Pinterest was founded by Ben Silbermann, Paul Sciarra & Evan Sharp in December 2009. At the start, the website had an invitation-only user and operated what is called closed beta. In the current versions one signs in the platform, the website asks to choose the fields of interest based upon which the home screen is populated, of all categories the most popular ones have been home, arts and crafts, style/fashion, and food. By October 2016, Pinterest announced 150 million monthly active users, 70 million in the US and 80 outside the US, and by April 2017 the active monthly users have reached 175 million marks.
Business Model: — Portfolio Business Model (Matchmaking and Product)
Pinterest is a web and mobile application unicorn that provides a photo-sharing platform for users and advertisers hence it is a multisided model in that respect, however since Pinterest also do sell the user-generated data to third-party analytics companies it also has a product business model in it; hence, it is safe to say that Pinterest is a portfolio business model with the majority of revenue coming from the multisided online platform and minor share from data sharing. Pinterest is more than just a social media site as per the CEO — Ben Silbermann. He stated that Pinterest is a catalog of ideas rather than a social media network, inspiring users to go out and do that thing. Besides many use cases of the site, one of the most written about has been the wedding planning by the female users.
The biggest strength of Pinterest is the value it creates in leveraging the power of visuals for both users and advertisers.
1. Value for users as described by Pinterest’s CEO is by getting the ideas and going out and making them happen. The biggest strength for Pinterest is engaging content. According to a study, almost 87% of Pinterest users buy because of pinning on Pinterest[v], hence this serves as a big bonus for the advertisers to focus on Pinterest as a potent platform.
2. The other strength of Pinterest lies in the integration of photo-sharing functionality with social media features, such as following, commenting, and pinboards. This brings more inclusion of the users.
3. Pinterest has seen a great deal of targeted marketing from big brands for millennials on the platform. The Rich Pins and the promoted pins have become a real world
4. Pin Factory: — Pinterest has also introduced an in-house creative studio to offer more creatively adept pins for advertisers.
5. Pinterest Analytics — Pinterest lets marketers use its data, but the data is currently open to a handful of analytical companies such as Salesforce.com, Hootsuite, Spredfast, Percolate, Piqora, Curalate, and Tailwind
Key Elements of Risk
With half of the population with internet access, the growth will always be there for pioneers such as Pinterest, but who will rule in terms of traffic will rule the advertisements.
1. The biggest risk for Pinterest is one of the lower Average Revenue Per user. ARPU — Average Revenue Per User can be estimated as in 2016 there were 150 million users per month and $500 million yearly revenue, hence ARP can be anything between $.2 to $.3, which is less as compared to the rivals. In comparison, Facebook is $4.23 and Snapchat is $0.9.
2. The replicable core proposition of Pinterest makes it a very risky business model. Pinterest does not do anything that cannot be replicated by Facebook, Instagram, or Snapchat and hence the advertisement revenues can be also diluted to other competitors
3. Constant pressure of innovation can make Pinterest invest in some risky Research and Development that can bring some huge losses as in materializing it to revenue.
4. Competition with public-traded companies, such as Facebook and Snapchat can see Pinterest going through many capitals raising rounds that can further change the equity structure and further the decision-making power.
5. Since Pinterest is a visual centered service it inherently has a barrier of penetration in geographies with lower bandwidth services
6. Technical disruption is always a risk to any technology company. Any new product cannot be anticipated and hence risk strategies cannot be framed as well
At last, Pinterest is an ideal takeover target for a big tech conglomerate, however, to stay afloat and keep thriving Pinterest has to keep innovating the revenue streams and user engagement channels. Pinterest has many avenues to do so, hardware integration, B2B services and Pinterest lite to name a few.
Pinterest can also extend its in-house Rich Pin agency into a full-fledged digital marketing agency to leverage platform expertise and seamless execution. The profits will come if adequate diversification will be done hence it is important for Pinterest to look into the business modeling from a portfolio perspective with the need for constant innovation.