Pinterest: Seeking an ambitious valuation

February 8, 2013

The popular image-sharing website will need to show its hand if it is to persuade investors it is worth the $2.5bn valuation it is after, says Lexi Brown.

Rumour has it that Pinterest is seeking additional funding to secure a $2.5 billion valuation, despite the fact that it has yet to generate a significant revenue stream. Investors providing the funding are gambling on the ‘potential value’ of Pinterest and it is clear that they have major expectations.

The big question is how will Pinterest actually monetise the platform and grow as a business?

Pinterest’s main strength is its focus around images. It is less limited by language barriers which increases its potential as an international platform. By connecting people with the same interests via images, the commercial potential of group buying or ‘co-buying’ could be huge. Allowing all those who want to purchase the same product to do so collectively will significantly reduce the price for all parties involved.

Pinterest currently has a ‘gifts’ section which it has probably already monetised. It could feature brands or products here, recommend products to users based upon their interests, or go even further and become an e-commerce site in its own right. I would assume that it is already working as an affiliate but there is also the potential to grow this area further.

Pinterest could also have a featured pins / user section, similar to how Twitter features users similar to those you already follow and Google has promoted search results. It could look into ‘sponsored pins’ whereby it shows pins relevant to the keywords you search for or the pins you have posted. It could also insert pin-shaped ads anywhere on the page, similar to how Facebook has ads directly in users’ newsfeeds.

Another potential revenue stream would be to allow users to turn their pinboards into physical scrapbooks. This would work really well for people collecting information and creating look books for their wedding day, redecorating their home or recipes for example.

Pinterest’s main concern is developing an API which not only provides an important point of integration for retailers whilst extending a seamless experience for the consumer, but also allows the developer community to open up the Pinterest ecosystem.

This is a strategy that has worked very well for Facebook and it now has a very strong developer community.

There is potential for Pinterest to monetise itself through a number of strategies, but if it is to meet the expectations of its investors, it will need to show its hand one way or another.

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