Facilitating a convenient and private shopping experience, e-commerce platforms have rapidly soared in relevance since the advent of secure connected solutions. With a few clicks of a mouse button, whatever products you desire — within budgetary constraints — could be delivered right to your doorstep, increasingly within 24 hours of purchase in some cases.
Steadily gaining prominence, the online sales industry received a massive shot in the arm when the COVID-19 crisis struck. According to data from the U.S. Census Bureau, e-commerce retail sales as a percentage of total sales spiked from 11.4% in the first quarter of 2020 to a monstrous 15.7% by the next quarter — an all-time record. Given such a robust backdrop, Pinterest Inc. attracts significant attention from investors.
How Pinterest Makes Money
Unlike other companies that preside over a library of revenue channels, Pinterest is comparatively straightforward. On the subject of how Pinterest makes money, the business primarily revolves around promoted pins. Almost identical looking to user-generated pins, the promoted iteration facilitates organic user engagement. By clicking on them, advertisers not only bolster brand awareness, they also enjoy a treasure trove of data analytics — the modern-day version of the mythical leprechaun and his pot of gold.
Though Pinterest may lack the revenue-channel diversity of other companies, it makes up for it in other ways. For instance, the image-sharing service’s international sales segment has increased dramatically, from $132.6 million in 2019 to $288.4 million in 2020. Last year, this segment rang up $574.4 million, demonstrating significant traction across a burgeoning global audience.
As well, Pinterest features balanced engagement stats on an income basis, which distinguishes the platform from competing social media outlets. The trough-to-peak gap in the percentage of online adults who use Pinterest only varies from 30% (among users who make less than $30,000 a year) to 35% (among users who make over $75,000).
Should the global economy encounter a recession — a non-zero probability at this point — Pinterest may be better positioned to survive (or even thrive) relative to platforms dependent on a higher-income stratum.
Pinterest Stock Price
Invariably, one of the pivotal factors that play into whether an investor acquires PINS stock is its share price. For better or for worse, it’s the opening salvo that then encourages — or in other cases discourages — further investigation.
However, merely buying a stock because of its fair market value at a particular point in time is not the most conducive strategy to investment success. Rather, one should consider the context of what this figure truly means. For example, assessing the target company’s float or the total number of shares available for trading for retail investors will help determine its equity share dilution.
In addition, prospective buyers of PINS stock or any security will want to measure the unit price relative to key performance indicators, such as earnings or sales. Performing this exercise will shed light on whether a stock is truly cheap or expensive.
Where to Invest in Pinterest
Running parallel with Pinterest’s origin story, many brokerages recognize the potential of connectivity services to deliver retail customers unparalleled access to the capital markets. As a result, the best brokers offer a convenient channel to acquire PINS stock, which you can find below.
Pinterest: The C-Suite
Though entrepreneurs are often fond of saying that their products sell themselves, in reality, a business venture will fail quickly without the right people working the levers. Below are some of the key executives who make the Pinterest brand possible.
A Yale University graduate, Silbermann’s leadership at Pinterest represents a compelling mix of intellectual acumen and sheer tenacity. By pivoting Tote’s collapse into a groundbreaking social media platform, he provided a life lesson for everyone — never give up.
Hailing from Stanford University and the United States Military Academy at West Point, Morgenfeld takes his no-nonsense approach to Pinterest’s finance and corporate accounting procedures. As well, the CFO oversees global sales and marketing, bolstering the brand’s presence internationally.
Joining the ranks in June of 2021, Deputy commands an extensive track record in the areas of human resources and talent management. Pinterest will undoubtedly lean on her expertise as she navigates the unusual circumstances of the pandemic-disrupted labor market environment.
Founded in 2010, Pinterest, like many groundbreaking enterprises, represents an evolution rather than a finished product that perfectly materialized to address its core consumer needs. Instead, it took an initial failure before a realization sparked of greater possibilities — with a few critical tweaks.
At its genesis, internet entrepreneurs Ben Silberman and Paul Sciarra brainstormed an application that would act as a virtual replacement for paper catalogs. Essentially, rather than customers sifting through page after page of product advertisements, they could quickly order what they wanted through a few keystrokes and mouse clicks.
Called Tote, the business catapulted from imagination to reality thanks to the immense synergies possible through the internet. Unfortunately, Tote entered the scene when mobile payment capacities were still in their infancy, stymieing convenient purchases through the app. Logically, the business model suffered — the tech at the time simply couldn’t keep pace with the aspiration.
However, the founders noted that Tote users nevertheless used the app to store large collections of tagged items. In addition, they were sharing what they found via browsing the underlying digital catalog with their friends and colleagues. Suddenly, a eureka moment emerged. Rather than facilitate sales transactions, Silberman and Sciarra could convert Tote’s architecture to serve as a social sharing platform. From there, the Pinterest brand was born.
With a fresh narrative in hand, the founders set out to develop Pinterest in December 2009. Shortly thereafter in March 2010, the site launched as a closed beta test run. After just 9 months, the website attracted 10,000 users. Thrilled, Silberman wrote to Pinterest’s first 5,000 users, even meeting with some of the early participants.
Later, a launch on the Apple Inc. (NASDAQ: AAPL) iPhone app in early March 2011 captivated significant interest — more than what the founders anticipated. Quickly, the platform experienced exponential growth in user awareness, commanding 11 million total visits per week. Among the brand’s many honors, Time labeled it as one of the 50 best websites of 2011.
As Pinterest gained steam, it also organically established an unofficial culture and ethos. According to data compiled by Statista.com, as of October 2021, over 77% of users identified as female while nearly 15% identified as male. Understandably, a social media platform should ideally be balanced across key demographic categorizations. However, the female tilt does accrue particular advantages, especially when it comes to how Pinterest makes money.
Per an intriguing study by First Insight, just 22% of male respondents reported frequently shopping on mobile devices compared to 40% of women. Additionally, 46% of men reported shopping frequently on Amazon.com Inc. (NASDAQ: AMZN) in contrast to 60% of women.
In other words, women are likely more receptive to the conversion opportunities that Pinterest provides for advertisers, which would be pivotal for the firm moving forward.
Following years of user growth and heightened brand awareness, The Wall Street Journal reported in February 2019 that Pinterest confidentially filed paperwork with the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO), with the platform seeking a valuation at the time of at least $12 billion.
Investors may recall that Pinterest’s overture for a capital raise came amid an IPO blitz among compelling tech firms such as Uber Technologies Inc. (NYSE: UBER) and LYFT Inc. (NASDAQ: LYFT). Starting life as a public entity with an initial offering price of $19, PINS stock made its debut in April 2019.
To be fair, early sentiment saw Pinterest drive higher thanks to facilitating a lucrative arena for advertisers to target a more easily convertible user base. By the late summer of 2019, PINS stock was trading hands above $30. However, demand for shares suffered, in part because of the U.S.-China trade war that preceded the COVID-19 pandemic.
But it was also strangely the global health crisis that may have given PINS stock new life. As government mandates forced millions of people to operate from home, the disruption basically gifted Pinterest a hostage audience. Combined with powerful catalysts that saw everyday workers exercise their inner Gordon Gekko, PINS rocketed to meteoric heights during the new normal.
And the impact wasn’t just limited to the capital market, which can sometimes run ahead of the fundamentals. Instead, what Pinterest did was deliver outstanding growth. For the full-year 2020, the image-sharing service rang up revenue of $1.69 billion, up 48% from 2019’s result. In 2021, the company generated revenue of $2.58 billion, for a year-over-year (YOY) gain of 52%, confirming that the brand spike was no one-off anomaly.
As expected, the hostage audience thesis worked like a charm regarding Pinterest’s annual user statistics. Back in 2019, 300 million people took advantage of the platform. One year later, this metric soared to 416 million, a 39% increase. As of Q4 2021, Pinterest had 431 million monthly active users.
Obviously, no question exists about viability in how Pinterest makes money. But tech firms have long eschewed profitability for growth, which risks testing investor patience. But recently, Pinterest has turned a corner on this common plotline, posting a net income of $316 million for 2021.
Therefore, the future appears encouraging for PINS stock, though concerns are also starting to rise.
On the surface, Pinterest can’t seem to do any wrong. Through perseverance and a little creative tweaking, the brand turned what was heading toward an ignominious failure into one of the most highly anticipated tech-based IPOs in recent memory. And when the pandemic struck, Pinterest dug deep, advantaging its unique circumstances to forward a corporate-record-busting sales tally in 2021.
Such an enticing backstory makes the elephant in the room all the more puzzling: why is PINS stock down so sharply on a year-to-date basis? Do investors no longer believe in how Pinterest makes money?
Some of the severely negative print stems from the arbitrary nature of comparative arithmetic; that is, when stacked against a phenomenal year of fiscal performances, it will be difficult for any organization to pull off an encore.
Still, the main factor for the as-of-yet disappointing run for PINS stock this year is that analysts remained perplexed about the underlying company’s forward relevance. As Benzinga staff writer Anusuya Lahiri mentioned, Wolfe Research analyst Deepak Mathivanan believes in Pinterest’s product enhancement initiatives and is generally bullish on the platform’s potential for “significant monetization upside.”
On the other hand, Guggenheim analyst Michael Morris downgraded PINS stock to neutral from buy, stating that while Pinterest enjoys value creation potential from its large global user base, “we don't see the platform's use case as developing as rapidly as peers, creating risk that competitors improve their social commerce offerings more quickly than Pinterest capitalizes on its position.”
As well, Wall Street wasn’t terribly impressed with management’s guidance for Q1 2022. Though it sees revenue increasing in the high teens on a YOY percentage basis, the company disclosed a risk of operating expenses also rising, to the tune of 10% YOY.
Unfortunately, the present juncture is a poor time to incur inclining expenses. With soaring consumer inflation crimping discretionary spending, advertisers may soon realize a reduced return on investment for its campaigns, possibly threatening lower revenues for Pinterest.
Though the company may appear to have its back against the wall, its future could depend on its core user base: female consumers.
Per research listed by Cambridge University Press, women are more likely to avoid radical right ideologies. Logically, with female users representing the bulk of Pinterest’s engagement dynamics, it stands to reason that the platform will sidestep much of the potential for explosively vituperative commentary that has so agonized other social media outlets, most recently Spotify Technology (NYSE: SPOT).
In alignment with peer influence — which the MIT Sloan School of Management confirms levers a conspicuous impact on purchasing behaviors — Pinterest has the opportunity to corral its generally controversy-free user base to promote a much-needed positive experience for both participants and advertisers.
An image-sharing and social media service, Pinterest separates itself from other platforms within this catch-all designation through fostering the digitalization of discovery. It’s similar in principle to public internet forums but rather than stimulating a contentious amalgamation of often-heated opinions, users share images, products and content that appeal to them, sparking curiosity over pugnaciousness.
Starting from a home feed, users can pin (or tag) images they find on the internet that particularly pique their interest onto their digital board — akin to how people stuck physical notes and reminders for themselves and others during the analog days. As well, Pinterest uses an artificial intelligence engine that recommends potentially attractive content based on a user’s recent internet activity.
As you might imagine, advertising represents the central revenue-making mechanism for Pinterest, specifically through promoted pins. Similar looking to user-generated pins, the promoted variety cultivates organic marketing — especially toward a targeted user base likely predisposed to purchasing the advertised product or service.
Thanks to the rising dominance of e-commerce, Pinterest may command speculator interest once the market works through the present volatility.
Frequently Asked Questions
How many followers do you need on Pinterest to make money?
In sharp contrast to other social media platforms, you don’t necessarily need a large following to make money since Pinterest is driven by visual content.
How do you monetize your Pinterest account without a blog?
Although having a blog or website can make your journey on the platform easier, you can still make money without these sources through creative means such as affiliate marketing or linking to a third-party merchant account.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.