With the launch of paid pins, Pinterest's reckoning moment has arrived
After what can only be described as "forever" in tech years, not to mention raising half a billion in venture capital, Pinterest is finally looking to to monetize. In case you were hiding under some sort of rock and missed the big news, the company has rolled out paid advertising pins.
In a classic effort to downplay the importance of this new revenue generator to the future of its business, Pinterest chose to roll out the news via a blog post and a few last minute emails to reporters. This is a stark contrast to the h’ordeuvres filled whoop-de-doo that the company normally hosts at its Carnival-themed headquarters when announcing important news.
Each subsequent evening at Pinterest HQ failed to deliver a promoted pins announcement, but rather amounted to big PR pushes for Place Pins and then Guided Search. But now, when Pinterest finally has significant news for its business to share, it keeps the fanfare to a minimum.
From the outside, you’d almost think Pinterest was a little scared about its big reckoning moment. If it's not, it should be.
The ten-year-old company's reported $3.8 billion valuation and $562.5 million in venture were all raised without any existing monetization efforts, whatsoever. Although Pinterest has been testing precursors to the paid pins product for awhile, it had yet to convince (or attempt to convince) advertisers to pay for them. Now that it has flipped the switch, investors will be watching closely to see whether this company was built on hype or actually has the potential to deliver huge profits.
Some might argue that Facebook, Twitter, and even possibly Google have more to fear from this announcement than Pinterest itself. I’ve heard anecdotally from startup founders -- in e-commerce, not software -- that they’ve been waiting excitedly to throw money at Pinterest. They've told me the traffic they get from click-throughs — just on organic user pins, not even promoted pins — is way higher than on the Twitter or Facebook ads they buy.
Of course, this may simply be because users are more likely to click a pin posted by a friend then they are to click a paid advertisement. That's where the gamble comes in for Pinterest and its lofty venture-backed expectations. Theoretically, the reason investors were willing to throw huge amounts of money at the company in a low-to-mid ten figure valuation range is because they expect its advertising units to be highly profitable.
Until now, neither Facebook nor Twitter (nor Google) was competing against Pinterest for advertisers' dollars. But now the floodcgates are open — at least partially. Pinterest’s paid pins are in beta testing for now, with big corporate names like Gap, Kraft, and Target named as initial advertisers.
Fortunately for Pinterest, it doesn’t have the pressure of nailing said ads right off the bat just to keep the lights on. The company is sitting on a huge pile of cash, particularly for a consumer Web service. Unlike Uber or Lyft -- each of which have raised almost $200 million less in venture -- Pinterest doesn’t even have any offline logistics to coordinate or inventory to purchase. Its funding is a big safety net that will give the company more than enough time to experiment with advertising and hopefully prove that its model is sustainable – if not outright profitable.
Pinterest’s last round was decried by many as “proof of a bubble” in tech. After all, it’s not exactly revolutionizing a huge $1.3 trillion industry like logistics and transportation. Cynics of the service might say it’s revolutionizing scrapbooking for grandmothers…so why does it need all that money?
As we’ve explored, this is more about Pinterest disrupting Google than it is about Pinterest disrupting Hallmark. With the company's new guided search feature, it has made those ambitions clear. Pinterest wants to be where users go for inspiration. And it wants its targeted ads to be right alongside said discovery, where they can command premium prices.
Pinterest has been underestimated for much of its meteoric rise, but now is its moment to put up or shut up. Investors want to see the the future of online advertising. Anything less and things could get ugly.