How Does Pinterest Make Money? Business Model Of Pinterest


How Does Pinterest Make Money

If you found this article, chances are you’re one of the 400+ million active users who visit Pinterest every month to discover new products and recipes. And so, you’re probably wondering how Pinterest actually makes money…

Pinterest operates on a social media discovery platform business model. Pinterest makes money by advertising (promoted pins), partnering with influencers and merchants, and charging commissions from partner sites.

You may have noticed the red Pinterest logo on just about every website. Even if you don’t use Pinterest, you most likely at least know someone who does.

Given the app’s popularity, it’s worth asking: How does Pinterest make money? How much money does Pinterest make? If you’re curious about what business model the company is using, where its revenue comes from, and if it is profitable, then read on. This article will share the answers to all of your questions.

Business Model Of Pinterest

Pinterest is a social networking site launched in 2009 by Ben Silbermann, Evan Sharp, and Paul Sciarra, who wanted to create a platform that would allow users to share ideas visually. The name Pinterest was inspired by the physical pinboards used as inspiration for the web service.

Social media is a crowded field, but Pinterest believes that it offers an experience unlike that of any of its competitors. You are invited to continue below, where you’ll learn what sets Pinterest apart from the rest.

 Pinterest is a visual discovery tool that allows users to create and share collections of things they love. Interests are organized into boards, which can be searched by keyword or theme. Users can follow other pinners, repin content that interests them, and comment on pins and boards.

 

An Online Pinboard

Take a second to imagine a corkboard or pinboard hung up in your office. You might choose to pin up reminders or mementos from friends. Pinterest is the online version of this and allows users to do much more than just pin up paper notes.

Users can either search for pins, upload photos, or create their pins. They then have the freedom to categorize pins as they please.

Common uses for Pinterest include:

  • Recipes
  • Workouts
  • Travel
  • Fashion
  • Wedding Planning
  • Brainstorming themes for a child’s birthday
  • And much more

Pinterest advertises itself as primarily a planning tool. Users don’t submit posts of current life updates in the same way that they do on social media apps like Facebook or Instagram. However, any pin you create could potentially be of use to others with the same interests (e.g. a travel collection containing ideas for rainy day activities in New York).

 

Free To Use

Pinterest does not charge users for registration. They also have access to an unlimited number of pins. Users also do not have to create an account through Pinterest, since there is an option to sign in through either a Facebook account or a Google account.

There is also no subscription plan with premium features. The only way that a user would be paying for a Pinterest Account would be if they were to upgrade to a business account for advertising.

Pinterest earns revenue primarily via advertising since access to the site is free. The primary objective of Pinterest is to serve as an interactive planner for its user base. Not just for big events, but everyday tasks as well.

 

Good For Shopping

A major part of the appeal of Pinterest, for both shoppers and businesses alike, is that it gives you ideas for your shopping list. Participants are introduced to a whole line of products that they otherwise may have not even ever heard of.

Here’s how Pinterest helps shoppers:

  • Links: Promotional pins come with a link to a retailer’s website.
  • Lens: Pinterest Lens (available on the mobile app) allows customers to search Pinterest for information about objects they see out in the world, including recipe ideas.
  • Shopping recommendations: You can browse similar items across multiple brands.

Pinterest is naturally visual, so it makes sense for retailers with visually appealing products like fashion brands, home decor stores, restaurants and travel destinations. But any kind of retailer can benefit from having a presence on Pinterest if they know how to leverage the platform.

 

Pinterest Is On Seemingly On Every Website

Whenever a merchant displays links to their social media pages, you’ll often find the Pinterest logo among the assembly. By now many retailers are aware of the role that Pinterest plays in online browsing.

Pinterest has come up with several different ways to draw more traffic to its site, where revenue is generated primarily through advertising (for more on this, check out the “How does Pinterest make money?” section below.)

In late 2017 Pinterest introduced its browser button. What does the browser button on Pinterest do?

  • The browser button is shown as an icon on many websites that says “save”.
  • As long as they are logged into an account, users can save any item with this icon to their boards.
  • It provides a visual search history that potential customers would otherwise not have.
  • The browser button also encourages visitors to set up a Pinterest account, if they haven’t done so already.

Pinterest continues to expand its arsenal of convenient tools for those seeking inspiration. In the sections below, you’ll find out whether the company is successful in its efforts.

 

How Does Pinterest Make Money?

Advertising is the primary source of revenue for Pinterest. The company’s business model puts it in a unique position as far as advertising revenue goes. Every time somebody is planning a party, a home remodels, a new recipe, or anything of the sort, Pinterest is there to help.

The company does have some other sources of revenue though. These include collaborations with partners and influencers. Pinterest has also acquired a total of 17 different companies since its inception. Continue below to learn more about Pinterest’s revenue streams.

Advertising

The main source of revenue for Pinterest comes from “Promoted Pins.” These are advertisements that are displayed on a user’s board to make it more relevant to search terms that are being used by other users. Promoted Pins provide targeted ads that are more effective than traditional ones. The company uses customer data and search terms to create ads that are relevant to what their customers want.

Social media sites typically earn money via some form of advertising. This allows the sites to offer their services for free while still earning revenue. Facebook and Twitter both earn revenue by filling users’ timelines with cost-per-click, cost-per-impression, and cost-per-like advertisements. Facebook earned 84.2 billion in ad revenue in 2020.

Pinterest generated $1.6 billion in revenue in 2020 with its advertisement strategy. Its new and simplified advertisement guide (introduced in Spring 2021) appears to be part of an effort for more companies to take advantage of Pinterest for digital marketing.

Unlike other social media apps, like Facebook, Pinterest does not use cost-per-click advertising. Instead, the folks at Pinterest have come up with a unique, interactive way to generate revenue through advertising.

Here’s how it works:

  • Promoted pins: Advertisers create special pins to demonstrate their products. Say you want to discover a healthy breakfast. If you search “healthy breakfast” in the app, several promoted pins will pop up among the search results.
  • Advertisers only have to pay whenever a user engages with the promoted pins.
  • Traditional advertising options exist as well, including cost-per-click and cost per thousand.

 

Pin Ads Manager

For advertisers who want to get their promoted pins popping, there’s Pinterest Ads Manager. The program is designed so that companies can hire influencers to create inspiring pins, which they hope will go viral.

Pinterest offers free ad consultation as a way to attract newcomers. The service includes creative strategies, campaign tips, and more.

How much do advertisements on Pinterest cost? Pinterest does not list pricing on its website. However, third-party websites report a rate of $2-5 per thousand impressions. Online engagement may cost $0.10-$1.50 per engagement.

 

Collaboration With Influencers

Pinterest is built around images. And, since it’s an image-based social media platform, it makes sense that Pinterest would try to monetize its traffic by selling ads against these branded pins.

Trouble is, most of the time when brands pin something on Pinterest, they aren’t doing so in a context that would make the pin effective as an ad. I mean, who wants to click on an ad that says “this food looks delicious!”? That’s like paying for online advertising space to tell people how much you like your company! So Pinterest has been trying to think of new ways to cash in on its massive user base.

One way they’re doing this is through what they call “Pinterest Creator Rewards,” which essentially allows brands to pay content creators to create content on their behalf. It’s sort of like paying someone else to pin for you. This has led some folks to worry that Pinterest has abandoned its user-generated roots and is now just another ad platform. Creators who used to make money from their original pins are now dependent on brands for their livelihood.

This probably isn’t true, but the fact remains that these sponsored posts are kind of a weird way for brands to work with influencers on the platform. As you might imagine, Pinterest takes a cut of the amount paid to influencers for these collaboratins.

 

Commissions From Partners

Pinterest has partnered with many businesses to help them expand their customer base. Pinterest is a free platform for users but makes money from companies that are looking to sell products and services.

Pinterest has been working closely with certain partners to help brands optimize their presence on Pinterest, including Shopify(ecommerce platform that helps you sell anything online) and Vidmob (a marketing management platform).

Pinterest likely earns at least some revenue from partner collaborations since they refer customers to these third-party apps. It earns from product clicks that leads to sales or from a referral fees from partner merchants which is approximately 5-25 percent of purchase price of products sold.

Pinterest collaborates with companies like Shopify, to allow merchants to upload their product catalogs onto the website. Think of it as a modern-day coupon catalog.

 

Buying Other Companies

Pinterest also acquires other companies in order to generate more revenue. For example, in December 2021 Pinterest acquired Vochi. This is a video creation and editing app with more than 500k users per month.

Previously Pinterest has acquired numerous other companies, including:

  • JellyHQ: a search engine
  • Instapaper: a web app that allows users to save web pages and makes it easier to read longer articles.
  • Math Camp: an application for developing social media and photography apps.

There are several other companies in the listing of acquisitions by Pinterest. The main takeaway here is that the company continues to bolster its assets and add tools that Pinterest’s user base should find useful.

 

Funding, Valuation & Revenue Of Pinterest

Pinterest has raised a total of $1.5 billion in funding over 24 rounds. The first rounds occurred in 2009 and 2010. In April 2019 the company first went public.

Continue below to find out how much Pinterest is worth today and what the future may hold for the site.

Valuation & Stock Performance

Pinterest (PINS) first went public on the NYSE on April 18, 2019. Since then it has maxed out at $85.90. This was in February 2021 following months of growth during the pandemic.

The company currently has a market cap of $23.3 billion, up from a valuation of $12.7 million following the initial public offering.

DatePrice Per Share (USD)
Initial Public Offering (IPO): April 18, 2019$23.75
January 3, 2020$18.36
January 8, 2021$71.87
February 19, 2021 (Max)$85.90
January 4, 2022$33.13

Courtesy: Google Finance

 

Revenue

Pinterest reported high net losses in 2019, primarily due to the company’s expansion efforts. In 2020, the company experienced a significant gain in revenue and a substantial decrease in total costs & expenses.

It’s also worth taking a peek at the year-over-year EBITDA, which is a metric of profitability that’s explained in further detail in the paragraphs below the table.

Period202020192018
Revenue1,692,6581,142,761755,932
Total Costs & Expenses1,835,1622,531,627830,653
Net Loss128,3231,361,37162,974
Adjusted EBITDA305,00416,70639,000

Source: Pinterest Annual Report

 

What Is EBITDA?

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a measure of a company’s overall financial performance. It is sometimes used as an alternative to net income.

Why use this metric?:

  • It excludes expenses associated with debt. Instead, it adds back interest expense and taxes to earnings.
  • EBITDA is a simple measure of a company’s profitability.

The adjusted EBITDA above shows that Pinterest was highly profitable in 2020, to the tune of $305,004.

 

How Many Users Does Pinterest Have?

As of the end of Q3 2021, Pinterest has 444 million active users. Since 2016 the site has gained more than 300 million active users.

YearUsersChange (%)
2016135 million0
2017185 million+37.037
2018231 million+24.9
2019300 million+29.87
2020416 million+38.67
2021478 million+14.903
September 30, 2021444 million-7.11

Courtesy: Statista

It’s clear in the table above that Pinterest experienced a decline in its number of active users in 2021. Does this mean that Pinterest is slowly becoming irrelevant?

Not so, says Motley Fool. Here’s why Pinterest experienced a decline in users in 2021 and why you shouldn’t be worried :

  • Less Quarantine: In 2021, many users returned their lives to some semblance of normalcy. They spent less time at home than they did in 2020, and consequently less time on Pinterest.
  • Users who left the platform in 2021 were typically not very active on the platform, to begin with, according to Pinterest.
  • Revenue per user in the US has more than doubled from $2.50 to $5.08.

It’s also not unusual for social media sites to have a volatile user base. For example, Twitter used to track users monthly and would experience wild swings in the number of active users from month to month.

 

Does Pinterest Have Any Competitors? Market Share of Pinterest

In the category of social networking websites, Pinterest owns 12.4% of the market share, placing it behind Facebook (71.79%) and ahead of Twitter (9.15%). Market share is less significant of a metric on social media sites since users typically have active profiles across multiple platforms.

It may be surprising to many though that users appear to be spending more time on Pinterest than on Twitter. Pinterest is set apart from most other social networking apps since Pinterest is specifically designed for planning.

 

Is Pinterest Profitable?

Pinterest, the visual search engine and social network, is profitable with an impressive 15% net profit margin. Pinterest has become one of the largest and fastest growing social media sites on the internet.

Key drivers of Pinterest’s financial performance include its ability to increase its number of active advertisers, average cost-per-click (CPC), and average revenue-per-user (ARPU). Each of these metrics contributes significantly to Pinterest’s ability to monetize its user base.

Pinterest saw its revenue per user increase by 37% from 2020 to 2021. The adjusted EBITDA, which is a measure of profitability, increased by nearly $290,000 in 2020. In short, Pinterest is profitable despite losing 7% of its active user base in the first 9 months of 2019.

How can this be? Well, Pinterest has a dedicated user base consisting of participants who want to take advantage of the ability to monetize their accounts. Pinterest is also a unique way for businesses, merchants, in particular, to reach customers with promoted pins directing customers to specific products.

 

Conclusion: How Does Pinterest Make Money

In the social media world, it’s tough to make money off free users, but with its massive user base, Pinterest has jumped into a win-win situation.

The site does plenty of advertising by posting items from Pinterest advertisers on its own site (which contributes to its revenue), but it also features two ways for brands to get an advantage with Pinterest over other networks. First, brands can consider paid ads on Pinterest that target users based on interest and intent. Second, brands can collaborate with Pinterest and develop branded boards for potential customers to explore.

There it is. That’s how Pinterest makes money. I told you it was easy, didn’t I? Well, that’s not to say that it is easy for Pinterest to make money. After all, generating income isn’t easy for anyone and the folks at Pinterest are no exception. They have had their share of struggles over the years as they try to get their business model up and running.

Pinterest is making money, and with new strategies for maximizing its revenue potential, the site has a bright future ahead. It’s got a huge user base with an even bigger purchasing power, so it’s no wonder that there are so many marketers out there trying to capitalize on Pinterest.

At the end of the day, Pinterest’s value is derived from its users. As long as those users keep coming back, the company should have a bright financial future. Given its popularity and social nature, Pinterest will likely remain heavily engaged in the e-commerce sector as well—and with any luck, its revenue figures will grow to match that engagement.

We hope this article has helpful for you, and has answered some of your questions about Pinterest! Of course, -nothing- is a substitute for first-hand knowledge, so we highly encourage you to follow Pinterest’s official webiste. In the meantime, thank you so much for reading and best of luck on your quest!

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