Despite being months away, Pinterest Inc. (PINS, Financial) has set the stage for a prosperous holiday season by forging a strategic partnership with Amazon.com Inc. (AMZN, Financial). The collaboration aims to address the company's attribution and scale challenges by outsourcing monetization to third parties.
The partnership, which was announced in April, is a notable development that deserves some credit. Wells Fargo analysts anticipate the partnership going live in October, just in time for the 2023 holiday season. Pinterest's decision to open up third-party ad demand marks a significant milestone for the platform.
Benefits of the partnership
This strategic partnership holds immense potential for both Pinterest users and advertisers alike, aiming to deliver a more comprehensive, shoppable and best-in-class buying experience. With over 463 million monthly active users, Pinterest aims to scale its shoppable content initiatives by leveraging Amazon's expertise and resources.
The collaboration with Amazon Ads aligns with Pinterest's vision of providing users with a seamless on-platform experience that integrates with the Amazon ecosystem. This strategic alignment not only enhances the shopping journey for consumers, but also offers brands and advertisers access to strong performance metrics and the ability to reach a broader audience.
Pinterest's focus on shoppable content
Pinterest's focus on shoppable content is already yielding promising results, as highlighted by the platform's recent performance metrics. The integration of shoppable pins into the home feed and improvements in the core relevancy algorithm has played a pivotal role in enhancing the user experience.
These efforts to increase the relevancy and distribution of shoppable content have led to significant growth in click-through rates and saves of shoppable pins, showing a 35% year-over-year increase in the first quarter. Pinterest surveys consistently reveal that over 50% of users view the platform as a place to shop, underscoring the significance of making every pin shoppable.
New shopping formats and merchant value
The San Francisco-based company is also exploring new formats to make shopping on the platform more enjoyable and engaging. The introduction of shoppable Shuffles aims to provide users with seamless access to shoppable pins from their collages. Early indications show that shuffles containing outfits, wedding and home ideas have garnered the highest number of saves.
As Pinterest continues to make progress in transitioning to social commerce, it simultaneously enhances the value for merchants on the platform. The attributed checkouts for merchants who upload their catalogs to the platform have seen a 30% increase in the last six months. These positive trends, coupled with a 40% year-over-year growth in shopping ads revenue, demonstrate the effectiveness of the strategy.
Significance of the Pinterest-Amazon partnership
The strategic partnership with Amazon as its first third-party ad demand partner is a well-aligned and beneficial move for both companies. The collaboration recognizes the value of ad content and its potential to drive positive outcomes for Pinterest. Amazon's extensive range of brands and products, coupled with a seamless consumer buying experience, make it an ideal partner for accelerating Pinterest's efforts to transition users from inspiration to action.
Although there is room for further monetization, the platform has significant commercial intent. The integration of more relevant ads has already resulted in a 30% increase in impressions without compromising user engagement, which shows ads can serve as valuable content and contribute to revenue growth while providing value to advertisers and users alike.
Growth and potential of social commerce
Data shared by Statista highlights the significant growth and potential of the social commerce industry. With an estimated $1.298 billion in sales through social media platforms in 2023 and a projected value of approximately $2.9 trillion by 2026, it is clear that online purchases via this channel are becoming increasingly popular.
When exploring the reasons behind the use of social media, it is evident that it serves as a valuable source of inspiration and product discovery. Around 28% of internet users aged 16 to 64 indicate they use social media to find inspiration for things to do or buy, while over 26% use it specifically to find products for purchase.
Social commerce in the United States
In the U.S., social commerce is gaining traction, with an estimated 108 million social buyers expected by 2025. The value of social commerce sales in the country is projected to reach $107.17 billion by the same year. In 2022, social commerce sales accounted for 5.1% of all online sales, amounting to $53.1 billion. This highlights the increasing significance of social media as a sales channel for businesses.
Social media's role in holiday shopping
Social media platforms also play a crucial role during the holiday season. As revealed by surveys, 34% of respondents in 2022 expressed their intention to use social media to search for or purchase items needed for the holidays. Additionally, 70% of U.S. consumers admitted to using at least one social media network for gift ideas, emphasizing its role as a source of inspiration.
Further, social media platforms have gained popularity among younger consumers, particularly gen Z. A Deloitte holiday retail survey for 2022 showed that 60% of gen Z and 56% of millennial shoppers planned to use social media for their holiday shopping. This demographic group is particularly influential and represents the fastest-growing segment on platforms like Pinterest.
Pinterest's unique position in social commerce
Undoubtedly, the growing trend of social commerce brings significant benefits to Pinterest. While Facebook and Instagram, which are both owned by Meta Platforms Inc. (META, Financial), dominate the social commerce landscape, Pinterest sets itself apart with a distinct purpose and a unique user base. Unlike its counterparts, th company's core focus on discovery and inspiration perfectly aligns with the intent-driven nature of social commerce.
Users actively visit Pinterest to find ideas and products, making it an ideal platform for businesses to showcase their offerings. The highly visual and organized nature of the platform enhances the user experience, allowing for seamless product discovery and a visually appealing interface.
Pinterest's competitive edge
Moreover, Pinterest's algorithm and recommendation system excels at delivering personalized and relevant content to users, increasing the likelihood of product discovery and purchase. The platform has a strong appeal among female users, who play a significant role in household purchasing decisions. According to Statista, over 70% of global Pinterest users are female.
While Facebook and Instagram may dominate in terms of user numbers and reach, Pinterest's differentiated purpose and user base provide a valuable niche in the social commerce landscape. This allows the platform to carve out its own space and cater to a specific segment of users who are seeking a more curated and inspirational shopping experience.
Conclusion
Pinterest's long-term goal is to make every pin shoppable. Although it might take more than a year, the company is already making significant progress. By leveraging its unique strengths in discovery and inspiration, the platform has captured the attention of users seeking a curated shopping experience. The algorithmic relevancy and expansion of ad capabilities contribute to its competitive advantages.
As social commerce continues to thrive and evolve, Pinterest has positioned itself as a key player in shaping the future of online shopping. With third-party ads and promising partnerships, the company is poised to unlock new opportunities and solidify its position as a leading platform for taste-based shopping and inspirational content.
