Posted on Friday, Sep 18th 2015
According to eMarketer, worldwide business-to-consumer (B2C) e-commerce sales are expected to reach $2.3 trillion by 2017. Billion Dollar Unicorn Club member Pinterest is eyeing this market with its recent launch of Buyable Pins. This comes amid the rise of discovery-driven commerce apps such as Fancy, Wish, and Wanelo and the e-commerce plans of Facebook and Twitter.
Pinterest’s Monetization Plans
Founded in 2009, San Francisco-based content discovery app Pinterest today has more than 70 million users and over 50 billion Pins. While it ranks third in terms of popularity as a social media website, it has struggled to find a viable monetization model. They started testing Promoted Pins with certain brands and early this year, announced the Promoted Pins program for all advertisers. This program is expected by analysts to generate revenue of $500 million by 2016.
According to a survey by digital research firm Millward Brown, 93% of active Pinners use Pinterest to plan for purchases and 87% said they’ve purchased something because of Pinterest. So in June, Pinterest rolled out Buy Buttons for its iPhone and iPad apps to allow their users buy directly from Pinterest using Apple Pay or a credit card.
There won’t be any fee for Pinners or merchants, as they want Pinners to shop with the confidence that the price would be the same on the merchant’s website. Pinterest expects to make money off the feature by selling its Promoted Pins ad unit to retailers who could insert the “Buyable Pins” inside the ads.
Pinterest’s e-commerce plans compete with those of social platforms Facebook and Twitter who have started experimenting with their own Buy buttons. Even Google is reportedly looking at adding Buy buttons in the ads in its search results. They would also be competing with Amazon and eBay.
Pinterest’s potential lies in its ability to understand users’ intent and a distinct advantage is that users come to the site to find new products. There are over 2.5 million products on Pinterest, but a challenge that analysts foresee is the lack of control over the inventory and the shipping process.
Pinterest’s Acquisition Strategy
In April, Pinterest acquired Hike Labs for the expertise of its co-founders Jason Shellen and Mike Demers. They are expected to work on Pinterest’s core vision of building a discovery engine. Shellen was earlier a founding team member at Blogger and Google Reader as well as a co-founder at Thing Labs. Demers had founded app development platform 9Astronauts and was the CTO at a Q&A startup YouSaidIt, where he developed a visual blogging site and an app-building service for people to build their own communities around interests.
This is Pinterest’s seventh acquisition to date, after Punchfork, Livestar, Hackermeter, Visual Graph, Icebergs, and Kosei. Acquihiring has been the core strategy behind them. The team from Icebergs helped it roll out updated Pin It buttons. The Visual Graph and Kosei acquisitions helped it gain access to key technology. Kosei’s technology is expected to help it improve its visual search and search advertising, by helping users find better pins and helping advertisers reach the users they want.
Pinterest is venture funded till now. Since being founded in 2009, they have raised $1.3 billion 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, Wellington Management, and Goldman Sachs. Their last round of funding was held in May 2015 when they raised $186 million as part of the $553 million Series G round at a valuation of $11 billion. An absurdly high valuation for an unvalidated monetization model!
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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