Social media companies have boomed over the past decade, some facing severe criticism for operations and values (such as Facebook for its valuing of profit over people, according to Facebook whistleblower Frances Haugen). Pinterest, which was founded in 2010, has largely avoided public scandal but for an incident in 2020, where two former employees alleged discrimination and retaliation.
Pinterest is a social platform where users “pin” content of interest on their Pinterest boards and then title them with a corresponding theme. Like most social media companies, Pinterest makes money primarily through advertising. But how does Pinterest’s revenue system work?
How Pinterest makes money
Advertising revenue is the key to Pinterest’s earning strategy, as is the case with Facebook and Instagram (which is owned by Facebook). Pinterest's primary source of revenue is the sale of what it calls “promoted pins.”
On Pinterest, users create their own curated online boards organized by themes ranging from vegan recipes to minimalist living to fashion. Users can create their own “pins” as well.
The company sells promoted pins, which are advertisements designed to look very similar to the posts or pins made by regular users of the platform. These promoted pins bring in the bulk of Pinterest’s revenue. CNBC reported that in 2018, promoted pins earned about $3 per Pinterest user.
Promoted pins are based on targeted advertising, meaning that Pinterest uses data from user interests and search terms to focus advertising on subjects and products that will interest a particular user.
According to Investopedia, the company has said, “We address various advertiser objectives through our Promoted Pin ad format, which contains either a single image, a carousel of images or video. Our ability to develop new and improve existing advertising products will be an important driver of our future growth”
Another source of revenue is Pinterest’s sale of click-to-buy shopping ads to businesses and retail partners. The platform is quite popular among fashion and beauty brands and influencers, and the primarily female followers of Pinterest boards often have disposable income to spend on products seen via Pinterest ads.
Pinterest's financial results
In Pinterest’s IPO filing in 2019, it stated that in the previous year the company’s revenue was $756 million, with $63 million in net losses.
In the fourth quarter of 2020, the company's revenue increased 76 percent YoY (year-over-year) to $706 million. Its global monthly active users (MAUs) rose 37 percent YoY to 459 million. Pinterest CEO and co-founder Ben Silbermann said upon the release of financial results, “As we look to the future, our focus will continue to be delivering more inspiring and shoppable content and helping advertisers realize the value and positivity of our platform.”
When was the Pinterest IPO?
Pinterest debuted on the NYSE in April 2019 at $19 per share under the ticker symbol is “PINS”. Its stock is now $61 per share.
Pinterest is reportedly in discussions for a $45 billion acquisition by PayPal, the payment service giant. If PayPal and Pinterest go through with the deal, it would be the largest tech company takeover of 2021.