How Pinterest Could Fuel Revenue Growth

by Trefis Team
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Pinterest is apparently looking to go public in 2019, and while the company has managed to attract a significant number of advertisers, its average revenue per user (ARPU) is still much lower compared to other players in the segment such as Snap and Twitter. Higher revenues are key to Pinterest’s valuation when it goes public, and the company is taking several steps to attract more advertisers to its platform.

In 2017, Pinterest’s ARPU was around $2.4o, half of what Snap generated ($4.80) in the same year. While Snap has nearly 180 million daily active users, Pinterest also has a strong user base of 200 million monthly active users. However, the revenue per user is vastly different for both these companies.  We do not expect a significant increase in Pinterest’s ARPU in 2018, but if the company is able to catch up with Snap and Twitter’s ARPU it could see a very high valuation when it does go. Our recent analysis – Can Pinterest Be A $ 30 Billion Company? – provides insights on the factors that can drive Pinterest’s valuation. We have also created an interactive dashboard analysis to see the company’s key value drivers, and how changes would impact Pinterest’s valuation.

Expanded Ad Offerings

Last year Pinterest launched a pilot of “Shopping Ads,” an automated advertising product where brands can showcase their products – in line with the visual search of the user. For instance, if a user is looking for curtains, a home decor store can advertise in this search and display its own collection – which the user can buy right away. This pilot was successful, and Pinterest is now expanding this offering to hundreds of other brands. Pinterest’s users spend a significant amount of time on its platform – more than 30 minutes per visit – and are usually looking for a specific product. Average value of an order placed via a product found on Pinterest is $59 (higher than Facebook). The high level of user engagement, and potential revenues which brands can generate by advertising on its platform, should attract more advertisers to Pinterest as it expands its Shopping Ads.

Pinterest is trying to leverage its visual uniqueness, and the fact that users on its platform are generally looking for something specific, to attract advertisers. Another unique feature of the site is that users can save ads just as “pins” and refer to them later. The company is actively marketing its differentiating features to brands as it competes for digital advertising dollars.

Pinterest has a unique value proposition for advertisers and an engaged and strong user base. The company is now trying to market itself effectively to attract advertisers and help them generate a high return on their investments.  If it is successful, the company’s revenues should grow significantly in the next few years.

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