Posted on Wednesday, Jan 28th 2015
The Billion Dollar Unicorn Club has several companies with high valuations and little or no revenues. One such company is San Francisco-based content discovery app Pinterest. But it appears that things are beginning to change as Pinterest scouts for a viable business model. Analysts are projecting revenues based on the early experiments.
Pinterest was founded in 2009 by co-founders Paul Sciarra, Ben Silbermann, and Evan Sharp who launched the first prototype of the site in 2010. Soon they launched publicly. Today Pinterest calls itself “a place to discover ideas”. It is a content discovery platform for projects, interests, activities, and other content that a user may like.
Like other social media and networking players, Pinterest expects users to register with their website for free. Once registered, members can then begin to apply visual bookmarks, also known as Pins, to content that they find on the Internet. These Pins are all located on the member’s pages, known as the Board. Users can come back to their Boards for referring to this content at a later time and can follow other user boards to discover content that they are interested in.
According to Pinterest, they have over 30 billion Pins on their website ready for members to explore. Analysts estimate that Pinterest has a following of 70 million users of which nearly 40 million are monthly active members. Pinterest is also one of the faster growing social media sites. According to a Global Web Index report, Pinterest’s registered users’ growth rate is the highest among the social platforms with 57% and is also the second-fastest growing social platform in active users with an 111% growth rate in the first half of the previous year.
It is only recently that Pinterest has decided to monetize their impressive usage metrics. Last year, Pinterest began exploring the option of earning revenues through an advertising model. Retailers and brands can place their ads on the platform in the form of Promoted Pins. Analysts estimate that Pinterest will be able to generate $500 million in revenues by the year 2016 through these ads.
The revenue growth is attributed to the overall “invisible” nature of Pinterest ads. Where ads on social networking sites like Facebook and Twitter are clearly identifiable as ads, Pinterest ads are more subtle as they weave into the story itself. Additionally, Pinterest’s high potential lies in their ability to convert search to an online sale. According to analysts, search provides about 33% of the traffic for most retail websites, making Pinterest a strong advertising platform.
Till date Pinterest is venture funded. They have raised $763 million in funding from individual investors and funds including Valiant Capital Partners, FirstMark Capital, Fidelity Investments, Bessemer Venture Partners, SV Angel, Andreessen Horowitz, Slow Ventures, Rakuten, Jack Abraham, Max Levchin, Kevin Hartz, Michael Birch, New York Angels, William Lohse, Jeremy Stoppelman, and Jack Abraham. Their last round of funding was held in May 2014 when they raised $225 million at a valuation of $3.8 billion, a significant increase over the $2.5 billion valuation at the beginning of 2014. Since then, valuation has increased further and analysts now value them at nearly $5 billion. The market expects Pinterest to file their IPO soon.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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