Can Pinterest and Snapchat keep up with digital ad titans?

Shares of Pinterest (PINS) and Snap (SNAP) continue to struggle after they took a hit from their latest quarterly earnings reports. The companies may have a hard time against competing against rivals like Meta (META).

Headline Venture Partner and Former Head of Corporate Development at Pinterest Kamran Ansari joins Yahoo Finance to give insight into the performance of these companies and the landscape of the overall digital ad sector.

Ansari gives insight into how these companies are positioned: "Pinterest is growing a little bit more handsomely, about 10%, they did about $3.1 billion for the year in 2023. And they're starting to eke out a profit now, I think they turned a minor profit in Q4, and for the year were about break even. I think different companies, but very different use cases. Snap competes much more directly with Tiktok and Instagram, which, at this point, are just so formidable, whereas I think Pinterest itself has a different swim lane and discovery in search and commerce, so hopefully they can carve something out there that's unique for them. Both companies are going to have to figure out: are they large enough businesses to be viable, stand alone companies when you have these Goliaths like Meta and Alphabet (GOOGL, GOOG) and Amazon (AMZN) out there."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JOSH LIPTON: All right, moving on. Shares of Pinterest and Snap both struggling to gain back ground after last week's steep post-earnings fall. Some investors now wondering if these two companies can survive today's tough digital ad market against giants like Meta, Google, and Amazon. For more on this debate, we bring in Kamran Ansari, Headline Venture Partner and former head of corporate development at Pinterest. Kamran, it's always good to see you. So let's talk these two names, Kamran. Pinterest and Snap, not a great start to the year for either one of those names. Some people may be asking, Kamran, listen, you look at these performances, can they actually survive as standalone companies? What do you think, Kamran?

KAMRAN ANSARI: Well, I mean, you guys talk about waste management, you're talking trash. It makes me think that were-- here in San Francisco we're talking about innovation and tech, but the simple businesses sometimes do the best. So SNAP and PINS have both been under pressure in the last several quarters. I think that they're two very different companies. I mean, SNAP at this point is a $4.5 billion top-line business, a very sizable business, but not really growing.

SNAP has been flat the last year or so. If you look at their 2022 revenue versus 2023, essentially identical, and they're still losing quite a bit of money. I think they lost something like $1.3 billion for the year. Meanwhile, Pinterest is growing a little bit more handsomely, about 10%. They did about $3.1 billion for the year in 2023, and they're starting to eke out a profit now. I think they turned a minor profit in Q4, and for the year, we're about break even. So I think they're different companies, but also very different use cases.

I think Snap competes much more directly with TikTok and Instagram, which at this point are just so formidable. Whereas I think Pinterest itself has a little bit of a different swim lane in discovery and search and commerce. So hopefully they can kind of carve something out there that's unique for them. But I think both companies are going to have to figure out are they large enough businesses to be viable standalone companies when you have these goliaths like Meta and Alphabet and Amazon out there.

JULIE HYMAN: What do you think? Will they be? I mean, let's take them one by one here. Are these going to be independent a year, three years, five years from now?

KAMRAN ANSARI: So when LinkedIn got bought, that was the last kind of business of this size, and the kind of digital media, social media universe, that was bought by Microsoft in 2016 for about $26 billion. At the time, they're doing about $2.5 billion in revenue. Today, LinkedIn does about $15 billion in revenue. So it's almost 5x since the Microsoft acquisition, which is, I think, a blockbuster deal for Microsoft.

Once that company got bought, it always said to me-- at the time, I was at Pinterest-- if they're not large enough to be standalone, then are we, or Snap, or these other companies big enough to be standalone? Because LinkedIn we looked at as being a very sizable asset. And there is a sense that the bigger companies seem to be having more gravitational pull, kind of the Death Star kind of thing going on, where if you're an advertiser, you have a dollar to spend, would you rather spend that on Meta or Google or PINS or Snapchat?

And I think people tend to prefer to go to the larger platforms with whom they've worked more heavily in the past. And they just have larger audiences. So I think that's a trend that is definitely happening. I do think there's still a place, particularly for Pinterest, because I think I know that business a little better. And I think it does have its own kind of unique profile. Snapchat, to me, seems a little bit more vulnerable to potentially getting bought. And of course, it was almost bought by Facebook several years back for about $3 billion, which they turned down.