Earnings Call Transcript - PINS Q3 2021

Operator, Operator

Good evening. Thank you for joining today's Pinterest Third quarter earnings call. My name is Bethany, and I will be your moderator for the call. I would now like to hand over the conference to your host, Jane Penner with Pinterest. Please proceed.

Jane Penner, Head of Investor Relations

Good afternoon, and thank you for joining us. Welcome to Pinterest's earnings call for the third quarter ended September 30, 2021. I'm Jane Penner, Head of Investor Relations for Pinterest. Joining me today on the call are Ben Silbermann, Pinterest's President and CEO; and Todd Morgenfeld, our Chief Financial Officer and Head of Business Operations. Now I'll cover the safe harbor. Some of the statements that we make today regarding our performance, operations and outlook, including the impact of the COVID-19 pandemic, may be considered forward-looking. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially. In addition, our results, trends and outlook for Q4 2021 and beyond are preliminary and are not an indication of future performance. We are making these forward-looking statements based on information available to us as of today, and we disclaim any duty to update them later, unless required by law. For more information, please refer to the risk factors discussed in our most recent Form 10-Q or 10-K filed with the SEC and available on the Investor Relations section of our website. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and letter to shareholders, which are distributed and available to the public through our Investor Relations website located at investor.pinterestinc.com. And now I'll turn the call over to Ben.

Benjamin Silbermann, President and CEO

Hi, everyone. Thanks so much for joining the call. Todd and I will give a bit more context about the quarter, and then we'll open it up to questions. I want to just start by saying how grateful I am for our team. In the face of so much uncertainty in the world, we continue to deliver great products for Pinners, creators and businesses. And I'm proud that, despite macro challenges like supply chain shortages, we grew revenue 43% year-over-year to $633 million. That was thanks to increasing demand from larger retail advertisers and growth in our international business. It's another signal that advertisers see different value on Pinterest than in other platforms. On engagement, monthly active users grew 1% to 444 million as we continue to see the pandemic unwind impact our engagement. While we had an uptick in our core out-of-home use cases, like fashion and beauty, they didn't outweigh the downtick we saw with core in-the-home-use cases, a trend that began in March. However, we don't believe this is a permanent change in behavior. Although the timing is hard to predict, we think that MAUs will return to a more normal seasonal growth pattern in the future, as more and more people return to looking for ideas for their homes, recipes, their families and so much more. In the bigger picture, we think there is growing demand for a positive place on the Internet to discover great ideas, try them and buy them. And that's why we remain focused on building a place that feels healthy and encouraging; a place to envision your best life with rich new tools; and a place that connects you to ideas, businesses and creators to help you turn inspiration into reality. For a long time, we've talked about helping people make the journey all the way from inspiration to realization, which is why we continued to invest in the core product to make it more shoppable. We've added new features like Slide Show Collections, which allow merchants to easily display more of their products in a full-screen video format. We've expanded our Verified Merchant Program into seven new markets, including Brazil, Italy and Spain. We've introduced product-tagging and affiliate links for Idea Pins, so creators can help Pinners shop their favorite brands. And these efforts are showing results. Overall product searches were up over 100% year-over-year. Searches on the Shop tab by Gen Z were up 200% year-over-year. In Q4, we started testing a more seamless checkout experience, and so we're excited about the momentum. At the same time, we continue to execute our longer-term creator strategy to evolve how by our Pinners. We believe that our investments in a native creator-driven ecosystem will lead to deeper engagement over time, with Idea Pins accelerating the rich video content on interest, offering new ways to get inspired and giving people new reasons to visit Pinterest more frequently as they find and follow creators they love. In just the past few weeks, we've released a number of new features to execute on this strategy. A new Watch tab, where folks can watch a vertical feed of full screen Idea Pins; a new feature called Takes, where users can publish their own personal spin on Idea Pins and encourage others to try those same ideas; a new rewards program to pay creators for sharing their passions with their audience; and most recently, Pinterest TV, which offers live original episodes featuring creators. And this is just the beginning. This is a long-term investment for us into the future of inspiring lifestyle media. So while that's changed in the world over the past 1.5 years, one thing we believe hasn't changed is our value proposition. If people want a place to focus on themselves, not others, define what they truly love, not just what others like, and to envision their best selves and to make that future possible, we believe that places Pinterest, and that's why I'm as excited as ever about our future. Now I'll turn it over to Todd.

Todd Morgenfeld, CFO and Head of Business Operations

Thanks, Ben. I'll share some further details on the trends we saw in Q3 and provide a preliminary outlook for Q4. We were pleased with the financial results that we delivered. Q3 revenue of $633 million grew 43% year-over-year, with adjusted EBITDA margins expanding nearly 1,100 basis points to 32% when compared to the third quarter of last year. While most of the details about our financial performance are in our shareholder letter, I'd like to provide a little bit of additional color. We estimate that absent the macro supply chain issues this year and the benefit from the social media boycott last year, advertising spend from CPG advertisers would have had a positive mid-single-digit impact on our Q3 year-over-year revenue growth. Also, we continued to scale the distribution and placement of Idea Pins during the quarter. We estimate that the negative impact to our Q3 year-over-year revenue growth was in the mid-single digits. This impact was factored into our guidance for Q3. Finally, we don't believe we saw a material revenue impact from Apple's ATT policy changes during Q3. That said, it's still too early to predict the long-term revenue impact of these and future iOS changes. On engagement, global monthly active users grew 1% year-over-year. We continued to face headwinds, primarily from pandemic easing, as Ben described, but also due to a lower contribution to monthly active user growth from Gen Z users and due to SEO changes that impacted web traffic to our service, particularly in certain emerging international markets. We remain encouraged by the fact that global mobile app MAUs continue to grow double digits year-over-year. In the U.S., our mobile app MAUs remained relatively resilient when compared to our web-based MAUs, which declined double digits year-over-year. Turning to our preliminary outlook for Q4. The exact impact of the pandemic and its aftermath on our engagement and revenue remains unknown. On the engagement side, it's worth pausing for a moment to recap our understanding of engagement trends on Pinterest over the last couple of quarters. When lockdowns began to ease last spring, we saw a precipitous drop in some of our core at-home use cases like home decor, cooking and DIY, and they haven't fully recovered yet. When you look at Pinterest today, the propensity to adopt at-home use cases, such as home decor and food and drink, is less than it was before the pandemic began, while the propensity to adopt use cases like beauty and women's fashion has grown. That's what's driving our belief that we're not in a normal environment yet. As Ben said, we don't believe that this trend reflects a permanent change in human behavior, and we think monthly active users will eventually return to a more normal seasonal growth pattern. While we believe this, the timing is uncertain because the pandemic and subsequent user behavior remains difficult to predict, as evidenced by Q3 monthly active users not following a typical seasonal trend. So we're monitoring this as well as SEO changes and the impact of time spent on competitive platforms as we mentioned last quarter. In this environment, we continue to build the most inspiring product we can, and we're confident that the investments we're making in native content will be engagement and revenue-accretive in the long term. Given this context, we think it is most helpful to let you know where we are today. As of Tuesday, November 2, U.S. monthly active users were approximately 89 million, and global monthly active users were approximately 447 million. While the quarter-to-date trend suggests some stabilization of monthly active users, the pandemic unwind has distorted our typical seasonal trends as we saw in Q3, so it's hard to predict exactly how the quarter will play out from here. On the revenue side, we expect total revenue to grow in the high teens on a percentage basis year-over-year. Please note that our Q4 revenue guide takes into account a few considerations. First, the macro environment remains challenging. For our CPG advertisers, supply chain issues are still front and center, and they're not sure when things will improve. Also, it's possible that the macro and supply chain issues will affect other non-CPG verticals more in Q4 than they did during the third quarter. Second, we're facing tough year-over-year comps this quarter. In the year-ago quarter, our investments in ads automation meaningfully drove year-on-year revenue, we had a very strong Q4 2020 holiday season, and we attracted ad spend for being a positive platform during the social media boycott in the 2020 election. Third, we continue to monitor the impacts that higher CPAs could have on our more price-sensitive advertisers. There are some exogenous factors that appear to be resulting in higher CPAs, including overall demand for digital ads from advertisers. On Pinterest specifically, if engagement declines continue, we'd eventually expect to see some constraints on our monetizable supply and, in turn, higher CPAs. This is not something we're seeing today, and we are monitoring this dynamic. At the same time, we're investing in a number of opportunities to monetize our existing supply and help advertisers achieve their goals. Finally, as we scale the distribution of Idea Pins, traffic will increasingly shift to relatively undermonetized surfaces such as Idea Pins streams and our new vertical video, Watch tab. These new surfaces will likely remain under monetized in the medium term as we optimize the user experience to drive engagement. This investment will likely be a modest headwind to revenue in the future quarters, as it was in Q3, and as reflected in our Q4 guide. However, we believe that Idea Pins will be both engagement and revenue-accretive over time. Finally, I'd like to touch on expenses. We continue to invest in the growth of the business in accordance with our key strategic priorities of inspiring content, the Pinner experience, advertiser success, and shopping. Our non-GAAP operating expenses in Q3 grew 26% year-over-year. We expect Q4 non-GAAP operating expenses to grow in the low-teens percentage basis quarter-over-quarter as we continue to ramp investments in our long-term strategic initiatives and invest in our brand-marketing campaign in the fourth quarter. Thank you to our teams at Pinterest, our advertising partners, our creators, and all of the people that come to Pinterest to find inspiration. And with that, we can open it up for questions.

Operator, Operator

The first question is from Ross Sandler with Barclays.

Ross Sandler, Analyst

Two questions. I guess one for Ben. The new creator tools and Idea Pins and Watch tab, it's just all the new creator activity. If we look out 2 to 3 years, what kind of uptake do you think this could get? And what kind of impact on overall engagement? Are we talking iterative? Or could it be material? Any thoughts on that and just how it's going in the early days here. And then, Todd, the Q4 guide actually looks pretty decent. If you look at it sequentially, kind of low 30s quarter-on-quarter, pretty good considering all the moving pieces right now. I guess, any more color on like what's outperforming as you go into Q4? What's underperforming aside from CPG? And can we get an update just high level on how big the kind of big 3 are, retail, CPG and all other, in terms of like percent of revenue?

Benjamin Silbermann, President and CEO

Thanks for your question, Ross. I'll start by talking about creators, and then Todd will address your second question. So on creators, like maybe just taking a step back, I just want to remind everyone of why we're investing in this in the first place. And there are two principal reasons. The first is that Pinterest is fundamentally about inspiration. We have long inspired people with web-based images, but we think that video is a fundamental format for inspiration in the future. And today, mobile video is really still in its infancy. So you're seeing all these different platforms develop video products that play to their core strengths. Some are about entertainment. Some are about social connection. And at Pinterest, we see this opportunity to enable creators to produce videos that are really aligned with what people are there to do on Pinterest, which is get inspired and take action. And so we think that we have a unique value proposition in that space. So one strategic goal is to better deliver on our mission through rich interactive video, and we think this will both deepen engagement over time and drive actions to shop behavior. The second goal, and you kind of suggest this, is to give our users more reasons to come back to Pinterest with greater frequency. And historically, people mostly come to Pinterest when something in their offline lives needs attention. For example, they might be planning a project for a home remodel or preparing for a seasonal event such as back-to-school. And that means engagement tends to be episodic and driven by events that are exogenous to the service itself. But on the Internet, when people subscribe to content from their favorite creators and brands, they have more reasons to visit a service and engage more frequently, regardless of what else is happening offline. So integrating this published subscribed model into Pinterest cannot only make the product more inspirational and more useful, but can also meaningfully change engagement. Look, it's still early days. It's going to take several quarters for these efforts in need of content to kind of meaningfully move the needle. But I'm really proud of the team. We invested significant resources off of more conventional growth investments to build out a new Watch tab, visibility of tagged products; the new feature that we mentioned called Takes; and as you mentioned, most recently, Pinterest TV. And we're starting to see those efforts getting some momentum. Idea Pins creator daily grew more than 15x since the beginning of the year. The number of weekly active Idea Pins creators grew 30x, and the time spent on those Pins has been increasing as well. So all of that is to say we're really optimistic about it. We're going to continue to invest. We consider this a long-term priority, and we tend to go long on the things that we believe in. We did it with shopping. We did it with global expansion and performance advertising, and now we're going to deal with online content creation.

Todd Morgenfeld, CFO and Head of Business Operations

And then Ross, I think your second question was about the fourth quarter guide, and I can give a little bit more color on that. So I know folks look at this in a variety of ways. But we often get the question on a stacked growth basis. I think it's in the mid-90s on a CAGR basis over the last couple of years. We're in the mid-40s, which is largely consistent with trend. So I think your point holds there. The color behind that is we expect that the CPG headwinds, which aren't unique to us, it's an industry-wide phenomenon. I would expect that, that continues through the fourth quarter. The question is whether it broadens beyond CPG, but we haven't seen that yet. And I mentioned this a little bit before, that we had a lot of really compelling product improvements through our work on automation last year, auto bid, campaign budget optimization and other things that had great results throughout the year. We had an especially strong holiday season last year, and then we had some election year benefits that persisted beyond Q3 into Q4. So we're lapping that. And then we're monitoring, as I mentioned, the impact of higher prices on the platform. But the strength is really around our larger retail advertisers, many of whom are buying consideration or traffic objectives right now, continued strength in international and the benefits of our investments in a full funnel performance platform are working. I mean that strategy that we've been talking about for the last couple of years is working, and we're seeing great success with our larger managed mid-market advertisers as a result, which means we're using our monetizable supply more efficiently. Does that answer your question?

Ross Sandler, Analyst

Yes. Yes, it does. I mean I don't know if you guys are willing to give it out, but like the revenue mix, I think, is something that comes up often in our conversations around CPG, retail, and other and just some of the moving pieces with those three. So any color, high level on that?

Todd Morgenfeld, CFO and Head of Business Operations

Thank you for bringing up that last part of your question. We initially grew the business due to strong performance with larger retail and consumer packaged goods advertisers, which has been a robust area for us in recent years. As you know, we've diversified into other sectors and focused more on the mid-market, especially with larger managed mid-market advertisers, as we enhance our ad stack automation to better meet their needs. Over time, we've shifted our diversification strategy, leading to a better balance away from consumer packaged goods and retail, although we still retain significant exposure to those areas. Given the strong performance we experienced last quarter in retail, we've seen a slight shift back towards retail in certain ways. Our larger advertisers were notably active last quarter.

Operator, Operator

The next question comes from the line of Eric Sheridan with Goldman Sachs.

Eric Sheridan, Analyst

I wanted to ask two questions, if I could. A lot of the other players in the industry have called out the need to build better internal mechanisms and tools around measurement, metrics, and intent on the back of the privacy changes Apple has made. Can you just give us a little bit of a sense of how you feel you're positioned against broader privacy headwinds in the industry in the coming years? And what investments might be key to you? And then Ben, I wanted to ask, the company has obviously been written a lot about in the press from a strategy and strategic standpoint a picture lately. How are you thinking about the way Pinterest is sort of positioned against some of the broader industry trends around commerce and advertising and the creative economies you called out? And how much of that you can accomplish sort of organically by yourself?

Benjamin Silbermann, President and CEO

Sure, Eric. To begin with your question on measurement, we've been preparing for changes in the privacy landscape for some time. Over the last three or four quarters, we've discussed investing in first-party measurement. We didn't see significant results in Q3, but we believe that any loss of signal hinders our ability to provide value to advertisers. It's too early to determine the long-term revenue impact of Apple's policy changes. We think the limited impact we've experienced is due to several factors. Historically, app install ads that relied on IDFA haven't generated meaningful revenue for us, and we phased that format out in 2021, reducing our exposure to signal loss. Additionally, because our users often have commercial intent and engage deeply with our service, we have a wealth of first-party data, making us less reliant on third-party signals for delivering relevant ads. Our models have shown resilience against the loss of offsite data. Furthermore, we've been enhancing our ad tech stack to improve conversion visibility in a privacy-focused environment. We aim to continue investing in seamless checkout, which will help mitigate the effects of privacy changes over time. Regarding your second question about our strategic position, I believe Pinterest is well positioned for several reasons. Our audience comes to Pinterest for a unique purpose; they aren't seeking to connect with friends but rather to envision and plan for their future. We're facilitating this by connecting them with retailers and products that can help them realize their inspirations. This offers a distinct value proposition and a compelling brand position. We're committed to ensuring Pinterest remains a positive and inspiring space through our content safety measures and policies that help people envision a hopeful future. Pinterest also occupies an interesting space at the intersection of several growth trends in the industry. In commerce, for example, larger platforms like Amazon excel at showing consumers products they already want. However, when it comes to areas like furniture and clothing, where aesthetics are crucial, people seek better tools, and Pinterest is uniquely positioned to provide those. We're enhancing our shopping solutions to meet users' specific needs. Finally, we are investing in a creator ecosystem in online video. I’ve mentioned before that online and mobile video is still emerging, and we're positioned to lead in developing media formats that inspire action while providing various revenue models for creators. This has been the foundation of our strategy over the past few years, and we’ve seen promising progress in driving shopping conversions, growing our new creator suite, and receiving positive feedback from users who consider Pinterest a source of inspiration for planning important aspects of their lives.

Brian Nowak, Analyst

I have two. Just the first one, I want to go a little bit more into the fourth quarter guide and the factors you helped us out with. Could you just help us understand a little bit? You mentioned the supply chain challenges for CPG, potentially going into other categories. What are you already seeing in October? Are you already seeing CPG companies pull back? Or are you seeing other categories pull back, et cetera? I'm trying to figure out what you've seen in October versus what you're just sort of having conversations about so far. And then the second one, maybe it's for Ben. I always appreciate the staff about product searches being up 100% and the Gen Z winds up 200%, et cetera. Can you just help us out a little more understand what percentage of the people who come to the platform, even high level, are coming on there and searching with intent as opposed to just browsing? I think it'll probably help investors understand a little bit just the value of the social shopping opportunity.

Todd Morgenfeld, CFO and Head of Business Operations

Thanks, Brian. Regarding the Q4 guidance, I want to share that it reflects our current trends and expected demand and delivery as we approach the end of the quarter. I'm not conveying anything particularly intricate; it's simply an extension of the trends we observed in Q3, which have continued into this quarter in the core CPG market. I'm aware of the ongoing supply chain challenges in this sector, but nothing seems to be unique to us in terms of advertising demand. This situation somewhat resembles the early days of the COVID period when CPG and omnichannel retailers faced pullbacks due to stock shortages and closed stores. We are experiencing a similar dynamic in CPG, where advertising becomes difficult when product delivery is compromised, and this observation is not specific to Pinterest. I haven't noticed any significant changes in the past few weeks compared to Q3. My caution regarding extensions in other industries remains in my mind, but I haven't seen any implications in the current quarter. I hope that clarifies my message without introducing any complex details.

Benjamin Silbermann, President and CEO

Brian, on your question of how do we think about shopping engagement on the platform, how many folks are searching and kind of what's going on there. We don't disclose the specifics of the engagement breakdown. But what I can tell you is that search is one of the fastest growing areas of engagement on the platform in general. And what we try to do in our philosophy in shopping is to make it so any place that you're feeling inspired, we want to make it seamless for you that it connects to a shopping surface. So in search, that means that we'll surface products. And then if you scroll down, you can see related products. Those are shopping surfaces. And over time, there's a lot of opportunity to grow the number of shopping ads within those surfaces. When you're just searching generally, we make it easier and easier for you to find individual retailers. That's been a big push by the team this year. And even when we talk about new inspirational services, our long-term plan is to connect those to shopping as well. So we talked a little bit about Idea Pins and Pinterest TV, and we want to make sure that experience is great. But a lot of people want to do there is they want to eventually buy the things they see. And so we're starting to experiment with some of the seamless checkout work in partnership with a couple of folks, including Shopify in Q4, we're helping them learn. That's just an early pilot. But again, it's about shortening the path from inspiration to purchase without disrupting the user experience at the same time.

Operator, Operator

The next question comes from the line of Rich Greenfield with LightShed Partners.

Richard Greenfield, Analyst

I have a couple of questions. First, to build on Eric's inquiries, Ben, many people are concerned about your ARPU being relatively low compared to your competitors. You also don’t face the ETT challenges that others do due to your first-party data. So, looking at Q4 and even 2022, my main question is why isn't advertising growth much faster considering your ARPU level? Do you need new ad products or a different ad sales team? It seems there’s a significant gap between your company’s size and its level of monetization. I’m curious about your thoughts on this. Secondly, we've noticed that Facebook is changing Instagram to focus more on video. As you consider Pinterest, do you think it needs to evolve to embrace the creator economy and include more video content? Should it adopt a different look and feel and become more video-oriented from the outset, rather than sticking with the traditional Pins on the main page? I'd like to hear your perspective on these issues, particularly with a focus on mobile.

Benjamin Silbermann, President and CEO

Sure, Rich. I'll start with your second question first. It's really about whether we are continuing to enhance the user experience to match evolving user expectations and behaviors. The answer is yes. We launched a set of features on October 20, including the Watch tab, which offers an immersive vertical scrolling format. We believe customers will grow accustomed to this format and it will help us showcase content that aligns with what Pinners want to achieve. This is just one example, and you'll see us introducing more new experiences designed to make browsing easier, inspire users, allow deeper engagement when they wish, and facilitate purchases. You're right to inquire about this, and our teams are diligently working on these enhancements. I'm actually excited to get these in front of more users, as the rollout has just begun worldwide. As for your first question about our revenue and low ARPU, let me share a few thoughts. I'm really proud of our team's achievements in significantly growing revenue. We've identified several opportunities for further growth. First, international revenue is scaling as we enter new geographies and accelerate the rollout of products like shopping that originated in the U.S. This is significant for ARPU, especially since many of our users are outside the U.S. Second, we have several high-intent areas that are currently under-monetized, particularly shopping. We are focused on developing automated methods to increase inventory, such as catalog uploading and an API for a broader range of products. It's essential to remember that relevance is crucial in shopping, and this relies on the scale and structure of our catalog. We're committed to this long-term investment and eager to continue advancing it. Reducing friction in checkout presents a substantial opportunity as well. We're working hard and I'm pleased with the progress we're making. Finally, our ads product team has significantly improved the efficiency of our advertising efforts. Todd mentioned briefly our focus on enhancing automation in various ways, including budget optimization, which has yielded impressive returns. Advertisers have experienced a 20% to 30% reduction in cost per click, indicating we can offer greater value to them, which is positive for our business. As larger advertisers adopt these automated tools, we see potential for democratizing access to them for mid-sized and smaller advertisers over time. I understand your concerns, and we're dedicated to building a successful business with many exciting opportunities ahead.

Richard Greenfield, Analyst

As you consider 2022, could you share how much of what you discussed will become evident as we progress through the year?

Benjamin Silbermann, President and CEO

Well, I'll let Todd expand on it more. I mean I think improvements in things like automation, improvements in ad formats and measurement, those are things that are kind of always driving better and better efficiencies. And I don't think that we've exhausted all those opportunities. And so we continue to work on that. Internationally, we're investing pretty significantly, and Todd can speak more about new markets that we're opening. We're building out operational teams there. I think farthest away are probably the monetization of Idea Pins and Idea Streams. Those are brand-new experiences. And what we like to do is really get those experiences working well. And we're willing to take a hit on short-term revenue to make sure that users are having a great experience and then find out how to fold in the right monetization opportunities over time. So Todd mentioned that this may be a headwind in the coming quarters. That's true, but I also think it's an intentional choice. We want to make sure that we're giving creators clear guidance on how to build the most inspiring content. We're growing our ability to show the right content to the right person, so people feel like they're getting information relevant to them. When those things are established and are driving engagement, we'll find bright ways to add revenue. We're beta testing idea ads. We're beta testing some really interesting partnerships with brands and creators, but I wouldn't expect those to be big revenue contributors in the short term.

Mark Mahaney, Analyst

I want to ask about your strategies for retaining and reactivating monthly active users. You had a solid influx of users who tried Pinterest and likely had good experiences, but some of the initial users might have only engaged with it for a single purpose and didn't fully appreciate the variety of use cases available on Pinterest. How do you plan to re-engage those users who tried it during the COVID period and didn't return? How can you encourage them to explore more comprehensive applications of Pinterest?

Benjamin Silbermann, President and CEO

Thanks, Mark. I think it's a great question. I mentioned it at the top, but unlike more social services where you engage with it almost daily to talk to your friends, Pinterest is something that you might come in, use it for a product, a project and then you may pause. And historically, we've seen a lot of our users use it for a period of time and then come back. Two answers to that. One is that we can do a better job at re-engaging those users. And so we're continuing to invest in things like the taste graph and better personalization, which will enable us to do that more and more efficiently, and this work is ongoing to do it really well. The second answer, and this is longer term, is we'd love for folks actually to continue using it from the get-go. And so part of the reason why we're excited about building more published subscribed models is that people can find creators that resonate with them and visit the service more frequently. And again, we're early on in that. But think of those as the two approaches. Like one is resurrecting folks by showing them use cases that are relevant and doing that by improving the quality of our personalization and the quality of outreach. And the second, not letting people lapse in the first place because we connect them with creators and use cases that really resonate, and that keeps them using the service more and more often to do more and more different things in their lives.

Operator, Operator

The next question comes from the line of Colin Sebastian with Baird.

Colin Sebastian, Analyst

I have a couple of questions also. I guess, first off, regarding the commentary around new services as a near-term revenue headwind. I guess what are your expectations in terms of the time frame needed for those to shift from a negative impact to a positive impact, if there are particular hurdles you're looking for, particularly if you're seeing cannibalization and usage away from legacy surfaces? And then secondly, with respect to the loss of Gen Z users, just curious from what you can tell. Is this part of the cohort that came on during the pandemic? Or could this be a loss of attention to other platforms?

Todd Morgenfeld, CFO and Head of Business Operations

Thank you. A few key points. First, Ben discussed our plans for enhancing our creator strategy, which we anticipate will encourage users to return to the platform more often and reduce churn. I'm enthusiastic about the published subscribe feature and Pinterest-based communities, as they are designed to engage users more. However, we are still in the early stages of these initiatives. We recently launched a series of products, which is a promising start. I believe it will take several quarters to establish a strong ecosystem for our creator community and user base. The timeline is extended because we adopt a long-term investment approach for these significant new projects. Looking back at our efforts to engage international audiences and enhance monetization, we undertook a multi-year process to localize content and ensure the user experience appealed outside of the U.S., aligning with advertising opportunities in various markets similar to those in the U.S. This has taken a few years, and we are now seeing positive results. Regarding our plans, we will expand into more Latin American markets next year, along with Japan. Such advancements unfold over several years. The shopping initiative also required us to create a two-sided marketplace, where we needed dedicated high-intent spaces for users to discover products, and merchants to upload catalogs so we could deliver relevant organic or promoted content based on users' commercial intent. Our initial priority was ensuring a positive user experience, and we are now progressively monetizing that shopping experience. Our focus remains on enhancing user experience first. The same applies to our investments in the Idea Pin creator ecosystem. I am confident that this will increase session frequency and deepen engagement through rich discovery opportunities. The published subscribe model will encourage more regular user return around interest-based communities, and I believe this will evolve into a strong shopping platform over time. However, this is not something we expect to see immediate results from in the next quarter; it’s a long-term commitment.

Operator, Operator

This will be our last question, from the line of Rob Sanderson with Loop Capital. Mr. Sanderson, your line is open.

Jane Penner, Head of Investor Relations

I'm sorry, operator, do we have Rob on the line? Or should we move to close the call?

Benjamin Silbermann, President and CEO

Well, I just want to thank everyone again for joining and for all the thoughtful questions. I want to thank again the Pinterest team for another quarter of great work. We look forward to keeping the dialogue going, and enjoy the rest of your day or your evening.

Operator, Operator

That concludes Pinterest's third quarter earnings call. Thank you for your participation. You may now disconnect your lines.