Q2 2020 Pinterest Inc Earnings Call
On France call at this time all participants are in the less then only mode. After the speaker's remarks, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone I will now like to turn the conference over to your Speaker today, Jane Penner head of Investor Relations. Please.
Go ahead.
Thank you Julie good morning, and thank you for joining US welcome to Pantheris earnings Conference call for the second quarter ended June 30, Twentytwenty joining me today on the call our been Silverman, our president and CEO and Todd Morgan filed 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 maybe considered forward looking and uncertainties that could cause actual results to differ materially.
In addition, our results trends and outlook for Q3, Twentytwenty, our preliminary and may not be 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 Dot pinch risks Inc. dotcom.
Now I'll turn the call over to them.
Joining the call this morning.
Todd May we'll be giving some brief opening remarks touching on our results in our four strategic priorities, which are making pinchers home to the most uninspiring content, helping painters discover more use cases, making petrus more shoppable.
There will be happy to take your questions.
But before going into business results, which at this period feels like anything but business as usual for people.
Well of businesses here in the U.S. and if Theres coping 19, which in addition to being a global health threat is impacting how people live and work, including all of us here interest.
We're learning how to operate a distributed workforce and in this new climate, we're going to keep making collaboration and efficiency a priority. So we can keep delivering repeaters and for our advertisers.
In addition here in the US we're experiencing historic norm informational justice, what's leading companies to look at what they can do better interest is no exception. We've made a number of commitments to drive change from improving representation in our product to increasing the diversity of our workforce, especially in senior roles.
I know this now how most earning cost again, but I want to be transparent with all of you and with the public that were not just focused on what we're doing as a business, but also how we do business.
These issues are top of mind with everything we do and we're going to work hard to do right by all our stakeholders.
Now onto our business results.
Interest had a strong Q2.
In both to us in international markets more people came to Petrus looking for inspiration than ever before.
We ended the quarter with 416 million monthly active users representing year over year growth of 39%.
In particular, we saw strong growth from resurrected users as well as from users under the age of 25, who grew twice as fast as.
As users over 25.
[noise] gives users came looking for ideas and see adjusted to life during a global pandemic and with new tools like the to date tab. We help connect them to Mark is set ups to recipes to cook at home to different summer activities for kids.
We also continued to make our content more inspirational and one example of this video which suffered offers printers another dynamic.
During Q2.
Both organic and paid grew over 150% year over year, we're looking to do more in the space.
In addition, we also.
So they can turn their plans into reality.
We saw a catalog uploads for business services increased by more than 350% from Q1 Q2, and we have built new features like our shop tab in the ability to shop from boards to make it easier for Peter is to find this content.
So in total were making a lot of progress in helping pillar is fine inspiration for their lives.
Because of everything happening in the world is meaningful and relevant as it has been.
Last decade, and here to share more in our overall business is our CFO.
Okay.
But.
The color on the trends, we've seen to date and <unk>.
Revenue as well as to provide them in in Q3.
Hobby.
For the more detail.
Starting with Q2 revenue, we saw advertiser demand improve.
Each month of the quarter media aftermath of sheltering in place.
May grow.
You showed further improvement.
Sharp acceleration in revenue to about 50% Europe.
At 29.
Well in the mid Thirtys percent range year over year in Q3. This growth rate assumes a deceleration from the strong growth we've seen so far in July.
I'll say more about the shortly.
First on unpack, what we've seen to date and what we currently known to be driving our results.
Then I'll discuss our outlook and the significant uncertainty uncertainties that we're facing.
Q2 was characterized by initial softness and advertising demand and then a partial return of that demand.
Former was triggered by Kobin 19 related Lockdowns and the latter by the return of economic activity as those locked down these.
We saw AD demand recover across many verticals starting in may with CPG, showing particular momentum in the latter part of June and into July.
The retail vertical lagged CPG, but has recently began began to recover as well.
This was the pattern in both the U.S. and in international markets, but non us markets recovered a bit faster.
On top of the macro driven recovery and advertising demand and for Pentrust ad products.
In particular.
Sure.
Here's what our advertisers are telling us.
First specially for marketers seeking sales and conversions.
The investments we.
None or owes CPM.
Shopping ads and auto bid.
Our making it easier for these advertisers.
The hit their goals.
In a world where their balance sheets are at risk marketers want ROI accountable ads and where we are delivering them.
This is bolstered our ability to attract performance oriented medium sized advertisers a group that have the audience in Q2.
Second.
The commercial mindset of our Yao because many advertisers want to drive online sales and printers tend to be end market consumers.
The early commercial intent on our platform also informs the insights we share with advertisers.
And they are increasingly using these insights.
Man and then in this unprecedented environment.
In the words of the ahead of Us media at Ford.
Seem to report that was incredibly interesting from Pentrust.
Sure.
From is changing from the types of behavior as you'd expect during shelter in place.
Recipes crafts with kids baking bread.
To planning oriented behaviors.
Sure. We can always look at the client data leading indicators traffic report.
But to get at something that unlocks what people are actually thinking about even if they're not sick.
That's where the relationships really come to lies between marketers and the platforms and quote.
Finally, advertisers feel pentrust is brands saves relative to other platforms in a moment, where there is a lot of hostile politik.
Go conversation happening on social media.
Advertisers are looking for new places to put their dollars.
We benefited from this in July.
As I noted earlier, we expect that revenue will grow in the mid thirtys percent range year over year in Q3, which implies a deceleration from the roughly 50% year over year growth rate, we've seeing quarter to date through July.
Let me unpack this.
One month may not be representative of the full quarter and there is significant uncertainty for the following reasons.
First cases of covered 19 are rising.
I would likely have negative impact on effort.
Thais or demand.
Three back to school will likely look very different this year as schools across.
This could lower both engagement and advertiser demand.
Third it's not clear air for how long the Tailwinds, we've experienced in July from advertisers boycotting social media will last.
Finally revenue growth in August.
In September 29 team.
It was stronger relative to July 29 team when a product change briefly lowered our conversion optimization revenue.
For the remainder of the quarter.
I also want to address our.
On our Q1 call.
Operating expenses year over year in the second quarter, but we just reported.
Slight decline in this number.
Commenting cost savings measures more quickly and our work from home model to a larger extent than when we continue to invest for growth.
Both across our key strategic priorities of content.
Adds diversification use case expansion and shopping.
To that end we grew.
Head count, 21% year over year and 5% sequentially.
During the second quarter.
We expect to grow Opex in Q3, both sequentially and year over year to pursue the long term vision of the company, while continuing to monitor and to respond to the ever changing environment.
I hope this detail has been informative and helpful with that I can turn it back or back to the operator, and we can begin to take some questions.
Thank you as a reminder, if you like to ask a question press Star one on your telephone to lead giant question Principality. Please wait another compound the question.
Your first question comes on line of Lloyd Walmsley with Deutsche Bank. Please go ahead.
Great. Thanks for taking the question if you if I can first just drilling into the higher engagement in the shareholder letter you said new users are engaging.
More this year than last year wondering Howard new users specifically.
The differently, maybe with the shopping functionality and then for that matter how are you keeping functionality.
Then just second one.
As you look at more CPC and seeing improving ROI is are you seeing them increased budgets any sense for what percent of your.
Adjusted basis these days.
Thanks, a lot.
Hi, This is Ben thanks for the question one.
But on a tackle your first question about user engagement and then I'll turn it over to Todd around kind of always on budgets. So the question was on how our new users occasion differently and in particular, how are they engaging with some of the shopping surfaces.
So we find that they use cases that people are coming to interest for our broadly similar in that people are looking for ways of establishing new habits, especially in the time of change so many of us into home a more lift.
Both.
Personal well being and pits as I mentioned opening remarks horse.
The folks that are under the age of 25.
The second part of the question was on how are these users engaging with some of the new shopping.
I'm good engagement, although it's still remain it's early.
We've shipped shopping only surfaces and engagement with a surface is up 50% in the first half of 2020.
And we're also seeing more product only searches I would ship ground by eight acts.
In 2020.
As you know from previous calls our strategy and shopping is to make these surfaces. That's also make sure that their Philip is highly relevant products and the two things we're doing to drive that are increasing the number of merchants, who have uploaded or catalog. We saw sharp increase in the number of catalog fees offloaded, 360% sequential.
Okay, and then to use machine learning and computer vision technology to make sure that we're matching the right products to inspiring seats I hope that give some color on shopping engagement and user came about.
Sure. It on the second part of your question on automatic bidding.
Let's start with why auto bid matters before automatic bidding advertisers had to constantly manage their bid strategy in a dynamic auction.
Now the auto bid tool does this for them and it aims to get advertisers. The most clicks at the lowest possible cost per click for our CPC or tropic objectives.
While spending their entire budget.
You made a lot of progress on that during Q2. The last time, we talked about 50% of our traffic objectives were flowing through auto bid and now about 80% of CPC revenue is going through out a bit.
And so budget Utilizations have remained high for auto bid Tropic objectives, and basically where it for better able to clear existing budgets and deliver more efficient cost per click.
And generally higher click through rates. So in other words, the advertisers through auto bid and we're taking the friction out of the process through better tooling.
What I would say is one example of that as arm <unk> Hammer baking soda aware of for do it yourself homes Science project campaigning for kids. They were driving 70 cents at 77% more efficient cost per clicks on 23% higher.
Per click through rates and so that's a specific example of how this can work for an advertiser.
In general what Thats man as we're better able to deliver against the budgets that are in the system today and as advertisers are seeing these sorts of good returns and performance. We would expect over time for there to be more budget in the system.
It's it's worth noting in addition to the traffic objective auto bid that we did launch as we said we were at a couple of months ago auto bid for our CPM objective a few weeks ago and we're seeing very good early traction there too.
Okay.
All right. Thank you.
And your next question comes on line of Ross Sandler Barclays. Please go ahead.
Hey, Thanks for all the color on on July in Threeq you.
Can we just talk a little bit like last call I think you talked about how some of your biggest retail advertisers.
I had had like a capacity versus demand mismatch and that they were pausing their budgets before that came before the normalized. So are there are some of those folks coming back now that we have these these high growth rates in July in Threeq, you, where does that Stan.
And then I guess.
Is it possible to parse based on your conversations you're having with advertisers like how much is actually coming from the boycott issue versus.
You know all these great product initiatives that you're doing within the AD stack is it like half from boycott Hafrun pantries product initiatives and any color there would be helpful. As well just in terms of framing this recovery that you're seeing thanks a lot.
Sure thing I know last time, we talked a lot about the macro environment and I because we grew the business initially on the back of Omni channel larger omni channel retail and CPG, we had exposure as some of those advertisers pulled back.
We talked a lot about how non essential retailers, we're suffering from store closures and essential retailers. We're sold out so that was a tough mix for us when there were pulling back for a very different reasons.
We have seen.
Some recovery I would say it started with CPG and we've seen a lot of momentum there on the retail side. It's the growth in the return of spend has lagged CPG, but it has come back to some extent as stores of reopened and as a central retailers some figured out their supply chain issues.
[noise] I've been more encouraged by what I talked about the opening remarks remarks about the strategic investments that we've made in our product and in our strategy to diversify our advertiser base into the mid market through improved tools measurement and formats driving resilience in the quarter and growth.
Insight I would say we've seen three things drives the performance both in Q2 and through July one is the macro recovery that you talked about that extends across non essential and essential retail and more notably in CPG.
The second is all of the strategic investments, we've made in our business and in our product, which has touched or been more exposed to the mid market segment that we've been talking about for a while in the spirit of driving adds diversification and more relevant content on the platform through conversion activities.
The third thing you noted was around the boycotts and.
What I would say about the Blake houses as it's been a tailwind, but we do believe the majority of our growth in July has been driven by advertising demand stemming from those strategic investments and the AD products that we've made over the last year and a house.
It's not really clear how sustainable that boycott tailwind is.
The boycott has given us an opportunity to win some budgets and to educate advertisers about how and why pay interest is different.
And while other platforms there at the center of political and free speech debates people come to Pentrust to think optimistically about their futures and that's especially relevant today as we provide a rest but from what could be one of the most contentious political new cycles in history.
Being a service for people in vision and plan. Their lives also creates opportunities, particularly as advertisers see positive platforms to build their brands and to drive sales.
So we're seeing some evidence of more advertisers choosing pentrust for this reason in July it's really hard for us to say how sustainable are significant the trend is.
We are tracking spend from advertisers who are participating in the boycott, but we don't know how much of that spend would have come to us anyway, because many of those advertisers do spend on both platforms overtime versus incremental spend do part due to the boycott.
So we can't really quantified the impact precisely at this point.
That's super helpful. Thanks.
And your next question comes on line of Eric Sheridan, Mike Yes. Please go ahead.
Thank you so much for taking my question, maybe two if I can one one big picture one if we go back even to the IPO you guys framed the investment you needed to make to reposition the cost the company again Street commerce initiatives and.
Capitalizing on the international opportunity trying to tease out how far along we are on the investment cycle versus now where you're starting to see some benefit from those investments running through the topline and what that might mean over the medium to long term for leverage in the model and how should we should be thinking about that and then Todd maybe just one housekeeping just following.
<unk> up on Ross's question with respect to the commentary in Q3, just because from the outside and it's hard to conceptualize. This is there anyway to frame what the headwind is in August and September because obviously the guidance does imply a pretty heavy DHL from the trends in July the back part just I think from the outside the in its tough to understand what that.
Headwind or comp might look like thanks, so much.
Sure. So on the on the first then may have some more color on this as well from a strategic perspective, but.
I think your questions were more around leverage in the model and I want to go back as you rightly noted we talked a lot about.
How shopping will evolve online and I think in this environment thats been accelerated so I'm very happy that we identified entering the year that we were going to prioritize shopping I'm, even more than we had historically which is pressure.
Our investments in E commerce, and shopping most notably had been improving the user experience so helping people find new ideas and bring them into into their lives by discovering new products and that's been enabled as Ben mentioned by better catalog ingestion and improving the high intent shopping sort of surface experience for users on pentrust.
So from a shopping advertising perspective, we noted that a lot of our growth came from conversion optimization and shopping ads, which are closer to online sales and conversion activity in an ROI accountable world.
The financial contribution of shopping adds right now it's still early days were focus mostly on allowing users to find new things and bringing them into their lives and improve that organic shopping experience knowing that overtime will start to see more contribution revenue contribution from shopping as we continue to improve the experience.
And convince advertisers that that early intent on the platform is something that they want to promote against.
So I wouldn't if you're thinking about shopping being a driver in the near term I would think of it is more of a contribution next year and beyond.
On the international side, you made a lot of investments over the last year plus in building out in particular in Western Europe, more direct coverage and related sales support functions outside of the U.S., but mostly in the English speaking countries outside of the U.S. in Western Europe.
We are hiring pretty aggressively in those markets leading into the co. The 19 shut down and we we found that those investments were had been paying off nicely and I think you've seen that in our results were in the last quarter. We grew international revenue, 72%. Despite all the.
Industry headwinds.
We'll continue to build that out I would say that there's still a lot of opportunity even in those markets where were we have been making investments and scaling the business. We also have other on monetized in large growing user bases like in Latin America that overtime will we will also monetize so a lot more to come there in terms of leverage in the model.
In terms of a de Sal we did want to try to point out on the opening comments. So theres just a lot in front of US right now we don't know what the back to school environment will look like it will it will be different we know we've got this headwind that I called out from a much weaker July on a year ago than we have this year.
Theres a lot of uncertainty around co that as we go into the fall. So you don't my expectation is that we will see some moderation in that growth and frankly as Ross pointed out around the boycott we don't really know how much is there and how sustainable the spend that we are getting from the boycott might be and so we try to capture all that in the mid Thirtys guidance.
Great. Thanks for the color.
And your next question comes on line of my call Evine Tyvaso. Please go ahead.
Congrats on the result, guys look because your little bit more I know you're talking about traction you were seeing on the shopping feed front I mean, how much is this shopify versus how much is actually you guys just getting to the right point to better facilitate a you know the product catalog upload and.
Is there any reason not to think is we look into the seasonally stronger part of the year.
I mean should have the show even further acceleration into Q4.
Thanks, Michael I can start off so the question was you know how much of the progress that we're seeing on shopping is being driven by.
Partnerships like the one we have with shopify.
And then how do we expect it to kind of it forward that feature.
So shopify, we're very happy in very early on in that partnership for those who haven't tried as previously that partnership allows the shopify merchants one click to set up a presence on interest to upload their catalog and I would say that it's still early days and it's one of several partnerships that are important to us and if you just take a step.
Back.
Interest long term vision for for shopping is to really build a full funnel experience. So I would we want to take people from the moment of inspiration when they first getting idea and then play them all the way through so they can identify products that can make fenestration reality and eventually purchase and that's going to be a long term road.
We're very focused right now I'm at the top in the middle of the funnel. So we're improving the amount of inventory we have seen we're building surfaces that keep interest and inspiring place. The way. The time is right push people I'm to identify the products they really want to buy and that's the value proposition. We want both for retailers, who really don't have a lot of.
Ways of getting new customers early into consideration cycle I'm and for bidders, who really think inspiration first and then they think about what we want to buy a messy go down.
Part of the next question was how should we expect that to evolve.
They're obviously a couple of macro tailwinds on there's just been an acceleration in E commerce driven by Kogut.
We also continue to build the product, but in terms of quantify how that'll congrats on over the short term I don't think we have a quantification over the long term. We believe that we're still very early in their shopping journey entitled to it as previous answer.
And your next question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.
Thanks for taking my question.
I just wanted to go back to the the Threeq guidance or when you called out the one of the factors could be cases of cobot rising a more lockdowns I guess with E Commerce surging.
And your the microbe side of the business improving so much with more advertisers et cetera, why why are you sort of of the of the view that a faster surging cove, it or lock down kind of material impacts in the businesses. So we can sort of understand maybe advertiser contribution or any advertiser exposure and then secondly in the guy.
Side, what are you sort of assuming on the pace of reopening in the in the U.S. Thanks.
Thanks, Yeah. So thanks for the question, Brian So and in retail what we're seeing right now I mean first of all I don't know, we really don't there's so much uncertainty in the market that we don't have clear visibility on exactly what totaling 19 means for.
The channel retail spend on our platform. What we know is that in mid March through the end of March we saw a rapid deceleration in their spend on the platform because of two things. One was story started to close and the second is that for essential retailers. They were sold out and they have supply chain issues. So advertising was.
Not useful when stores were closed or it wasn't effective if they were sold out and can deliver on demand.
I don't know what the fall will hold in terms of future lockdowns, but what we're seeing as a rise in cases and the past the prospect of potentially.
Slower store Reopenings less economic activity.
And possibly.
Just that uncertainty in general is something we need to factor in what we're hearing from retail and advertisers. They have a shorter lease on their budget commitments right now theyre store closures in place and possibly more coming.
The while we're still signing large joint business partnerships and seeing a lot of traction with those advertisers the spend commitments tend to be smaller more dynamic and more flexible in this environment. So it's just harder for us to to look out very far beyond where we are in the moment.
Kind of harken back to what we've been trying to do over the last few months, which is too in our communication to be very clear about what we're seeing in the business in the moment at a time of heightened uncertainty, which is why we've given a lot more disclosure about recent performance and monthly updates like we have over the last couple of couple of a couple of months.
And we have withdrawn or annual guidance because in this environment just doesn't feel proof and that's because of the dynamic flexibility and uncertainty and some of these spend commitments and dialing back of larger long term commitments from some of these fees retail partners.
Got it that's helpful. Thanks Todd.
[laughter] then your next question comes the line of Justin Post at Bank of America. Please go ahead.
A great a few questions I guess.
Obviously very strong international adds over 100 million over the last year, where are those user locations are there are they in high high value areas for monetization like in Europe or move more detail on that will be helpful. And then I noticed in your outlook for at least for Threeq you you Didnt mention Apple.
I'd say changes do you expect any impact from that as you look out over the next year and then maybe one more on just the catalog evolution.
Where are you still very early in that and how would that show up in the user experience maybe explain that a little bit to people. Thank you.
[noise], Thanks, Justin for I heard three questions in there I think.
I can take the first one on international user growth and then I heard one on I'd say for Apple and catalogs that perhaps Benton can start my compile auto helpful.
On user growth the U.S. was our slowest growing geography, a 13%.
We saw.
Obviously international markets overall grew 49% in the quarter to 321 million users and our growth in every non U.S. rejoining exceeded U.S. growth through its very strong growth in our Monetizable English speaking countries outside of the you actually.
And in Western Europe.
Where we've been making a.
Heavy monetization investments and we've seen good results.
We have seen.
Rapid growth in our <unk>.
Highest growth rates continue to be in our least mature markets, which was on surprising, but we are seeing exceptionally strong growth across all geographies.
I still expect that would be able to monetize a.
A significant majority of our users over the next couple of years and we are doing exactly that any speaking countries outside the U.S. today and in Western Europe and as we've said historically the next region for US would be Latin America, which we would expect to to begin monetizing probably six months from now.
Great.
Justin I heard two other questions what about idea fey in the second about catalogs.
So.
On the idea Fay based on what Apple is shared we do expect to new opt in requirements are idea face sharing will decrease our ability to measure conversions from iOS apps.
So as a result, we're continuing investment strategy, we started last year to increase our tax presence build first party measurement tools as well as investing in alternative sources of signaling measurement and things like enhanced search. We also have the ability to leverage on platform signal as people engage primarily but.
Our country. So it's something we have our eye on and it fits into a longer term theme that we've been talking about for a few quarters about really investing in measurement solutions. So advertisers can understand the return on their side.
The second question was around catalogs and as he mentioned before it we've been extremely excited about progress on shopping in general and catalog uploaded in particular I assume you mentioned that catalog seeds grew 350% quarter on quarter, that's up 10, X. I'm a half.
Perhaps now that's starting from a very low number but still the progress has been really encouraging.
We also have our DMP program or verified merchant program and we're seeing both healthy growth there.
Healthy retention.
I'm. So all signs are good but the reason they say we're early because there's still a lot of stores out there and we're continuing to invest to make sure that we ingest catalogs me understand what's in that catalog and we can give users a great experience and I think that with the second half. Your question how do we see the experience.
You know what Penrice have always told US is they want interest primarily start with I'm getting inspired with an idea.
Could be an image that causes them to think about how they might want to dress differently or video about setting up a home Jim and they want to work backwards that inspiration to figure out what are the products that can turn that vision into reality.
Experience that we envision it time is that people have engages they do today. They look for inspiration they save the things that are excited about the board. They think of interest is the place to plan for their future, but we can actually begin to take that down the path of making that into reality. So in a scene. We can show them the products that are.
Inside of it uptake in ER visit a retailers agency there catalog.
And all the products within it they can compare items to financing it's right for that.
At that end to end text ads that we think is the big opportunity in shopping online we feel like once you know exactly what you're looking for they are actually fantastic options for you I'm to find the lowest price to the lowest shipping but the problem that still really hard for a retailer is how do I reach a customer who doesn't yet know exactly what product sheet.
Looking for and we believe that one of the key ways to do that is to reach them at the moment of planning inspiration into work backwards from there.
And next question comes from the line, that's Mark Smith I couldn't Bernstein. Please go ahead.
Hi, Thanks for taking the question a couple if I may add that first yes, so user growth seems very strong and let it sounds like quite a lot of kind of call. It the non traditional core demos, namely like men and Gen. Z. So this is specific like internal objective to grow into those demos and if so can you share a bit of approach I like how they approach has been how much of this is.
Organic versus you know concentrated efforts you guys are making a and then you know any color you can share on how users are kind of trending in July we've heard some some of the other names talking about warning signs about engagement headwinds as markets tend to reopen but any color you can share there would be appreciated. Thank you.
Yes, I can start in terms of user growth as you mentioned, we did see two areas of real strength folks that were coming back to platforms and they tried it and earlier point of a pause or usage and then special strike in Jens Isa folks that are under 25 years old.
Now our approach to growth.
As typically focused on used cases I'm. So the reason when we talk to our core strategic priorities. We say, we really want to make interest useful for as many use cases possible is that the lens that our users take I've into when we think about growing users. We think about how do we make it more useful in use cases care about for Gen Z last summer.
The use cases are the same there are a few that are different.
There's a little bit less focus on cooking for example, and there's more focus on crafts and art and in terms of common things that people are still looking for some of our core verticals like beauty fashion things to make their home more livable. So we're really taking that approach in some of the investments that needs to improve adoption use cases.
Run the gamut from the today tab, which kind of guide people and editorial way to things that we think a relevant right now to better machine learning and recommendations so as people share what they're interested in we can guide them through an adjacent use case to making interest just a better tool to go deeper that's used cases, and we've launched features like I'm a lot.
I would add to date to aboard I'm, allowing to add more project planning tools I mean, that's the core of how we think about it today.
Now the second question and maybe talk in China, and it was really about growth are looking forward in July and it might be worthwhile to take a little bit of a step back and talk about the engagement that we're seeing and we've obviously seen an acceleration that co bid.
And we think.
For on at home more but it's largely also because people are rethinking and they're looking for inspiration and how to rethink some of their day to day habit everything for cooking at home to their home itself and so we see a lot of that users we might have expected to come in the fall actually been pulled forward into July.
We're monitoring those engagements that and the things that we look at such as the number of searches people perform a number of board. They create they looked really healthy compared to what we've seen in the past I'm in so we'll be monitoring that on this is obviously an unprecedented situation we expect.
I'm pull back, but we still think that they're going to settle out well above precooked levels.
And I think that's the thing I would add from a yeah. So I think that's the the right overall perspective, but I think to this audience. One one thing that I did want to point out is.
Because we've had this conversation over the last year.
Q2 tends to seasonally be our weakest quarter, so Q1 to Q2.
Are by far seasonally weakest quarters as Dan mentioned people are typically.
Beginning to go outside of their homes and do things offline.
And then we historically have seen user growth sequentially grow stronger in Q3 is people come back inside they start planning for back to school they start their holiday planning.
And this year people never left their homes. So its has been mentioned very unprecedented but because people didn't leave their homes than we've seen this possible pull forward of user growth into Q2 that we typically would have seen in Q3 I would expect that to.
Sequential user growth going into Q3 would add about half the typical number that we've seen over the last couple of years of new EMEA you ads.
Into Q3 so.
I think you know, it's very difficult to say exactly how these cohorts perform but given the dynamics that we're seeing I would expect significantly lower sequential user growth going into Q3, probably half the number that we've seen over the last couple of years.
And your next question comes on line of Douglas and not with JP Morgan. Please go ahead.
Thanks for taking the questions.
Todd Toby you could give us some color just around what you're seeing in terms of overall advertiser numbers were growth and how that's translating into auction density and then just related can you just help us understand some of the volume price trends that you saw during Twoq you and then how that's inflect.
Good early in the third quarter, so far thanks.
Great. Thanks, Thanks, Doug So a couple of things one.
I'm going to go back to this theme because I think it's important what we've been hearing is that add the need to be ROI accountable in this environment and that advertisers value the commercial planning mindset of our users and the focus on.
Online sales and conversion objectives like go CPM and shopping so our investments in tools like auto bid catalog offload tag adoption partnerships and now emerging tools for agencies.
Those things are driving more advertisers to the platform. So we've seen our advertiser growth in terms of number about.
Year over year and spend.
Small and medium business advertisers.
Measurements measurement and formats investments.
Grow significantly to now nearly half of our total revenue so that's been.
I've been very excited about the strategy that we've been laying out and talking about with you all over the last year, we're seeing that unfold now in terms of the advertiser count and traction in the mid market.
I would expect Doug that over time that translates into more option density as more advertisers are on the platform seeing positive results. That's enabled by the tools that we build to the measurement solutions.
What we're rolling out.
In Q2, it's a bit of a different dynamic because demand was.
You know it through from April May and June was different than what we're experiencing today.
We did see.
Our AD impression count grow 17%.
In Q2, and our effective Cpms are pricing go down 11% that was driven mostly by.
The demand picture, which was frankly healthy and bringing on more performance oriented advertisers around those conversion optimization and shopping objectives and showing.
Great returns, which we think will drive more people to the platform and.
So it what's happening there to take you to the 50 ish percent growth engine.
Well certainly gotten a couple of things so weve definitely seen a return of demand and that has been across awareness objectives are brand advertisers and in performance objectives.
And the.
The auto bids.
Product improvement that we made for traffic objectives and have now rolled out to our conversion optimization objectives is created more pressure on the option and we've seen both clear much better so.
It's been I think a healthy dynamic all aware out it's the picture is definitely improves through every month from April may and June at an inflection point in July.
Great. Thank you Todd.
Hi.
I mean from the line of Heath, Terry Schmid Goldman Sachs. Please go ahead.
Great. Thanks, I was wondering if you could give us a bit of an update on the technology.
And the development of visual search and to the extent that Jeremy is now sort of been there a little over over a year and surely has its feet well under him at this point sort of where his is probably.
Priorities priorities lie would appreciate sort of any or any sort of answer.
Sure. So you know.
Peter Mission as a core technology and.
There's sometimes an impression that.
Kind of one products such as the lens product. So if you take a photo but it actually improves the relevance.
All right around the around the product itself. So when we talk about shopping I'm in being able to match images to products computer vision needs with that we talk about recommendation.
Helps with that as well and so we continue to make large investment.
In machine learning more broadly in computer vision specifically.
In terms of some of the areas that Jeremy looking at but there's a there's a mix there's obviously, what we and.
We've been.
Arms in a way that are more scalable, but we see an opportunity to continue to unify the way that we.
Frank and look at both content.
And that really is about.
The fundamental alignment that we know that users perspective exists.
Between their goal, which is to get inspired and turn those things or something.
Your life.
As well as.
The advertisers goal, which is to inspire the customers get people wait transaction.
That continues to be a core focus as well as making sure we're building fishing infrastructure.
Also making sure that the service remains reliable scalable as we grow.
Great. Thanks.
And I will now turn to call back over to Jeff antenna for closing remarks.
Thanks, everyone.
That concludes our Q2 thousand 20 earnings conference call I'm going to turn the bat Calibrin a band for some closing remarks.
Thanks, Jamie I just want to thank everyone for taking the time to join US I definitely appreciate your questions and it's always we look forward to stay engaged with you.
Feature everyday.
This concludes today's conference call sort of 10 Trust second quarter earnings you May now disconnect. Thank you.
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