Upfront I will say I am very bullish on Pinterest (PINS) and was previously uneducated on Etsy (ETSY). Since I recently had a lot of free time for investment research and everyone on the board has been gaga over ETSY, I figured I would finally take a look. I didn’t have to go too deep to realize this is not a company I would like to invest in. Below I hope to explain why concisely and then contrast it with Pinterest.

Etsy is a unique marketplace which allows sellers to sell items to buyers. Their marketplace makes money from: listing fees, transaction fees, payments platform, and offsite ads transaction fees. Their services makes money from: advertising - Etsy ads and bump, shipping labels, and other. I see this as a problem right off the bat because their sales only increase by 1) increase # of sellers, 2) higher fees for the sellers, or 3) increase # of buyers. Some changes were implemented when the new non-founder CEO Josh Silverman took control (…). One could certainly brush off the allegations in the website but I have first-hand experience from my brother and sister-in-law who were able to use Etsy as their sole income because their shop was one of the top rated shops and the changes listed in the link crippled them requiring them to seek out other employment; Etsy income for them is now ~30% what it was. Keep in mind this is just one anecdote but it speaks volumes to the mindset of the leadership.

Looking through their investor presentation, one chart on slide 21 tells the whole story (GMS = Gross Merchandise Sales); see summary of chart in table below. How can someone say that this is not a COVID play? I am sure they have gained a lot of people who are going to be repeat shoppers, and I am sure their international expansion is going well, but the bottom line is that this growth is not sustainable, no matter how you spin it. This isn’t a service like Facebook where people come and stay, this is an ecommerce platform where people come to shop every now and again. If there are other revenue steams and income expansion that I am missing, please bring it to my attention.

	**FY 2017**	**FY 2018**	**FY 2019**	**FY 2020**
**GMS (M)**	3,254	3,932	4,975	10,281
**% Diff**	-	20.8%	26.5%	106.7%

Something else of note: Debt/Equity = 59% (but they do have a sufficient cash position to cover the debt).

I would certainly not call this a deep dive but I dove deep enough to assure myself that this is not a place where I want my money to be, especially when there are so many great companies out there, many of which are discussed on this board, who got a sustained boost from COVID.

This is a founder-led, transparent, no-nonsense company firing on all cylinders. Pinterest’s mission statement is to bring everyone the inspiration to create the life they love. They are going about this is so many different ways that I wish I could get a time machine and see what this company is doing 5 years down the road. Their main income is from advertising. People misclassify them as a social media website but think about it, when you advertise on Facebook you are pretty much shooting in the dark. When you advertise on Pinterest, you know exactly what that user has been searching for, what renovations they have been researching, what type of cooking they have been diving into, etc; this is not a shot in the dark but a deeply targeted advertisement which demands a higher premium from the advertiser. On Pinterest you search to better yourself, on Facebook/Twitter/etc you connect to see what others are doing.

Their growth recently has come from 1) automated advertising, 2) making Pinterest more shoppable, 3) international monetization. Q4 saw almost half of the advertising spend go through automated bidding which they only introduced a few quarters ago. Pinterest has a deal with Shopify so Pinners can go straight from Pinterest searches to purchasing through Shopify. Shopping will be greatly expanded over the coming quarters.

Here is my favorite stat to tout. International users make up 78.6% of the user base but only 17.4% of the revenue. Average Revenue Per User in the US is $5.94 while international ARPU is $0.35. This isn’t because they can’t make enough money internationally, it is because they haven’t monetized them yet. Pinterest has spent a lot of time monetizing Europe and is planning to begin monetization of Latin America 1H2021. I am not about to say that international ARPU can get to the levels of US ARPU, but they certainly have a long runway ahead of them.

See table below for why this is not a COVID spike (MAU=Monthly Active User). I put the % YoY values here because this business is seasonal with Q3 being good and Q4 being great. You can clearly see a COVID bump between Q1-20 and Q2-20 but this is not the kind of bump that would make me thing the business is relying on COVID (see Etsy table above). As already mentioned, even if the MAUs stayed constant or decreased, their ARPU is increasing because of all of the innovations they are incorporating into the business to make advertising more efficient, lead Pinners to purchases based on what they are researching, and increase in international monetization. They are even talking about allowing Pinner to monetize instructional videos on how to cook, do origami, stitch, etc.

	**Q4-18**	**Q1-19**	**Q2-19**	**Q3-19**	**Q4-19**	**Q1-20**	**Q2-20**	**Q3-20**	**Q4-20**
**USA MAU**	82	85	85	87	88	90	96	98	98
**% YoY**	-	-	-	-	7.3%	5.9%	12.9%	12.6%	11.4%
**INT MAU**	184	206	215	235	247	277	321	343	361
**% YoY**	-	-	-	-	34.2%	34.5%	49.3%	46.0%	46.2%

No debt, $1.760 B cash position.

Both ETSY and PINS seem like great businesses and both will most likely succeed. I view ETSY as having gotten a huge, temporary boost from COVID and will have a tough time continuing to increase revenue (already going down the M&A route). Pinterest had a moderate bump from COVID but has a huge runway ahead of them which will increase current revenue streams all while introducing new ones concurrently. It is actually pretty comical that I am so bullish on Pinterest because initially I wasn’t interested but as you research them more and more, you see clearly how this company can become a real behemoth.

Please do your own research, I could be wrong on all accounts :). This is not all encompassing but is only meant to present a story of the two companies for the purposes of comparison.



Great writeup on PINS.

The bull thesis is that Etsy’s amazing brand awareness and international expansion will help the high growth continue post covid as it trys to create more and more habitual buyers. Etsys recent stats show it is becomg more and more sticky and user engagement is off the charts, ie 2.7 million videos uploaded last quarter. Buyers and sellers are growing like crazy on Etsy, the numbers don’t lie. The network affect only increases the moat and the pricing power. See the posts on Etsy’s earnings for details.

As you mentioned, Etsy is the #4 website in the country. I invest in mega trends and e-commerce is one of my favorites. The #4 website in the country only has a market cap of 25 Billion, grew at 129% this past quarter, and has an estimated TAM of 1.7 trillion! Oh wait the PE is only 77. How much better can it get? There is no pepsi to etsy’s coke. 88% of buyers go to Etsy because they can’t find the product anywhere else. Covid didn’t just force people to shop online, it actually pulled e-commerce adoption ahead by 5 years! In my humble opinion, there’s a lot of upside here, especially with the recent price haircut.

Long Etsy (8%)



I think there is an important distinction to make regarding your definition of a “Covid play.” While I agree that Etsy hugely benefited from the pandemic – I think a key to Etsy’s investment thesis lays in the extent to which its hypergrowth will be sustained. One of the greatest questions that the pandemic has left us with is – gaging which behaviors will stick and which won’t. It’s fair to look at Etsy’s surge in growth and interpret it as unsustainable. But perhaps it won’t be as unsustainable as it seems at first glance…

(1) Product Uniqueness: On a recent survey of Etsy’s buyers, 88% agreed that Etsy has items you can’t find anywhere else. In a way, it is like a more refined version of a centralized flea market that will continue pursuing global expansion (which now makes up 41% of GMS). Comparing it to Pintrest here, while I fully agree that Pintrest has a massive opportunity to convert “Pinners” into shoppers, Pintrest is still competing for its users attention – while Etsy is slowly becoming the owner of personalized/handcrafted shopping

(2) Habitual Buyers: Etsy has a generational opportunity to convert its new customers into habitual ones, and it is executing very well so far. For many people that discovered Etsy over the past year, it may become their primary avenue for holiday/gift shopping in the coming years. A portion of Etsy’s massive surge was driven by customers that won’t go away after Covid. The key question is how much does this portion represent
• The percentage of buyers that had two or more purchases in 2020 was 48%. And for that segment, the average was 5 purchases for the first time ever
• Of the 3M masks-only buyers in Q3, approximately 50% returned in Q4 for a non-mark purchase (up 12% compared to Q3)
• Approximately 22% buyers in 2020 became repeat buyers within 60 days of their first purchase, up from 16% in 2019

(3) Customer Intelligence: Etsy completed its migration to Google Cloud in February 2020, and they are just starting to dial up the power of this infrastructure shift. Along with operational improvements, they are scratching the surface of mass personalization. Silverman (CEO) mentioned how “we’re learning more how TV can then mid-funnel things like video and other ads in social can really all work collectively to get us top of mind and have you start on Etsy and not start somewhere else.” Etsy indicated in their latest annual report that they “expect to continue to enhance our search and discovery capabilities and machine learning to deliver a more personalized shopping experience in the future. The percentage of purchases with a query reformulation is down from 39% in 2018 to 31% today.

Lastly, it’s important to note that this isn’t just about the narrative – the numbers are backing it up bigtime. Etsy is now generating $1.2M p/employee (that’s approximately 2x Zoom’s). Etsy grew 2.5x faster than the growth of ecommerce in 2020. It produced $672M in FCF last fiscal year - $349M of net income! All while it stands at a market cap of $25B (about ½ of Crowdstrike’s).

So, while it is true that the Covid bump was more pronounced than for Pintrest, we differ in the interpretation of how impactful that bump will be going forward. This reminds me of the diverging opinions on the board lately about Zoom. We know that it “conquered the world” in 2020 – but how much runway is left? Only time will tell…

Protect the identity of this board and maximize your learning by reading… before participating


A merger ETSY + PINS would be awesome.
I still dont like both Website Layouts. There is big room for improvements

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As an advertiser who has used Facebook, I’d argue that ‘when you advertise on Facebook you are pretty much shooting in the dark.’ Is far from the truth.

The reason FB has grown its revenues is because of advertising. The amount of granular data on every user on FB is incredible. They know your demographics, your location, your politics, your likes and dislikes in food, movies, books, hobbies, etc and even your relationships (father, son, mother, sibling, etc). And those are just a few of the data points you can target as an advertiser. I don’t see how any company could provide advertisers more targeted traffic.


Appreciate all of the feedback on Etsy. I am hopeful it will turn out to be a great investment for those who have gone long.

As for the advertising comment, I am certainly not an advertiser and I probably used more hyperbole in my “shot in the dark” comment than was necessary. The big difference I see is the intent of the users on Facebook, Twitter, etc versus Pinterest. Sure Facebook might intuit that I like soccer, pizza, traveling, and know Italian so I would be a perfect match for an advertisement about Italian vacations but I am not in the market for an Italian vacation so it falls on deaf ears. On Pinterest, I am searching and pinning things that I am in the market for. Let’s say I am currently renovating my bathroom so I search for sinks, paint colors, mirrors, etc. They can sprinkle in advertisements for all of those things along with bathmats, shower curtains, etc and have a high probability that it’ll stick because I am actively searching for these items. This is what I mean by “shooting in the dark.” The advertisers hope they might get a catch on Facebook when they throw the lure in but advertising on Pinterest is like shooting fish in a barrel. Hyperbole again? Maybe, but I hope the point comes across regardless that there is a fundamental difference in advertising between the two platforms.



this is an interesting thread…

My 2 cents:


  1. ETSY is a strong brand and has become much stronger in 2020… Josh Silverman is very capable CEO… and all of those things show up in their results…

  2. However, just like Zoom and Teladoc and Peloton, Etsy will see strong comp headwinds through 2021… and very likely 2nd half of 2021 and may be even 2022 will see slow to no growth in e-commerce just because people want to

  3. Josh has done an amazing job of monetizing much before pandemic which just kind of matured as 2020 arrived… array tools he has used is just fantastic to monetize… so all that super charged ETSY in 2020.

trouble is, there is only so much you can monetize… you need fundamental growth in transactions and I believe those headwinds in 2021 will be major issue…

So I would not discard ETSY’ long term potential, for now, it is not as attractive play for me.

Pinterest has seen both difficulties and some benefits due to pandemic… 1st and 2nd quarter ad spend drop in 2020 is set up as fantastic comp for 2021… roaring comeback in 3rd and 4th quarter just confirmed and reconfirmed PINS value for both advertisers and users…

I believe at-least in the 2nd half of 2020, there was unusual benefit to PINS as more people stayed home, more people wanted to upgrade home… however, I do not believe that will hurt as much to PINS in 2021 because its value to users is in terms of planning (home furnishing, party etc.) and that value is not changing post-pandemic… for sure people may be done with home furnishing, but then they need to plan so many parties in 2021 that PINS will see continuous usage growth…

and more importantly, if you follow PINS story, you can see very clearly that in the past, up until 2018 / 2019, PINS monetization efforts were narrowly focused while spending more to acquire users and add features…

That has changed in 2019 and 2020 as management stepped up monetization infrastructure big time

If you just compare to ETSY, PINS has been at-least a year or two behind in its monetization efforts… however, there is a laundry list of monetization efforts PINS has put in 2019 and 2020 (advertisement tools, international sales offices… integration with Shopify…) that should turbo charge PINS in 2021.

And ofcourse, those macro changes in advertisement spend trend - IDFA changes driven increasing value of first party data, and benefit of intent based advertisement on PINS - all of these are tailwinds for PINS for 12 months…

Lastly, given the valuation, of the stocks discussed on Saul’s board, I believe PINS has one of the best upside for next 12 months… right alongwith NARI… and dare I say, even better than CRWD or DDOG or NET…

PS: I have been reducing DDOG, TDOC and NET to add to PINS (~10%) and NARI (~9%), now my 3rd and 4th position behind CRWD (24%)and ROKU (15%)

PPS: I see comp headwinds for TDOC and NET in 2021 driving me to reduce… DDOG may accelerate but I still want to see one more quarter…


BTW - PINS delivered $97M in FCF last Q for a revenue of $706M…

And if you remove ~$90M cash loss booked in Q3 due to exiting HQ building lease, PINS 2020 full year FCF yield is ~6% growing from -3% for 2019.