Pintrest is a website created in March 2010 by Ben Silbermann, Evan Sharp, and Paul Sciarri. The Pintrest website describes itself as “is a tool for discovering things you love, and doing those things in real life.” The question for this post is, how the heck does Pintrest generate a revenue stream to support 70 Millions users3?
The costs of supporting the database, technical staff, legal staff, and so on have to be that of any other social media website, such as Twitter which spent $1.3B4 to run the company. Twitter has 560M users according to mediabistro.com5. That being the case, since Pintrest is just 12.5% the size of Twitter in users, figure, $162.5M to run the company annually.
In 2012 Pintrest was exposed for embedding code on some of the pins that lead to sales of online merchandise linked through their site with an affiliate company called Skimlink2. Both Skimlink and Pintrest said it was not a dirty underhand intention but that it was a beta test that had already stopped before the article was even released. No facts or figures were published on the amount Pintrest generated during its time with Slimlink, although I find it funny that Slimlink doesn’t have a Pintrest share button on their page…
Pintrest has mainly used venture capital to run as a viable business since inception. In 2010 it started with an Angel investment of $500K, followed by $37M in 2011, $100M in 2012, $425M in 2013 and $200M in 2014 so far. A grand total of $762.5M has been given to Pintrest. They have also acquired 4 companies in that timeframe, VisualGraph(2014), Hackermeter(2013), Livestar(2013) and Punchfork(2013), cost to acquire is unknown. These companies revolve around creating and sustaining online searches and databases for showing people pins as they search through Pintrest.
According to the New York Times7 the valuation for investors is $5B for Pintrest. How could this be for a startup that has yet to open the “flood gate” of revenue? In May of this year, Pintrest began an initial test of Promoted Pins with Kraft, Gap, General Mills, Ziploc, Nestle, Lululemon, ABC Family and Expedia. Adage.com reports that the new test market will be more like a consultancy setup in which Pintrest essentially gives one of these companies a team to help with targeting which pins show up where. The thing with online advertising is that no one trusts it, no one needs it and no one uses it to the extent that it makes sense to keep spending money with Google to spam users with ads they don’t want to see for vacation when they are looking up cold medicine.
The conclusion about the business model I draw is that Pintrest is going to use precision and time to pinpoint the trust issue people have with online ads, then dig deep into the psychology of how to get around that, at the same time court large companies hand in hand through test processes, hopefully demonstrating meaningful and measurable revenue generation for that company, which in turn means more money for Pintrest. I see Pintrest as a Facebook social business wrapped in Ernst & Young marketing clothing, both servicing two sides of the business. Boil it down, it just a new way to sell old ideas, now the trick is to find out where the psychology of consumers is, gain their trust and expand on it.
Sources:
1http://about.pinterest.com/en/press
2http://blog.skimlinks.com/2012/02/08/it’s-not-a-secret/
3http://expandedramblings.com/index.php/pinterest-stats/#.U8sLplZJZqs
5http://www.mediabistro.com/alltwitter/social-media-stats-2014_b54243
6http://www.crunchbase.com/organization/pinterest
7http://dealbook.nytimes.com/2014/05/15/pinterest-raises-more-money-fetching-a-valuation-of-5-billion/?_php=true&_type=blogs&_r=0
Pintrest...why do people think this is just for women?!
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