Q1 2022 Pinterest Inc Earnings Call
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 <unk> Pinterest, Inc. Dot com.
And now I will turn the call over to Ben.
Hi, everyone. We appreciate you joining the call we will open up with some comments and then take your questions, but just before we get started I wanted to express on behalf of our entire company and our Hearts continue to go out to all those impacted by what's happening in Ukraine. We.
We had members of our team who lived in the region and are now thankfully safe and I'm proud of how our company came together to support humanitarian efforts for Ukrainians, we'll continue to keep everyone affected in our thoughts during this unimaginable time.
Turning to the business a few minutes ago, we released our Q1 shareholder letter.
Revenue was strong with 18% year over year growth to $575 million.
This was due to strength from retail advertisers, our international business and our manage SMB advertisers all of which offset the economic weakness, we're seeing in CPG in Europe because of the war.
Meanwhile, we continue to face engagement headwinds, we had $433 million global monthly active users down 9% compared to Q1 last year, a quarter that was driven by pandemic influence growth.
We also felt the impacts of lower traffic from search and time spent by people of competitive platforms.
We're doing a number of things to improve the patient experience and tackle engagement headwinds head on.
In the near term, we're applying sophisticated machine learning to every aspect of our platform.
As a result, we've seen marked improvements in the relevance of home feed recommendations the quality of search results and engagement with notifications.
All of these enhanced the quality of our platform for Pinterest, and our leading indicators of deeper user engagement.
We also plan to launch our global brand awareness and comprehension marketing campaign, starting in Q3.
In the medium term, we continue to invest in our rich content ecosystem with publishing tools that allow creators to publish rich lifestyle content onto Pinterest and we're also allowing people to take the content they find and create on Pinterest and sure that inspiration with their friends family and followers across the Internet.
To do this well we're also working to connect <unk> with the most inspirational creators and native content in dynamic formats like short term video.
As we've discussed in past calls this investment has come at the cost of so let me use in the short term as we get the ecosystem off the ground, but we're committed to this strategy because we believe it will drive engagement over time, and because we believe that native content and video in particular is fundamental to helping people get inspiration and shop in the future.
In 2021, I'm, especially proud of our teams that laid the foundation for native content ecosystem.
Traction the number of video idea pins is up 15 times year over year and this content is resonating with more and more people as we continue to see that painters, who followed multiple creators visit pinterest more often compared to those who do not.
We plan to continue building new publishing tools with the help of our new acquisition Vouchee. So creators can make even better content content that is not only entertaining but helps move our user base from inspiration all the way to action content, we're saving.
We're also expanding rewards to bring on more inspirational creators to pinterest.
Finally, we continue to invest in making pinterest, a shopping destination and we've taken some big steps here, we launched Pinterest API for shopping to help merchants and get printers of real time information about the products AC for pricing to availability.
We also started beta testing your shop, which uses our unique ability to understand tastes and preferences to deliver an experience for each pinner, that's personalized to them.
This work is fundamental to our vision. So users can not only come to pinterest with the expectation of being inspired but also know that they can turn those inspiration into a reality with purchases.
Across the board, we continue to make progress in helping painters go from the spark of inspiration through to buying making trying and doing well.
We're confident that our strategy will deliver great results for Pinterest creators advertisers merchants and to our business and we remain excited about the enormous opportunity to help people live a life they truly love.
With that I'll turn it over to Todd to give you more color into the business.
Thanks, Ben I'll share. Some further details on the trends that we saw in the first quarter and provide our preliminary outlook for Q2.
Beginning this quarter, we are providing additional disclosure around our revenue our monthly active users.
Our average revenue per user or <unk> by presenting the U S and Canada, Europe and rest of world separately.
As our international operations become a more meaningful part of our business, we want to provide additional detail on those regions.
Please refer to our earnings presentation for the new geographic breakouts.
As part of this change we re categorized the U S into the U S and Canada.
Please note that there is little difference and historical year over year and sequential growth rates for the U S alone versus the U S and Canada together.
We're categorizing these two regions together going forward because they are both relatively mature and they share a similar advertiser base.
Furthermore, while we provided us monthly active users recognize revenue in <unk> for Q1.
<unk> forward, we plan to only report these metrics for the new combined U S and Canada.
Turning to our financial performance Q1 revenue grew 18% year over year to $575 million.
In line with our guidance.
Adjusted EBITDA came in at $77 million with an adjusted EBITDA margin of 13%.
Most of the details on our quarterly performance can be found in our shareholder letter, but I wanted to provide you with some additional specifics.
As our international business has grown we are becoming more subject to currency fluctuations.
Revenue growth from Europe was 27% year over year on a constant currency basis revenue growth in Europe would have been approximately 34% year over year.
And as we continued the distribution and placement of idea pins. We believe this negatively impacted our first quarter year over year revenue growth in the mid single digits on a percentage basis.
Similar to the prior two quarters.
This impact was factored into our guidance for the first quarter.
Turning to expenses, we accelerated our non-GAAP operating expense growth in the first quarter.
To 31% year over year versus 27% year over year in the fourth quarter.
However sequentially, our non-GAAP opex declined 1% due to pushing off creator related spend slower hiring than we anticipated, particularly in the bay area and a few other favorable items.
Before getting into some specific trends on user engagement in the quarter I want to double click on our strategy to combat engagement headwinds.
As Ben mentioned, we're looking at ways to drive more sustainable user acquisition and retention.
For example, we're making pinterest more browsable without immediately requiring Rick.
Requiring users to sign up when they land on the site.
While this had a modest negative impact on global new user sign ups initially.
We believe that removing barriers for longer browsing sessions can drive more activations overtime.
We also believe our investments in the core Pinner experience on home feed search and shopping.
Can make pinterest feel more personal and relevant in the near to medium term and that our investments in creator led native content and short form videos can bend the curve on engagement in the long run.
With respect to our Q1 engagement trends, it's worth noting that our global mobile App meus, which account for the significant majority of our impressions and revenue.
<unk> in the mid single digits year over year.
Mobile App may use in the U S and Canada.
We're also relatively resilient declining around 6% year over year versus down 31% year over year for web based I'm at us.
Sequentially U S and Canada mobile App meus were flat.
Our younger Gen Z users were also a source of strength growing mid single digits year over year.
Finally shopping engagement remained relatively resilient with the number of printers, engaging and shopping surfaces growing year over year.
Turning to our preliminary outlook for Q2.
While we typically don't provide guidance.
For the last three quarters, we've shared our quarter to date snapshot of Emmett use in our earnings.
As of April 25th.
And Canada Meus, we're at $94 million.
And global Meus.
$432 9 million.
We've provided intra quarter data points on ever us over the last few quarters, because the lifting of pandemic lockdowns in 2021 disrupted our seasonal our typical seasonal engagement patterns and limited visibility into quarterly trends.
Lockdowns began to lift for some geographies in mid March 2021.
Which is when we began to see year over year engagement declines.
Engagement continued to normalize towards pre COVID-19 levels throughout Q2, 2021, as more geos lifted COVID-19 restrictions.
We believe that the pandemic unwind will no longer create a year over year headwind in the third quarter of this year. So we don't plan on providing an intra quarter update on <unk> going forward.
As you think about <unk> for Q2, I would like to provide you with some additional context.
Q2 has historically been our seasonally weakest quarter for <unk>.
Given that people tend to be outside more travel more and engage in our core use cases less often.
As a reminder, at the end of the quarter, we calculate meus based on a 30 day look back from the last month of each quarter.
Since June is one of our weaker months for engagement in the U S.
<unk> on April 25th May not predict <unk> and.
And finally, we continue to face year over year growth headwinds from the search algorithm change that happened in the fourth quarter of 2021.
As well as potential new headwinds from future search algorithm updates the timing of which are hard to predict.
On the revenue side, we expect Q2 revenue to grow around 11% on a percentage basis year over year.
Please note that our Q2 revenue guide takes into account a few considerations.
First it's worth noting that we had a particularly strong Q2 last year with revenue growing 125%.
After a weak Q2 of 2020.
Second the macro environment remains challenging including supply chain issues and inflation exacerbated by the conflict in Europe .
It's unclear how long these conditions will persist.
Third we continue to monitor the impact of higher CPA.
In general we believe that higher pricing has multiple drivers, including industry wide dynamics and recent trends in our user base.
In Q1, we observed a higher pricing lower budget utilization for a subset of our U S small and medium sized advertisers and small and medium sized advertisers that are more price sensitive.
We believe that advertisers who value what makes <unk> unique.
Namely our users planning mindset are positive platform, our insights insights based media buying and our unique audience of commercial intended intent users.
We will find value on our platform using our automated bidding products.
Finally, our investment in building a native content ecosystem will likely remain a mid single digit headwind to revenue. However, we believe that this effort will both be engagement and revenue accretive over time.
Finally, I want to touch on expenses.
We expect the second quarter non-GAAP operating expenses to grow at 10% quarter over quarter as we push some of the spend from Q1 into Q2 and beyond.
We plan to continue to scale, our investments and our native content ecosystem, the core pinner experience and head count across research and development and sales and marketing.
But timing could be lumpy quarter to quarter.
We also plan to push our Q2 brand marketing campaign to start towards the end of Q3 and into Q4 this year.
For the full year, we plan to invest in our growth initiatives.
Layering in some of the benefits and under spend for Q1 and recognizing that this is a competitive hiring environment.
We are expecting non-GAAP operating expenses to grow in the range of 35% to 40% year over year.
Thanks to our teams of interest our advertising partners are creators and all the people that come to pinterest to find inspiration and with that we can open it up for questions.
Yes.
Okay.
Greater if you will.
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And our first question comes from the line of Ross Sandler with Barclays. Please go ahead.
Hey, guys.
Two questions on the.
Trajectory for Ben I guess, why Hasnt search traffic recovered and how are we going to basically you have to wait until you lap the negative effects from fall of 'twenty one.
For that to start to pick up and I guess just stepping back of all these initiatives you guys are working on what are you. Most excited about that can help drive engagement over the long term and then the second one for Todd just kind of nitpicky, but any additional color.
If you can provide on both global and U SMA use like why the decline from the.
February one intra quarter update that you provided last quarter to the end of the quarter any color there would be helpful. Thank you.
I'll get started Ross and then turn it over to Todd.
Discussed in the past that search has always been an important channel for us, especially in bringing in brand new users and.
And for users that engage periodically it brings them back into the service.
So Google is often making changes to their algorithm and entering Q1, we started to lower baseline then we would have absent the algorithm updates in November 2021, when we had few resurrection. Some research in February and March So we typically see.
Now this quarter, we chose to take a different strategy than we have.
In times past, so rather than playing a short game, we've really invested in protecting our long term opportunity in search for example, when you visit Pinterest now compared to a few months ago. The experience a lot more open meaning you can explore the whole service you can explore different pens without prompting you to sign up and we allow you to dismiss that prompt.
Todd mentioned that that caused some modest declines in may use in the short term, but we think it's the right long term strategy. It's one that we've been testing internationally and results in higher activation rates and more sign ups over the medium to long term. So we're proactively investing in better relevance.
And then the other question you asked is what are the other things that we're doing that we're excited about to drive long term growth.
And there are a few that I mentioned.
The first one that I mentioned, which is in a brand new feature but is the thing that pinterest fundamentally come to pinterest for as we continue to invest in the quality of the recommendations and search results and I'm really proud of the team that they improved both in the last quarter on the recommendation quality, we saw better engagement with native video content.
Better recommendations overall and in search we began to introduce new features such as structured search for things like recipes that we'll expand it in new verticals and what we're seeing from those is an increase in search query volume and the resulting increase in engagement. So it's kind of one pillar and think of that as improving the core.
The second thing we're doing as we continue to invest in bringing on more native content onto interest and this is been a big investment for us over the last 12 months to 18 months I'm incredibly proud of the team. They stood up this entire ecosystem essentially from scratch and we're starting to see really great traction there there's significant increases in both the number of create.
<unk> that are adding idea pins.
A video at events that are being consumed and we continue to see that painters, who follow up more of those creators to visit more often now we're building this ecosystem into a much larger population base. So we described it as a headwind in the near term, but early signs are that we're getting traction there and this is also a.
<unk> important because we think video is a format is just fundamental to the way people get inspired.
Take action in the future.
Finally, I'm sure we'll talk about it more in the call, but we continue to invest in shopping.
We've talked a little bit about improving the quality of content, we released the Pinterest API, we've got beta testing your shop, and then finally, we will be testing and expanding the test of checkout and all of those bring more utility to the platform, which we think in turn are both revenue and engagement accretive investments.
Todd.
Yes, Ross I think the second part of your question was what happened to us from the fab one intra quarter update we gave on the last earnings call through the end of the quarter.
And just for.
Just to kind of reset from February one to March 31, the U S declined from $86 6 million monthly active users to 85.2 and.
In global M&A use declined from $436 8 million to $433 3 million.
In the U S. The decline was really due to three things one was as we've talked about in the past, especially on the last call lower traffic lower traffic from search.
Historically, we've seen new user sign ups and resurrection typically tick up in the months of February and March.
And we just didn't see that happen in the first quarter, we think because of the impact of the search algo change from Q4.
The second was Russia's invasion of Ukraine, and we talked about this a little bit at the beginning of the Covid.
Lockdowns that during periods, where there are other large news events going on people often turn away from inspiration and planning behavior toward real time news updates that they find on other.
And then lastly, we've talked a little bit about competition. The U S is our most mature market and we see a lot of social media Entertainment and news apps competing for user time spent.
Globally, the decline was due to lower engagement in Russia, Ukraine and other countries in Europe , and we think based on our estimates that that was about a 5 million global Mou impact so had it not been for those events, we think our global meus would've been modestly.
Up.
From the fab, one Mou number that we shared.
So hopefully that's helpful.
Next question operator.
Thank you. Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.
Thank you so much for taking the questions maybe two if I can first you called out some of the macro volatility that we saw in results around the war in eastern Europe , any greater color you could give about the depth of pullback from advertising spend or how volatile. It was as the quarter came to an end and whether you're still seeing.
Sustained weakness as we move into Q2 that would be question number one and then to the comment and then Todd just brought it back again with respect to video centric apps and what impact it might be having on usage can you talk a little bit about what you are seeing.
As you think of it as a direct correlation that people spending more time on video centric maybe versus your engagement and how do you think your product roadmap positioning do better competitively vis vis those video centric products over the medium term. Thanks.
So Eric I can take the first part and I'll, probably ask Ben to step in on the second part of the video centric apps question, but in terms of demand and volatility.
It definitely wasn't helpful to us in terms of monthly active users as I talked about we had probably a $5 million.
The active user impact and it also had knock on effects to advertising spend around the world, but in particular in Europe .
I don't know when that conflict resolved, but it's definitely a period of uncertainty that's not helpful. We've seen in.
In addition.
A fair amount of weakness that we've called out over time in the consumer packaged goods or CPG space, driven we think by supply chain pressures and inflation as I called out. So the combination of those things has not been good for brand building in this environment.
But we hope that once that resolves and we start to see some of the supply chain issues abate that will see a recovery in some of that demand.
Yes, I think to your second question on competition in video.
We called out competition, just because there is a tremendous amount of options for consumers on the phone at any given time and we look at the same data that all externals do.
That said, we think that what we've heard from Pinterest and what we see is that we have a pretty differentiated use case I mean, that's the use case of actually using pinterest to plan.
Ready for major events, and then eventually to make considered purchases and that's quite different from an entertainment and news use case.
Now the way you characterize the question was kind of video versus not we think video is going to be a fundamental medium for all kinds of activities like from entertainment to news to education and that's why we've made this investment in building out our native content ecosystem. This one is kind of along that we started 18 months ago, but if you were to stick.
Fast forward to the future. We think the Pinterest is undoubtedly just a more engaging and richer surface.
If you can shop with video if you can get new ideas that are part of video and a lot of our core use cases are already seeing the benefits from having more video content on board. So we're going to continue to make that investment we think it enhances the core value proposition of going from inspiration all the way to realization and that's why we've gone long on that investment as a company.
Great. Thank you for the color.
Thank you Mr. Sheridan.
Our next question comes from the line of Mark.
Johnny with Evercore ISI. Please go ahead.
Okay. Thank you I just wanted to ask one question about shopping that data point, you provide about the number of printers engaging and shopping services growing year over year that seems to be.
Things seem to be going into right direction for you how long is the path to getting to the.
And to the kind of the shopping experience that you envision that you'd like to see.
Interest and.
What are the remaining things you need to do to create that experience. Thank you.
Yes, thanks for the question Mark.
Really proud of the team for continuing to make progress and shopping and we've talked about this three pronged strategy.
First as Ben we really want to improve the quality of inventory. So the journey that we've been on started with the verified merchant program. It expanded to letting people upload catalogs and then multi feed this quarter. We expanded that to include a pinterest API for shopping as well as our partnership with Blue Commerce gives millions.
Merchants the power to turn their product catalogs in the shop level product pins and all of that is just the fundamental baseline investment that we need but already this quarter, where you can see is if you start looking at the product pages not only has the data up to date, but we're keeping it up to date in real time and that gives people confidence to purchase.
The second part of that strategy is improving the discover ability of that so we've talked in the past about surfacing shopping results in things like search using computer vision technology to match products to all of the seen images I think the next big milestone for us will be taking your shop, which is a personalized shopping.
Fifth out of beta, which is how it's being tested today and into kind of the market in a more mainstream way.
And then finally, we continue to test seamless checkout with more and more merchants, we think that for a long considered items people are less sensitive to having one tap checkout, if its something <unk> been thinking about for months, but over the long run. We think this is going to be a fundamental expectation and so that's how we're pursuing that strategy.
I'm happy with the progress we have a ways to go I think that is.
Company up in Seattle, that's been continuing to prove shopping experience for literally decades, but we think what pinterest brings is that ability to discover products.
Out necessarily knowing the exact name of that product using your taste and preferences to connect each of products that help you get something done in real life.
Okay. Thanks, Ben.
Thank you Mr. Miami.
Our next question comes from the line Rich Greenfield with <unk>. Please go ahead.
Hi, Thanks for taking the questions I've got two one just sort of macro obviously inflation.
Fears growing sort of recession, Europe , even U S sort of.
Certainly growing concerns and E com.
Slowing and just I guess, just what are you seeing on the ground in terms of.
As you're sort of pushing much more aggressively into shopping and make that experience better.
How does this sort of kind of retail.
Spending outlook do you think impact you as you look out, especially as you move into.
Q2, and even into back to school in Q3.
And then sort of just a big picture question on the creative side Youre, obviously doing a lot to sort of create on platform content that's unique.
You've obviously hired Malik and pushing into the creator economy. When you talk about competition I think you've mentioned it a couple of times already.
Mostly tictoc is that.
Instagram like where are you seeing mode. Most of that competition is there any way to sort of isolate.
Where youre, losing time spent mostly too in that sort of war for time.
So rich I can take the first part of your question on market dynamics inflation recession.
Supply chain all of that stuff as it relates to the retail outlook and then maybe Ben can weigh in on the creator side.
So first of all we saw particular strength last quarter in the retail advertising market, we saw more pressure on CPG advertisers do.
Due to supply chain pressures inflation et cetera.
We were.
We benefited significantly from strength in retail.
And I would imagine that based on what we're seeing that that will continue the reason I have confidence that it will continue is that our progress in signing joint business partnerships, which I think we've described in the past that we call them <unk>, but there.
Not contracts to spend but they are indications of intent to spend.
The number of those large deals that we signed in particular with retailers grew 35% in terms of raw number year over year in the first quarter.
And the dollar amounts indicated by those agreements grew 55% year over year in the first quarter. So that suggests not only strength last quarter in the retail segment, which showed up in the results, but also an indication of willingness to continue to spend.
Ben would you like to weigh in on the creator side, yes.
Yes, rich I think the way that I interpreted your question is if you are losing time spending where is it going to and we don't have exact fidelity onto where people are spending their time, but obviously the story of the last couple of years in terms of time shift has been the rise of Tictoc is a major place that people are spending their time.
Now on Pinterest, and what we're really trying to establish the creators is a place where they can publish content and they're rewarded for that content ability to inspire action rather than the raw entertainment value of that and thats going to have to be reflected in the way that we provide incentives for creators, but also the way that we ranked content on pinterest. So the reason that.
Our feed on Pinterest feels different than a feed on a social network or feet on the pure entertainment network is that the content is ranked taking into account how useful that idea will be to getting something done in the future as.
As we think about things like create a rewards and roll out new AD formats like idea pins that are sponsored.
The sort of central thesis behind it and it's in line with the central thesis of Pinterest overall, where this isn't a platform to talk to your friends, it's not a platform to keep up with the news. It's a platform for you to articulate things that you want to do in your life.
For us to help you visualize what the end state looks like and then for us to give us the planning tools and the shopping tools to turn that vision into reality and we think creators can play a positive role all the way across that inspiration to realization journey.
Thanks very much.
Thank you Mr. Zhang.
The next question comes from the line of.
With Bank of America. Please go ahead.
Great. Thank you a couple of Todd you've given a lot of metrics, suggesting users are somewhat stabilizing, especially on mobile when does that mobile crossover happen or are you trying to kind of signal that we're nearing a bottom maybe this summer.
And then second.
Just on the onsite shopping tests are you seeing.
Better conversion or better monetization of usage when people do onsite shopping thank you.
So just I think the question Youre trying to get out is really around guidance.
Be careful that we're not providing guidance and there are a few things to note around that.
In my opening remarks, I called out the second quarter as our weakest quarter typically as people headed into summer a lot of times you are spending more time outside and less time on pinterest, because youre doing instead of planning.
It was interesting to note and Google's call yesterday that travel searches in the first quarter were above Q1, 2019 pre pandemic levels, which suggests that we.
We may see that even more so in the month of June going into the summer of this year.
And so.
I also want to make sure that we.
We reminded folks of the way, we calculate our M&A use it on a 30 day look back from the last day of the quarter and so our Q2 <unk> will be calculated based on June data, which is.
Seasonally weaker month for us.
As people start heading out probably on vacations, and we've seen that trend historically.
Haven't really gotten into a lot of seasonality within quarters, because it's a little noisy, but we wanted to give people. These intra quarter updates over the last couple of years to just give you a sense of what we're seeing in real time.
And then the last point was that we're still facing this year over year growth headwind from the search algorithm change that happened in the fourth quarter.
And the threat of potential new headwinds from future Algo changes, which is hard for us to predict in terms of timing.
And the competition for time spent on competing and video centric platforms is something we pay close attention to.
Yeah, Justin I think your second question was how are we seeing shopping we've known for a long time that pinterest have a lot of commercial intent may bring that intent to pinterest and what we've seen is that as we remove barriers to people executing that in turn by linking them to products by ensuring those products are in stock at the prices are accurate.
Are they purchasing behavior increases and so our core strategy has been around increasing that inventory, making the matching of more efficient and then eventually streamlining that conversion event at the end, but those first two are really fundamental and then we think creators and social shopping they can be a bonus on top of that by giving people more confidence in that.
<unk> to buy and we've seen some great early signs both with <unk> TV as well as with partnerships. We had one this quarter with fixture and Ralph which was a new fragrance for repair them up with the creator showing really good business results because at the end of the day, they're getting painters with commercial intent the confidence they need to eventually make that purchase.
Great. Thank you Ben Thanks, Scott.
Thank you Mr <unk>.
Our next question comes from the line.
Shmulik with Bernstein. Please go ahead.
Hi, This is John on for Mark.
We wanted to ask I guess two questions. The first one on like quarter to date trends for like revenue haven't necessarily seen as reflective over the overall quarter for everyone. We wanted to know are there any ebbs and flows like beyond Ukraine for how to think about the rest of the second quarter for revenue and if we're giving how much room, maybe we're giving for uncertainty around macro there and then the <unk>.
Question, if you could elaborate more on you've talked about how you've pushed up your creator expand but any expectations around that and what youre looking for there.
Yes.
Sure I can take the first question on the quarter to date revenue piece and then maybe Ben can weigh in on the creative side.
I know others have called out intra quarter trends on revenue what I would say is that our guidance for the quarter. We said, we anticipate growing about 11% year over year.
That reflects our best judgment of where we'll land this quarter and so we look at a number of factors internally to gauge that but we're not calling out any other.
I think others have called and called for a deceleration or or have other factors kind of weighed in our best judgment is we're going to land at roughly 11% growth in that that's kind of everything that we see about business today and our outlook.
So I wanted to make sure that I understood. The intent of your question you mentioned kind of our trend on creators spending was that is that right.
Yeah.
Yes, I think we might have mentioned earlier, we did have some greater marketing spend that we pushed out from the beginning of the year to the back half of the year as we continue to learn how to really what works with creators and how do we create incentives that give them kind of the motivation to create content, that's really useful and often content. That's a lot more evergreen than the kind of a femoral con.
You see on a lot of other platform because thats, a pretty different mindset for a lot of the creators that are on competing platforms that are essentially rewarded on a combination of volume and entertainment value versus the ability to inspire action. So a tutorial that might help you teach something and is just as relevant as it search a year from now as it was on the day.
It's posted so we're still in early experiments with exactly how to do that that's part of the reason that we pushed out some of that spend but it doesn't reflect a lack of conviction in our investment around the initiative.
Okay.
Thank you.
Our next question comes from the line.
Doug Anmuth with Jpmorgan. Please go ahead.
Hi, This is John Bullock.
So just a couple of questions. One is if you could help us frame the performance of brand versus Dr spending during <unk> and how it's trending quarter to date.
Anything else on mute.
Obviously, you guys <unk> expense outlook from 40% to 35% to 40%, but it is not coming through.
Sure.
In terms of brand versus performance, we've talked historically about being.
A majority performance based advertising in terms of our mix versus brand.
And there is no change in that I would say that.
The one read through on the weakness, we've been experiencing especially in CPG, which is I think an industry wide.
Kind of supply.
Supply chain inflation, driven phenomenon that disproportionately impacts brands, but we're still seeing growth across objectives.
So that's part one and then on the lowered expense side, our ambition is to invest in the long term.
We set out a bunch of priorities earlier in the year that we communicated on the last call and for a number of reasons that we talked about earlier.
Slower than desired growth in hiring some delays in our creator spend as Ben mentioned, a moment ago, and then lower in office spend in the first quarter.
Among a few other items, we just got off to a little bit of a slower start and ramping our spend even though our opex grew 31% year over year up four points on a year over basis year over year basis from the fourth quarter.
We also grew our head count 27% year over year, which is at the same rate that we grew head count.
On a year over year basis in the fourth quarter. So we're hiring aggressively we're spending against our strategic priorities.
We set the bar really high for the year and got off to a little bit slower start than we anticipated we will catch up.
On some of that spend as the year unfolds, but not all the way to the full amount that we had intended to spend in the first quarter, which is why we brought the guidance down to 35% to 40% for the year.
And operator, we'll take one last question.
Alright.
Our last question comes from the line of Brian Fitzgerald with Wells Fargo. Please go ahead.
I do apologize one moment.
Okay.
Brian Your line is now open.
Thank you.
Two quick ones, maybe follow ups on the on the shopping API I'm, sorry, if we missed it but.
Did you give us any color on kind of the penetration dynamics there is it accelerating.
What kind of caution people are testing there what kind of what are they doing maybe even any color on.
Verticals that are using it more so than others and then on the.
On the head count.
Tiring and kind of I don't think it was pause. It was just it was lighter than expected in Q1 can you give us any color on the dynamics. There is it is it is competitive.
Candidates are kind of pricing themselves out of your <unk>.
Threshold or anything on the head count color.
Yes, Brian why don't I start with the second part will come back to the first the first question in a second so we.
We had a pretty aggressive desired ramp in head count leading into the year.
We have done a great job in hiring.
I think we're still very competitive for talent, but we set the bar really high the scale of our team and.
As you know in the industry right now, it's very competitive for talent.
We especially in the Bay area, which is why we started to build hubs for talent in other geographies Toronto, Mexico City in Poland.
Which we think will be an opportunity for us to diversify the sources of talent and bring on a broader group of people.
To build a great product so.
We're doing I think the right things there, but what you shouldn't expect from us.
Is to be in disciplined around hiring.
Uneconomic or unfair terms, so we want to balance our.
Our ambition to staff the team.
<unk> is we need to deliver the product that we want to build over the next few years, but we don't want to do that in a in a reckless way.
On shopping.
You can think of the shopping API is kind of a next generation of our catalog uploader. So it's very much in line with our desire to get as much up to date and accurate information and then we apply machine learning to rationalize all of those products.
And then computer vision to match them up again seems so we're seeing really good early uptake it's been a learning process as we have gone from single feed upload to multi feed upload now to a proper API and we continue to see continue we plan to see continued improvement in the quality of inventory, which in turn kind of enables people to you.
So from that inspiration to purchasing experience, which is fundamental to our mission as a company.
Excellent. Thank you. Thank you very much.
And that concludes our call.
Yes.
Thank you.
I would now has it back to Ben Silbermann for any closing remarks.
Well I just wanted to thank everyone for the thoughtful questions. We look forward to keeping the dialogue open I know, it's a busy afternoon for a lot of industry. So enjoy the rest of your day.
That concludes.
<unk> first quarter 2022.
Carl I Hope you all enjoy the rest of your day you may now disconnect your lines.
Yeah.
Everyone else has left the call.