions pay much more, in fact, roughly 5x more. So not only can you significantly take up the ad load on the page in the commercial context, you can also shift from impression-based advertising to conversion-based advertising that pays 5x more.
So coming all the way back to your around what’s the path on Amazon. I think this is where a lot of folks have s are like, why can’t you just – why won’t that be live next quarter? Well, if you’re just doing like a banner ad implementation or something like we have that live in a weekend. But what we’re doing is satisfying this broader opportunity, which is really all contingent on, you’ve got to have things that are really relevant for the consumer. You can take that out much further if you have good relevancy for the consumer and a good experience. So that takes a little bit longer to do, but very clear line of sight into how to do it. And so – and if you look back not to this last call, the call before. And I was getting s around, well, hey, Bill, it’s probably 2024 before you all sign a third-party demand dealers. And I said no. I think we will sign it this year but don’t change our expectations for revenue this year. So I think we’ve consistently talked about that consistently and actually pacing ahead of what we had said. I think some folks maybe got a little out in front of us on it. But in terms of – we’re doing what we said we would do because it was always the intent that we weren’t just going to go throw up a slapdash banner out implementation we’re really solving for great shopability on the platform. That takes a little longer, but the rewards are so much greater.
Doug Anmuth
Okay. And will Amazon go through kind of the same bidding platform as other marketers?
Bill Ready
So in the in-state yes, so in the interim, as we’re working through this, we will also be part of what we have to do is start to bring those auctions together. But I think maybe sort of the question, behind that question a bit, and I’ve heard this from a number of folks are like, well, how should we think about the economic opportunity there, right? And obviously, there is a fine line. I can’t get into confidentiality of an agreement and things like that. But I think at the core of that question a lot of folks are asking like, well, hey, if you’re doing this through a third party, did you leave money on the table, right? And we feel really good about the economic arrangement that we put in place there. And as a general construct I’d say it’s generally comparable to what our own cost of selling would be, right? So obviously, all things considered, we prefer a first-party relationship and we have that. But as a smaller platform, there is a lot of brands and a lot of products that we just don’t have on the platform yet. And so this can really help us accelerate the brands and the products on the platform. And in a way that is generally consistent with what our own – if you had from a holistic perspective, generally consistent with what our own cost of selling would be, so we don’t feel like we’re leaving money on the table either.
Doug Anmuth
Okay. And you kind of framed this as you’re confident that Amazon is the best first deal, which certainly suggests that there will be…
Bill Ready
That’s right.
Doug Anmuth
Others going forward. So how do we think about pipeline and timing…
Bill Ready
So given my commentary around like we really want to make sure we get the consumer experience right and you get this working well because to take the ad load up and to get the higher dollar conversions, all those things, you’ve got to really have the relevancy right for the consumer and the buying experience right for the consumer. We’ve proven a lot of these things out already. So we’ve laid a lot of the right foundation. I talked about – in Q4, we launched whole page optimization, which is what really lets us start to take the whole page and optimize it toward what’s the most relevant thing for the user and taking an integrated view of between the organic and the ads if there is a more relevant ad or an equally relevant to add to be able to show that to a user, so it’s a monetizable event. We laid that foundation in Q4, buying experience. We know what that looks like. A lot of this – now that the Amazon deal is public, you could have seen on our platform for a long time. Amazon has advertiser. And we’ve talked about things like mobile deep linking, driving the majority of our growth in shopping ads. Shopping ads is growing at 40% plus year-on-year. So we know what a lot of that buying experience looks like. So we’re going to spend the next, call it, 6 months, really making sure that we get this one really right. But we’ve proven out with what these look like. And so it’s really about doing the implementation, dialing up the ramp, making sure it’s working for consumers, sort of adjusting those dials. So it’s not about will the dogs eat the dog food or not? We know. We’ve seen it already. We’ve proven those things out. We’ve laid a lot of that foundation. And then now we spend the next 6 months really tweaking the dials, making sure it’s working well. And then as we do that, then we will think about how we expand beyond our first partner.
Doug Anmuth
Okay. Great. Alright. Let’s shift gears a little bit. Talk about user base. You’ve seen good progress stabilizing users. You added 13 million users in 1Q. So I guess there is kind of two s here. First is kind of what are the drivers there that you’ve seen obviously kind of cycling through some of COVID pull forward. But that initiation also have driven that stability and growth, obviously? But then in the near term, you are talking about more stable, basically, in terms of net adds and – just talk about your expectations, where trends are a little bit choppier? I know that seasonality changes and then you also have some data birthday collection impact as well. If you could talk about that.
Bill Ready
Sure, yes. So we’re really proud of our return to year-on-year user growth. Again, this is one of the biggest questions on the business a year ago was in multiple quarters of user decline, and we’ve now had multiple quarters of user growth. And when you look at that user growth, we grew monthly active users 7% year-on-year. Engagement is actually deepening for users. So engagement clearly consistently growing double-digit plus. But then if you look at like our mobile app users, which mobile app users are 80% of our – more than 80% of our engagement and monetization, those are growing at 16% year-on-year. So we’ve really, really shifted sort of the direction on users and even more importantly, on engagement.
So coming back to the question on – and so because I think there is some question after our commentary in the quarter. We said then we expect the year-on-year growth trends that return year-on-year growth to continue there is seasonality in the business. So we are calling that out. More important to look at the year-on-year than the quarter-on-quarter because we measure in the last month of the quarter. June as people are getting out of school, it’s start of summer, and so you have some seasonal patterns there with people kicking out of the house and doing things. By the way, when you get into Q3, it looks back the other direction is back to school and people are shopping. And so you see a seasonal lift there. So it’s just important to look at the year-on-year on those things. From a year-on-year perspective, we’ve clearly returned to growth year-on-year, and we commented on the call, we expect that to continue.
I think the birthday collection, we’re we were getting out in front of a regulatory requirement in Europe. In fact, we went broader than that, even doing it in the U.S. because we thought it did some really good things to us bring safety for our users at the time of the call. We were much of the way through it, but not all the way through. We’re all the way through it now. It’s not a consequence, it’s behind us. And so we feel really good about sort of how all that’s playing out, both in terms of continued growth in users and engagement, as well as getting out in front of some of the regulatory things that were coming later down the road and really leading the way on user safety in doing that, not just in Europe but in the U.S. as well.
Doug Anmuth
Okay. Great. Let’s talk about margins. So Pinterest has been committed to meaningful margin expansion, and we kind of think about that as like 200 basis points or so. Your guide for 2Q implies kind of stable to slight deceleration in revenue growth. The Street now modeling a little bit over 100 basis points of margin expansion for ‘23. So a little bit below kind of some of that communication. Do you still have confidence that meaningful margin expansion and a couple of hundred basis points this year?
Bill Ready
Yes. Absolutely, yes. And I’ve commented on each of the last calls that we’re committed to that margin expansion. And even in this last call, reiterated that as well. But maybe I just say even more clearly, which is in any state of the world, we’re committed to that margin expansion on the order of a couple of hundred basis points. And it gives us a really clear line of sight to that. When I came into the business, partway into Q3 last year, there had been a big acceleration in expense growth in the first half of the year, which sort of locked – it was accelerating in the first half of last year and sort of locked in with our expense growth would be in the back half. But we started to immediately put cost controls in place. We started – when I came in, in July, we started pausing hiring. We started putting in control on infrastructure spend. And you saw this from us the last two quarters, even as user engagement is accelerating. Normally we expect infrastructure spend to grow at some discount to user engagement. Well, previously, infrastructure have been growing much faster than users. Well, now we’re in a place now we’ve started really focusing on efficiency there, engages growing faster than what it was a year ago, users growing faster than they were a year ago, but infrastructure spend is reducing.
And so when you look at our back half of this year, we will start to – instead of right now, we are lapping a lot of that sort of increase in spend that was happening in H1 of last year. As we get to the back half we now start to lap the period where we have started to put in a lot of operational rigor and cost controls. And so that’s what gives us confidence that really in any state of the world, we can deliver on the couple of hundred basis points that we talked about. And even in a – and then that’s effectively say that we continue on sort of the revenue growth rate that we are, we have clear line of sight to how we would go deliver that couple of hundred basis points. Even a modest revenue acceleration, we could see double that on the margin side. And so we feel really confident in our ability to go control the costs and drive operational efficiency in the business. And not in ways that hinder our growth like the infrastructure example where we have accelerated user growth. We have gotten better on our AI tools even as we control infrastructure spend. So, there is a lot of these things. I have said it pretty consistently. I am a big believer that constraints breed creativity. And that’s what you have seen us doing even as we put in cost controls, we have been accelerating the business, and we think we can continue to do that.
Doug Anmuth
Okay. Great. Alright. Commerce initiatives have clearly been a key priority for the platform. You have made some good strides, but at the same time, it still feels pretty early. Maybe you can talk about some of your latest initiatives just to improve shopping on Pinterest and where you see this going over time?
Bill Ready
Yes. Great question. So, this is another big a year ago. July last year when I came into the business, Pinterest approach like some others have been to address shopping by having a separate corner of the app, like a separate tab in the app that you would go to, rather than doing it on the main surfaces of the app. We completely ship with that strategy, both in terms of – instead of it being a separate place in the app you go to which very few people would do, really integrating it into the core experience of the app. More than half the users say that they are to shop. So, a year ago, the question would have been, well, hey, surveys say that users want to shop on the platform. But until you put it in front of the users like you don’t know if the dogs are going to eat the dog food until you put in front of them, right. And as we have built out those products, as we build out those experiences, even though we are early days, we started to bring shopping into the main services of the app, our home fee, our search results to those places where the primary engagement on the app happens. As we have been doing that, we are seeing fantastic results from users, 35%-plus lift in engagement with shoppable content for the advertiser side of those, those merchants and advertisers are integrating their product catalogs are seeing 30% plus lift in the checkouts that they are getting, the conversions they are getting from our users. So, really great value on both sides of that for the consumer and the merchant, but we are early days. We came in July. We really started leaning into that to building out through sort of late Q3 and Q4, really starting to ramp that into Q1. And we are past the biggest part of the question, which is like, will the dogs eat dog food. Clearly, the users like it. And so now we just have to continue to manage that ramp and bring on more quality inventory for those users, which again, we are finding great ways to do that like our deal with Amazon.
Doug Anmuth
Okay. And related, but maybe you can talk about some of the initiatives on mobile deep linking and whole page optimization and kind of what the feedback has been from advertisers?
Bill Ready
Yes. So, whole page optimization, I think this is – this one is really, really significant and maybe not fully understood. So, maybe let me try to break this down and give like sort of a before and after kind of picture. So, Pinterest a year ago, users would have found a lot of what they are interested in, but had very low actionability because they would have found user uploaded pictures, things like as like, oh, I found the pair of shoes I am interested in. What are those pair of shoes, well, I would have to go hunt through comments and see if somebody had made a comment or was putting a description like what those shoes are called. And the user would oftentimes have to go search someplace else, or even worse do like a reverse image first to figure out what those shoes are. Now, from that as a world before, now we are bringing much more actionability so that the user can increasingly not only know what that pair of shoes are, but like click to a place to go buy those, which again, deepens engagement because when they had to go someplace else, I was leaked to engagement, but also leak monetization. So, from a year ago to today, much more of that content is becoming shoppable. Now, we still have more of that ramp to go, but much more is becoming top than what it was a year ago. A year from now, what you should expect to see is that not only are more of those slots on the page actionable, more and more of those ought to be paid content. And paid content that is highly relevant to these are, so coming out the whole page optimization, the big unlock with whole page optimization that we proved out is that we could grow ad load in a way that was enhancing to the user. It was engaged on positive. Again, a lot of people, especially in social media, think of ad load as being sort of a trade-off with the user. The more you take the ad load up, the more it hurts your engagement because the user is ultimately there for some other purpose to watch a funny video or look at pictures of their friends. And so the more you took them away from that thing, the more you sort of trade off engagement for monetization. We took up our ad impressions, 30% plus with engagement growing double digits. So, part of that is the engagement growth being double digits, but took the ad impressions up 30%, much faster than the growth of engagement overall, while also increasing engagement, which means the relevancy is good, which means we have proven out our ability to go swap in more sponsored content in a way that is enhancing to the user. That’s a huge unlock. We launched that in Q4. And so that really is the foundation I have been talking about, about how we get more sponsored content in that we can put in, in a way that is actually enhancing to the user or not sort of taking away from the user. Then on like mobile deep linking, this was also a question for Pinterest of sort of the – while Pinterest has been building towards a full funnel. And I think really in the Western world, the only true full funnel from a consumer experience, we have the consumer in sort of upper mid and lower funnel. And while that has been the case, the low funnel has been the Achilles’ heel of the platform for years, right. And so as we have been leaning into these lower funnel experiences that help the user take action, we are finding really good success with those. So, mobile deep linking is a good example. Our shopping ads growing 40% plus year-on-year, but then the majority of that growth being driven by our implementation of mobile deep linking, which again, was late last year that we launched that, but it’s been a hugely successful launch, which is really proving out because this was another question of the business like, well, the users come there for window shopping, are they going to take action. Well, mobile deep linking is like we are taking the user from they see a product on Pinterest, they click and we drop them straight into the checkout with the retail. It’s a really fantastic buying experience. And really getting to this, this is other shift that we made in the shopping strategy that previously Pinterest have been going down the path of being sort of Pinterest as retailer. And we have shifted that to clearly Pinterest as ad platform, but solving for a really great buying experience in a way that lets the consumer connect directly with the retailer, which is great for the consumer because if you need to make a return, where are you going to go all the support after the sale, but also great for the retailer. Retailers love it because they get a customer, not just a transaction. By the way, if you are an advertiser, which one are you willing to pay more for a customer or a transaction, the customer is worth a lot more. And so really great proof points on both the unlock of whole page optimization and our ability to get the consumer all the way down to taking action on the product and getting to the buying experience.
Doug Anmuth
That point on retailers want to customer, not just the transaction. I mean when you came in early, it seemed like you kind of pivoted the business from the transaction and shopping directly?
Bill Ready
That’s right.
Doug Anmuth
On Pinterest, right? I mean is that really the driver?
Bill Ready
Absolutely, yes.
Doug Anmuth
Does that effectively mean you think you can monetize it better?
Bill Ready
Yes. I mean in past life, I did sidewise high comparisons between sort of ad model and commission model and went to the ad model because it performed better. I also think just public information, go look at what were – what have been the largest commission-based platforms. And they have effectively moved to ad-based platforms, right, that you see those two ways. Go do a clarity on those larger commission-based platforms would have a lot of third-party sellers. And you will see that the first – most of the content you see when you query is going to be sponsor, which effectively means that even they still have commissions, commissions are the floor of the auction. And the auction is still ultimately setting the price. And the reason for that, the reason the auction outperforms is that if you have a static commission, you are perpetually either overpriced or underpriced. And if you are overpriced, you are missing inventory that the consumer would want. And if you are underpriced, you left money on the table. So, the auction just outperforms. And so yes, that was a clear shift in strategy, and we have seen it help accelerate our efforts there quite a bit.
Doug Anmuth
Okay. Great. Alright. We are going to wrap up with a quick word association. So, first thing…
Bill Ready
Dangerous.
Doug Anmuth
First thing that comes to mind, shopping.
Bill Ready
Conversion.
Doug Anmuth
Macro.
Bill Ready
We will get through it.
Doug Anmuth
Google.
Bill Ready
It’s a great ad platform.
Doug Anmuth
NAUs?
Bill Ready
Growing.
Doug Anmuth
AI.
Bill Ready
Huge opportunity.
Doug Anmuth
Amazon.
Bill Ready
Great partner.
Doug Anmuth
AdTech.
Bill Ready
Huge opportunity in AI there. If I can give you more than one word on that because – we didn’t talk about AI. And so maybe I will spend just a second on that. There is a lot of talk about AI and what it can do. We have had years of investment in AI. A lot of our gains are coming from that. So, like our personalization, we have already started implementing next-gen AI capabilities. So, for example, we are now using recommendation models that are 100x larger than our prior models because of the switch from CPUs to GPUs and next-gen AI technology. So, when you look at us making better and better recommendations in fact, 95% perceived relevance by users. A lot of that is leaning into next-gen AI technologies. Same thing on our ad stack, so I think there is just a huge amount of productivity and sort of increased opportunity from that even without the – what are you doing on like generating new images, there is a lot of cool stuff you can do there, but those probably take a while to play out. There is immediate benefits that you are already seeing in our business from that.
Doug Anmuth
Okay. Alright. Great. We will leave it there. Thank you, Bill.
Bill Ready
Alright. Thanks for having.
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