Here’s why Pinterest shares are down nearly 20% on Friday morning

Pinterest Inc (NYSE: PINS) shares are down close to 20% on Friday morning as the social networking service said its monthly average users tanked 5% in the fiscal second quarter. It also warned that the decline accelerated further in July, with the MAUs down about 7% on a year over year basis.

In terms of income and revenue, the San Francisco-based company performed better than last year and topped Wall Street estimates. But investors remained focused on the fact that it lost 24 million active user accounts in one quarter.  

Pinterest found a broader user base last year as the COVID-19 crisis restricted people to their homes. After the Q2 report, however, investors are now wondering if Pinterest will retain the user growth after the pandemic?  

Julia Boorstin’s remarks on CNBC’s “TechCheck”

After avoiding it for years, Pinterest finally succumbed to the demand for short-form video content this year. It launched Idea Pins in May to further penetrate the creator community.

Pinterest doesn’t need to look for M&A

Boorstin further highlighted that Pinterest has been investing in tools like shoppable pins and others that pave its way into eCommerce, which is why it might not need to consider mergers and acquisitions like Etsy to expand into social commerce.

According to Boorstin, video ads are more valuable than static ads, and that’s an opportunity that Pinterest wants to tap with its slate of new features. Would that help with the sharply contracting user base, though? That is yet to be known.