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C H A P T E R 1    T h e R e v o l u t i o n I s J u s t B e g i n n i n g

1.9 CASE STUDY

Pi nt erest:
A Picture Is Worth a Thousand Words

L ike all successful e-commerce companies, Pinterest taps into a simple truth.
In Pinterest’s case, the simple truth is that people love to collect things, and
show off their collections to others. Founded in 2009 by Ben Silbermann,
Evan Sharp, and Paul Sciarra and launched in March 2010, Pinterest allows you to
create virtual scrapbooks of images, video, and other content that you “pin” (save) to a
virtual bulletin board or pin board. Categories range from Animals to Videos, with Food
& Drink, DIY & Crafts, Home Décor, and Women’s Fashion among the most popular. Find
something that you particularly like? In addition to saving and perhaps commenting on
it, you can re-pin it to your own board or follow a link back to the original source. Find
someone whose taste you admire or who shares your passions? You can follow one or more
of that pinner’s boards to keep track of everything she or he pins. As of February 2017,
there were over 75 billion pins on Pinterest on more than 1.5 billion different boards.
Pinterest originally positioned itself as a social network. However, it has changed its
tune and now describes itself as a visual search tool for discovering and saving creative
ideas (and potential purchases), with less emphasis on sharing with friends. Search has

© Blaize Pascall / Alamy Stock Photo

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become the core part of its mission. It views Google, rather than Facebook, Twitter, or
Instagram, as its primary competition.
As of June 2017, Pinterest has over 175 million monthly active members worldwide.
About 70% of those members are women, but men are its fastest growing demographic:
according to Pinterest, 40% of new signups are men. According to a survey by the Pew
Research Center, the percentage of online adults in the United States who use Pinterest
has more than doubled since 2012, increasing to about 70 million in 2017.
Thus far, investors such as well-known Silicon Valley venture capital firms Andreessen
Horowitz and Bessemer Venture Partners, hedge fund Valiant Capital Partners, and
Japanese e-commerce company Rakuten have poured over $1.3 billion in venture capital
into Pinterest, with its latest round of funding in May 2015 valuing the company at $11
billion. Like Facebook, Twitter, and many other startup companies, Pinterest focused
initially on refining its product and building its user base, but not surprisingly, its investors
began to push it to begin generating revenue. Pinterest’s first step was to offer business
accounts that provided additional resources for brands. In 2013, it introduced Rich Pins,
which allowed companies to embed information, such as current pricing and availability,
as well as a direct link to a product page. In 2014, Pinterest took the official leap into
the advertising arena, launching a beta version of ads it called Promoted Pins that appear
in search results and category feeds. Around the same time, Pinterest also introduced
a search engine, called Guided Search, which suggests related terms to refine a search.
Guided Search is based on user metadata, such as gender, board titles, captions, and
comments related to pins, to create different categories and subcategories.
In the last several years, Pinterest has gotten serious about monetization. In January
2015, it rolled out Promoted Pins to all its U.S.-based partners and they are now also
available to advertisers in the United Kingdom, Canada, Ireland, New Zealand, and
Australia. In May 2015, it added Cinematic Pins, a made-for-mobile format. Cinematic
Pins display a short animation when the user scrolls down through the ad, and only play
a full-length version when the user clicks on the ad, providing more user control over the
experience. Pinterest also introduced new ad-targeting and pricing options. Advertisers
can target users by interests, life stage, or “persona” such as Millennial, prospective
parent, or foodie. In 2016, it added three additional ad-targeting options: custom list
targeting (similar to Facebook’s Custom Audiences); visitor targeting, which allows
advertisers to retarget a customer who has visited the advertiser’s website; and lookalike
targeting, which enables advertisers to target consumers who share traits or behaviors
with the advertiser’s existing customers. Ads can be purchased on a pay-per-view, pay-
per-click, cost-per-engagement (CPE), or cost-per-action (CPA) model. Using the CPE
model, advertisers only pay when a user engages with a pin, such as through re-pinning,
and with the CPA model, only when the user clicks through to a website and makes a
purchase or downloads an app.
Search advertising is the next frontier for Pinterest. Pinterest search differs from
other types of search because it is visual and typically happens at the early stages of a
person’s decision process. Users currently conduct over 2 billion keyword and 250 million
visual searches per month on Pinterest. In July 2016, Pinterest began offering its search
inventory to advertisers for the first time and in February 2017 expanded its paid search

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SOURCES: “Pinterest Will Soon
Let Advertisers Reach Consumers
Through Their Smartphone’s
Camera,” by Sarah Perez, Tech-
crunch.com, May 16, 2017;
“Pinterest is Waving Farewell to Its
Like Button,” by David Cohen,
Adweek.com, April 21, 2017;
“Audience Insights: A Closer Look
at Who’s on Pinterest,” Business.
pinterest.com, April 12, 2017;
“Pinterest Expects to Make More
Than $500 Million in Revenue This
Year,” by Kurt Wagner, Recode.net,
March 21, 2017; “Pinterest Is
Extending Promoted Pins to
Ireland, Australia, and New
Zealand,” by David Cohen,
Adweek.com, February 22, 2017;
“Pinterest Co-founders on the
Launch of Lens,” Cbsnews.com,
February 9, 2017; “Pinterest’s New
‘Lens’ Tool Places Real-World
Objects in Digital Context,” by
Kathleen Chaykowski, Forbes.com,
February 8, 2017; “Pinterest
Expands Search Ad Offerings,” by
Danny Goodwin, Searchengine-
journal.com, February 1, 2017;
“Social Media Update 2016,” by
Shannon Greenwood et al.,
Pewinternet.org, November 11,
2016; “At Pinterest, Shopping
Beats Social Media,” by Maghan
McDowell, Wwd.com, October 24,
2016; “Pinterest Starts Expanding
Its Visual Search Tools to Video,” by
Matthew Lynley, Techcrunch.com,
August 4, 2016; “Social’s Next
Evolution? Pinterest Begins to
Monetize Users’ Search,” eMar-
keter, Inc., July 15, 2016; “Amid
IPO Speculation, Pinterest Hangs a
Target on Alphabet’s Back,” by
John-Erik Koslosky, Fool.com, July
11, 2016; “Pinterest Updates
Strategy, Looks to Scale Search and
Audience Based Buying,” by
George Slefo, Adage.com, July 5,
2016; “Pinterest Hopes to Woo
Shoppers with Visual Search,” by
Rachel Metz, MIT Technology
Review, June 28, 2016; “Pinterest
Makes a Major E-commerce Push,”
by Zak Stambor, Internetretailer.
com, June 28, 2016; “Pinterest
Ramps Up Its Ad Targeting
Options,” by Zak Stambor,
Internetretailer.com, June 14,
2016; “Pinterest Renames ‘Pin It’
Button as ‘Save’ in Push for Global
Growth,” by Kathleen Chaykowski,
Forbes.com, June 2, 2016;
“Pinterest Broadens Ad Sales Focus
EC14_CH01.indd 48
platform functionality to include keyword ad campaigns, shopping campaigns, targeting,
and reporting. Pinterest believes search advertising revenue can become a significant part
of its business, and that it can challenge Google in the mobile search arena. It is making
significant investments in search technology, such as deep-learning assisted visual search,
which will build on its existing visual search tool that allows users to search within images
on Pinterest. In August 2016, it began updating its visual search tools to work on videos
and also began rolling out a fully integrated native video player similar to that offered by
Facebook, along with video ads. In February 2017, Pinterest introduced several updates
to its visual search tools, all focused on the ability to pinpoint specific elements within
an image. One feature, called Lens, can automatically isolate the different objects in an
image stored on a user’s camera, and gives the user the ability to start searching for
similar elements. Another tool enables users to jump from element to element, such as
from a shirt to pants, within a pinned image.
Many analysts also believe that Pinterest will become a significant factor in the
social e-commerce arena. In 2015, Pinterest launched Buyable Pins, which allow users to
directly purchase products by clicking a blue Buy It button within the pin, for its iPhone,
iPad, and Android apps, and in June 2016 also made them available on the desktop.
According to Pinterest, more than 10 million unique items are available for sale, from
over 25,000 different merchants both large (such as Macy’s, Nordstrom, Neiman Marcus,
Bloomingdale’s, and Wayfair) and small. Pinterest says its data shows that Buyable Pins
are generating a significant percentage of brand-new customers for merchants. Pinterest
is significantly ahead of other social networks such as Facebook, Instagram, and Twitter in
terms of the percentage of users who use it to find or shop for products: 55% for Pinterest
versus just 12% for Facebook and Instagram and 9% for Twitter. And almost 90% of
users have purchased a product they have seen on the platform. To further enhance its
lead, in 2016, it announced a number of other e-commerce-related initiatives, including
Shopping with Pinterest, a shopping cart that links to a user’s account, is visible on all
devices, can hold multiple items, and allows for checkout on any device.
The fact that Pinterest launched Buyable Pins on its iOS mobile platform rather than
the desktop is just one indication of how important the mobile platform is to Pinterest.
Pinterest provides apps for iPhone, iPad, Android, and Windows Phone, as well as a
mobile version of its website using HTML5. Pinterest Mobile runs inside the smartphone’s
browser rather than as a stand-alone program. Mobile has been a huge success for
Pinterest, with 80% of its traffic coming from mobile devices in 2017. Pinterest releases
new versions of its mobile apps on a regular basis, and in April 2016 launched a nearly
completely written iOS app that allows the home page to load much more quickly, scales
to the different number of iOS screens more efficiently, and is readable in all 31 languages
in which Pinterest is available. According to Pinterest co-founder Evan Sharp, the smart-
phone is the platform Pinterest focuses on when it develops new features and products.
International expansion continues to be a major area of focus. Pinterest introduced
its first localized site, for the United Kingdom, in 2013, and it is now available in 31
different languages. Pinterest is aiming to make its platform feel more regional, focusing
specifically on the United Kingdom, France, Germany, Japan, and Brazil. In 2017, about
60% of its monthly active users are located outside the United States. Looking to the
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future, Pinterest believes that international expansion will provide it with the greatest Once Again,” by Jack Marshall,
Wall Street Journal, May 2, 2016;
growth opportunities. “Pinterest’s Plans for World
Despite all the good news for Pinterest, there are some issues lurking just behind the Domination,” by Lara O’Reilly,
Businessinsider.com, April 28,
scenes that may cloud its future, such as the issue of copyright infringement. The basis of 2016; “Pinterest Is a Sleeping
Pinterest’s business model involves users potentially violating others’ copyrights by posting Giant – Don’t Underestimate It,”
by Madjumita Murgia, Telegraph.
images without permission and/or attribution. Although Pinterest’s Terms of Service puts co.uk, April 28, 2016; “Pinterest
the onus on its users to avoid doing so, the site knowingly facilitates such actions by, for Launches Promoted Pins Interna-
tionally, Starting with the U.K.,” by
example, providing a Pin It tool embedded in the user’s browser toolbar. Much content on Paul Sawers, Venturebeat.com,
the site reportedly violates its Terms of Service. Pinterest has provided an opt-out code April 7, 2016; “Final Update on
Boffoli Case Against Pinterest,”
to enable other sites to bar its content from being shared on Pinterest, but some question Ipforthelittleguy.com, March 26,
why they should have to take action when Pinterest is creating the problem. Another thing 2016; “With Buyable Pins,
Pinterest Lets You Buy Stuff Right
Pinterest has done to try to ameliorate the problem is to automatically add citations (at- in the App,” by JP Mangalindan,
tribution) to content coming from certain specified sources, such as Flickr, YouTube, Vimeo, Mashable.com, June 2, 2015;
“Why $11 Billion Pinterest Thinks
Etsy, Kickstarter, and SlideShare, among others. In 2013, it entered into an agreement It Has the ‘Best Kind of Business
with Getty Images in which it agreed to provide attribution for Getty content and pay Getty Model’,” by Jillian D’Onfrio,
Businessinsider.com, May 19,
a fee. Pinterest says it complies with the Digital Millennium Copyright Act, which requires 2015; “Pinterest Doubles Down on
sites to remove images that violate copyright, but this too requires the copyright holder Making Money, Rolls Out Video
Ads,” by JP Mangalindan, Mash-
to be proactive and take action to demand the images be removed. Christopher Boffoli, a able.com, May 19, 2015; “Pinterest
well-known photographer, filed a federal lawsuit against Pinterest in late 2014 alleging that Beefs Up Security with Full HTTPS
Support and Bug Bounty Program,”
Pinterest users used his photographs without his permission and that Pinterest failed to take by Jordan Novet, Venturebeat.com,
adequate measures to remove them. In 2015, Boffoli agreed to dismiss the case, presumably March 13, 2015; “Fighting Spam
at Pinterest,” Engineering.
as part of a confidential settlement with Pinterest, leaving the legal issues raised unresolved. pinterest.com, February 20, 2015;
Pinterest is also not immune to the spam and scams that plague many e-commerce “Pinning Down Pinterest:
Addressing Copyright and Other IP
initiatives. Security analysts believe Pinterest will have to adapt its systems to deal with Issues,” by Jennifer L. Barry,
scammers and warn users to be wary of requests to pin content before viewing it and to Lexology.com, October 22, 2013;
“Pinterest Gives Copyright Credit
be suspicious of “free” offers, surveys, and links with questionable titles. Pinterest has to Etsy, Kickstarter, SoundCloud,”
acknowledged the problem and has promised to improve its technology. In 2015, for by Sarah Kessler, Mashable.com,
July 19, 2012; “Pinterest Releases
instance, Pinterest migrated its website to the HTTPS protocol, which provides more Optional Code to Prevent
security than the more common HTTP protocol typically used to access web pages. Unwanted Image Sharing,” by
Andrew Webster, Theverge.com,
Pinterest also employs a system known as Stingray that enables it to quickly react to spam February 20, 2012; “A Scrapbook
and other types of malicious behavior, and has created a program that pays a bounty to on the Web Catches Fire,” by David
Pogue, New York Times, February
white hat hackers who discover security issues. 15, 2012.
At the moment, however, the future looks very bright for Pinterest. Although it
may encounter some future obstacles along the way, it has begun to generate significant
revenue (estimated at over $500 million in 2017), and is reportedly gearing up for an
initial public offering in the new future.

Case Study Questions

1. Why does Pinterest view Google as its primary competitor?

2. Why does Pinterest focus on the smartphone platform when it develops new
features and products?
3. Why is copyright infringement a potential issue for Pinterest?

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