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Pinterest Business Model: How Pinterest Makes Money

Pinterest is not what most people think it is.

Most people classify Pinterest to be a social media platform, but unlike social media platforms where user behaviour leans towards sharing personal updates and learning about the personal updates of friends and family, Pinterest is a visual discovery platform where people go to discover new ideas and seek inspiration.

In its S1 document, Pinterest described how visual search differs from traditional text-based search,

Search helps people find a discrete piece of information quickly, but it isn’t an adequate tool if you don’t know exactly what you’re looking for, you can’t describe it in words or you’re seeking something that is tailored to your taste.

These common dilemmas are best solved by a visual discovery journey, rather than by a text-based search. Discovery on Pinterest is a rich experience that combines some of the utility features of search with some of the enjoyable features of media.

Let’s say you’re an interior designer looking for bedroom design ideas. You ask Pinterest for help and it lists down a bunch of images, based on your personal taste & interests which Pinterest refers to as Pins. 

How to use Pinterest

You can then save and organize these images into collections called boards, which can also be seen by other Pinterest users unless made private. 

Users can also directly upload images to Pinterest or add images they find on the web using Pinterest’s browser extension.

While the interior design example is just one use case, people use Pinterest for several activities like deciding what to wear, finding cooking recipes, planning a wedding and looking up things they’re passionate about.

Pinterest is home to a variety of different types of pins customized to the user’s intent.

1. Product Pin

Product Pins are associated with shoppable products.

They contain product pricing, availability status and links that redirect users directly to the checkout page of the seller’s websites.

How Pinterest Product Pins work

2. Recipe Pins

Recipe Pins make life easier for those looking for cooking inspiration by bringing relevant information like ingredients, cooking time and serving information right to the Pin.

How Pinterest Recipe Pins work

3. Shop the Look

Shop the look pins make it possible for Pinners to shop for individual products they see within the fashion and home decor pins.

How Pinterest Shop the look works

4. Video Pins

Video pins are short how-to videos on topics like cooking & beauty that engage Pinners deeply by showing them the transformation of an idea.

How Pinterest Video Pins Work

Pinterest User Demographics

According to Pinterest’s 2020 Financial reports, Pinterest had around 459 million monthly active users, a metric that has shown slow but steady growth since Q4 2017.

Out of the 459 million monthly active users, 98 million of them were based in the US and the remaining 361 million were international.

During its early days, Pinterest was more focused on the US Market. In recent years, the company has prioritized growing its user base in international markets as well.

Pinterest Monthly Active Users from Q4 2017 to Q4 2020
Source: Pinterest 2020 Financial Report

In their 2018 S1 filing, Pinterest had mentioned that two-thirds of their then 250 million-plus users were females.

At that time, their audience included 43% of internet users in the United States as per an independent study by Comscore based on total unique visitors.

8 out of 10 of these unique visitors were moms, who are often the primary decision-makers when it comes to buying products and services for their households, making Pinterest a lucrative platform for advertisers.

Pinterest Business Model

Similar to digital platforms that aggregate user attention and sell it to advertisers, Pinterest makes money by seller user attention to advertisers via ads. Approximately two-thirds of the 2020 revenue came from performance advertising (optimized for actions like clicks/sales) and the remaining came from brand advertising (optimized for impressions/video views to build brand awareness).

Pinterest Revenue from 2017 to 2020
Source: Pinterest 2020 Financial Report

In 2020, Pinterest generated a revenue of around $1.69 billion at a net loss of 128 million.

While Pinterest is yet to achieve profitability, the positive thing is that revenue is growing Year-Over-Year(YOY) and losses have been more or stable. The only outlier in terms of losses was 2019. However, most of the losses in that year came due to share-based compensation, not operational inefficiency.

Pinterest Losses from 2018 to 2020
Source: Pinterest 2020 Financial Report

According to Pinterest’s 2020 Financial Report, around 81% of Pinterest’s revenue was generated from the United States. Here’s a breakdown of Pinterest’s international revenue vs US revenue.

Pinterest US vs International Revenue Breakdown from Q4 2017 to Q4 2020
Source: Pinterest 2020 Financial Report

As you would have made out from the revenue breakdown in the image above, Pinterest’s international revenue has grown at a faster rate than its US revenue from 2017 to 2020.

Pinterest’s revenue is higher in the US than international because of the relative maturity of the US digital advertising market & Pinterest’s decision to focus its monetization efforts in the US initially, which means Pinterest still has room for growing its revenue by focussing on international markets. Pinterest can also look to grow its US Revenue by deepening its penetration in the market.

Here’s how Pinterest has fared in terms of Average Revenue Per user from Q4 2017 to Q4 2020

Pinterest US vs International Pinterest ARPU from Q4 2017 to Q4 2020
Source: Pinterest 2020 Financial Report

In 2020, Pinterest had a global ARPU of $4.26, 12% higher compared to 2019. US ARPU was $15.34 and international ARPU was $0.88, representing an increase of 27% and 62% respectively from 2019.

To add some perspective to Pinterest’s ARPU number, Facebook reported a global ARPU of $32.03 & Snapchat reported a global ARPU of $10.09 in 2020.

Who does Pinterest compete with?

While Pinterest is a digital platform, Pinterest essentially competes for brand ad spends that happen on traditional offline channels like print, direct mail, television and radio, as well as ad spends on online channels like Google, Facebook, Amazon, Snapchat & more.

While offline media budgets are shifting to online media and online media is expected to grow substantially, growing revenue will be challenging for Pinterest revenue since most media budgets are allocated to digital advertising behemoths like Google, Facebook & Amazon, which account for close to 60% of the digital ad spending.

What makes Pinterest advertising unique in a sea of digital advertising platforms?

The ability of any digital advertising to rake in brand ad spends depends on its unique value proposition and capability to deliver ROI to advertisers. 

When it comes to Google, search advertising is valuable because it is user-intent driven.

Amazon advertising is valuable because Amazon has become the default shopping search engine.

Facebook takes a big chunk of digital spends because it commands most of the social media space user attention. 

So unique value proposition does Pinterest provide advertisers?

Here what Pinterest had said in its S1 filing,

The value of Pinterest’s audience to advertisers is driven not merely by the number of Pinners on our platform or their demographics, but also by the reason they come to Pinterest in the first place. Getting inspiration for your home, your style or your travel often means that you are actively looking for products and services to buy.

Billions of searches happen on Pinterest every month. In the United States, more people use Pinterest to find or shop for products than on social networks, according to a survey by Cowen and Company.

Sales at retail stores that primarily focus on our core verticals of food, home, beauty and fashion and internet retail sales of products in those verticals represented nearly two-thirds of retail sales of consumer goods in 2018 in the United States, according to Euromonitor.

An analysis by Oracle of retail transactions from 2016 to 2017 showed that on average Pinterest households were 39% more likely to buy retail products, and they spent 29% more than the average household.

Commercial content from brands, retailers and advertisers is central to Pinterest; the majority of Pins saved on our service are from businesses. Ads do not compete with the content Pinners want to see—they are native content.

The mutually beneficial alignment between advertisers and Pinners differentiates us from other platforms where ads can be distracting or annoying. Pinners travel from inspiration to action and back again on our service.

Advertisers have the opportunity to put relevant content in front of them at every stage of this journey—when they are browsing through many possibilities, when they are comparing a handful of options and when they are ready to make a purchase.

As a result, advertisers can achieve a range of objectives on Pinterest.

Pinterest Marketing Funnel

While Pinterest makes a good case for its advertising platform, it’s worth noting that Google, Facebook & Amazon also provide advertisers with the ability to target people in all three phases of the marketing funnel: brand awareness, consideration and sales.

In the case of Google, Google Display ads are targeted at people in the awareness and consideration phases of the marketing funnel while Google Search is more about targeting people in the consideration and sales phase of the funnel.

When it comes to Facebook, it provides advertisers with the ability to run ads using different objectives across all the three phases of the funnel.

Likewise, Amazon is also used to generate brand awareness, spark consideration and drive sales by digital advertisers.

While any of this does not take away Pinterest’s unique value proposition to advertisers, as I said earlier, competing with Google, Amazon & Facebook for ad spends is going to be a challenge for Pinterest.

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Summary
Pinterest Business Model: How Pinterest Makes Money
Article Name
Pinterest Business Model: How Pinterest Makes Money
Description
Similar to digital platforms that aggregate user attention and sell it to advertisers, Pinterest makes money by seller user attention to advertisers via ads. Approximately two-thirds of the 2020 revenue came from performance advertising (optimized for actions like clicks/sales) and the remaining came from brand advertising (optimized for impressions/video views to build brand awareness).
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WhatIsTheBusinessModelOf
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Hey 👋

I'm a digital marketer working 5 days a week as a salaried employee & writing business blogs on weekends.

My goal is to turn this blog into a full-time gig. But for that to happen, I need it to generate as much revenue as my salary to protect the downside.

To be transparent, I currently make money with ads, but it isn't enough to transition to working full-time.

Why do I want to work full-time on the blog if I can carry on writing on the weekends?
Two reasons:

  • My blog gets more than 20000 monthly visitors, most of them through search. The only bottleneck to growth is the amount of time I'm able to dedicate to the project, so working full-time will help me scale and turn it into my primary income source.
  • Working on projects of my own opens the door to unlimited personal and financial growth.

If you've found value from reading my content, feel free to support my dream in even the smallest way you can.



Muaaz Qadri
A Proud Computer Engineer turned Digital Marketer
Summary
Pinterest Business Model: How Pinterest Makes Money
Article Name
Pinterest Business Model: How Pinterest Makes Money
Description
Similar to digital platforms that aggregate user attention and sell it to advertisers, Pinterest makes money by seller user attention to advertisers via ads. Approximately two-thirds of the 2020 revenue came from performance advertising (optimized for actions like clicks/sales) and the remaining came from brand advertising (optimized for impressions/video views to build brand awareness).
Author
Publisher Name
WhatIsTheBusinessModelOf
Publisher Logo