Recently, Facebook acquired Instagram, a mobile photo-sharing platform with over 30 million users, for $1 billion. Palo Alto, CA-based Pinterest is one such company, which some believe has many potential suitors or a possible IPO in the waiting. If you haven't heard of Pinterest, you likely will soon.
Pinterest’s Financials :
There is one problem: The 16-person Palo Alto, Calif., start-up isn't sure how it is going to make money. Pinterest is a scrap-book like social networking site that lets users create pinboards around events and themes to share photos among their friends. Development on Pinterest began in 2008 through co-founders Ben Silbermann and Paul Sciarra. The Pinterest closed BETA was launched in March 2010 and post launch, the service amassed over 10,000 users within the first nine months. According to more recent data, the number of daily unique visitors to Pinterest grew from 2 million users in January to 4 million by March 2012. As of January 2012, the service had over 11 million users who can share their pinboards over other social networking sites including Facebook and Twitter.
"Pinterest's monetization strategy isn't in the oven and it's not even off the baking table," said Jeremy Levine, a board member of Pinterest and a venture capitalist at Bessemer Venture Partners. "We have one hundred ideas but no execution as of yet." {via WSJ article}
Mr. Silbermann co-founded Cold Brew Labs Inc. in 2008 and launched Pinterest, the company's only product, the following year. It has raised $37.5 million from Silicon Valley angel investors including Yelp Inc. Chief Executive Jeremy Stoppelman and top venture firms such as Bessemer and Andreessen Horowitz.
The closely held company wouldn't disclose financial figures, but isn't yet making much revenue and is unprofitable. Pinterest is currently valued at around $200 million, according to a person familiar with the matter.
How traffic from Pinterest converts to revenues ??
Pinterest claims to be still searching for the right monetization model. For now, though, the company is generating revenues through successful implementation of an affiliate marketing model. Pinterest uses SkimLink services to identify if a photograph posted on the site can be linked to an affiliate program. Once a user clicks through the link and buys a product from the affiliated retailer’s site, Pinterest gets a share of the sale. While statistics are not available, analysts believe that Pinterest is driving plenty of traffic to retailers, especially the smaller ones.
Pinterest became the third most visited social network in the US in March 2012. Facebook is the leading player with seven billion total visits, followed at a distant second by Twitter’s 182 million visits. But, Pinterest is catching up with 104 million visits, already having surpassed Google+’s 61 million visits.
David Lawee of Google is taking a look at Pinterest. He says - ‘Pinterest is a phenomenon that’s extraordinary.’ Suggesting an acquisition price of around $2 bn, simply because Google can afford it and needs to make a move in the social space, but I still can’t get my head there.
Recently, Pinterest extended its photo sharing capabilities by adding video sharing as well. The company enabled the addition of Vimeo videos on to its virtual pinboard. In 2011, Pinterest had introduced video sharing by letting users add YouTube videos on their boards. As a video service, Vimeo is preferred.
Google has been trying to grow within social networking through Google+ which will benefit from an efficient photo sharing tool. Instagram attracted a $1 billion valuation even when they did not have a revenue model in place. Considering that Pinterest has figured out a steady source of revenues through affiliate marketing, they should be able to command a respectable valuation.
