Pinterest – Media Company or Commerce Company?

I would not consider myself a power user of Pinterest, but I do find the product really fascinating. And I’m really intrigued by how broad Pinterest usage is within my network – a lot of my friends from high school in Michigan and others who are not super active on Facebook or Twitter are very active on Pinterest. But you’ve read that before.

I’m particularly interested in where Pinterest goes as a business. When I first heard about and played with Pinterest, I really thought that the big opportunity was in affiliate referrals. But the more I think about it, the less convincing I find that approach. The real question is whether Pinterest will head down the road of being a commerce company (intermediating transactions and connecting buyers and sellers) or being more of a media company (providing exposure and audience to advertisers and brands). In my limited experience using Pinterest, I’ve come to believe that the big opportunity is in the media space, not the commerce space. There are a few potentially interesting business models I can envision for Pinterest:

“Pinwords” Contextual Advertising on Pinterest Pages – The one business model that makes a lot of sense to me is the idea of using Pinterest pins as explicit signals of my interest. For example, I have been pinning a lot of office furniture for an upcoming office move. A friend of mine, who is a very active pinner, reached out to me and sent me an email commenting on my furniture choices and recommending another site to check out. This is the type of activity that Pinterest could enable at the platform level. They see what I’m pinning and the time density of pins. If I pin a bunch of office furniture in a short period of time, chances are that I’m thinking about buying furniture. Would I be open to seeing other items that I should consider for purchase? For example, if I’m pinning a lot of items that are couches (and I believe that Pinterest could know that given the metadata about the items I’m pinning), why not show me other couches or brands that I might find interesting or relevant? This would not be intrusive or creepy – it would be useful. And it could easily be accomplished with some kind of second-price auction system a la AdWords where advertisers could bid to have their products or offerings shown when people create boards with relevant content.

Sponsored Pins– A second model that I can envision for Pinterest is a model where they offer something along the lines of sponsored pins available for bid on the homepage or on other pages. This would be a less targeted approach than the “Pinwords” model I mentioned above. But in the same way that some video advertisers are willing to spend money to have their TV show, movie, or other form of video content put in front of all visitors to the YouTube homepage, the same could be true of Pinterest. For this level of spray-and-pray advertising to work, there would have to be even more traffic and usage on the core Pinterest site.

Affiliate links for e-commerce revenue share – This was the model that originally jumped out at me as obvious. Anecdotally, Pinterest sends a lot of traffic to sites whose content is regularly pinned. So it’s not a hard logical leap to see Pinterest leveraging this ability to direct traffic to an e-commerce affiliate relationship with downstream traffic recipients. The problem with this model, though, is that Pinterest only really gets paid on conversion. There are likely tons of content categories where there isn’t any conversion event. And, at typical single-digit affiliate payout rates, this isn’t an attractive business. I think it’s far business for Pinterest to be in the business of referring traffic to sites and allowing those sites to bid for traffic (similar to Google with AdWords) than it is to get into the conversion loop.

I’m curious to hear what others think – feel free to leave a comment here or send me your thoughts on Twitter @chudson.

  • Great post. I think contextual advertising on Pinterest is fascinating from an implementation point of view. The core challenge is that while you as a user may be pinning office furniture, Pinterest doesn’t necessarily know it’s office furniture, and unlike Google, there’s no search term at hand. To serve a PinWords ad, Pinterest will need to gather together the different metadata they have for each pin and make an educated guess about what the pin represents, essentially backing out a keyword. The pin metadata that Pinterest does have directly from the user is: the pinned image URL (not helpful unless you have amazing image recognition tech), the target site URL (somewhat helpful, if you analyze the page or domain), the pin description (could be “office desk” [helpful] or could be “I love this” [not helpful]), the board title (possibly helpful) and the board category (somewhat helpful). Perhaps if they put all of this together–and aggregate metadata for the same pin across multiple users, too–then it’s a surmountable problem. But definitely a tough one.

  • Justin Smith

    I tend to agree with your gut about media vs commerce. But one other category to throw out there – any reason to consider premium vanity features?

  • I expect that some people will want to customize their profiles / boards / pages. That could be an interesting opportunity for power Pinners.

  • Elita Ng

    funny you think it’s more media, because I was trying to get my friend into pinterest (because she is totally the target market), but she was already using flipboard and didn’t find a need to switch (yet). 

    Still, i can see them monetizing easily on the commerce side with your 3 options above. btw, I’ve been pinning lots of bathrooms (trying to remodel bathroom) and a lead like that to a bathroom designer/contractor is worth quite a bit…. or the soon to be brides who are pinning/liking a billion wedding things… great for targeting high value potential customers. 

  • Elita,

    I definitely see a commerce / lead generation opportunity here, but I am trying to differentiate between “commerce” as in affiliate sales or taking a cut of transactions driven versus “media” where advertising units are used to drive awareness, clicks, or traffic that are monetized independent of Pinterest. Still feels to me like the latter is the big opportunity.

  • I would like to use pinterest as a social network not as an e-commerce site.

  • Aaron

    Though I agree the contextual advertising is interesting, the sustainability of this model, as you described, is also predicated on a conversion basis. If advertisers bid to get in front of pinners, they ultimately must convert them into customers to justify the continual ad spend. IMO I think pinterest would have a difficult time figuring out this formula between the behavior of a compulsive pinner who’s scrap booking for the sake of collecting beautiful images and someone who’s pinning a product type over and over because he’s actually interested in buying.

  • Outstanding information, i’m really happy to read this information. As my point of view i use pinterest as social media, but everyone have diffrent thoughts…