For five years, Pinterest has meticulously laid the groundwork to build not just a hugely influential social network but a massive commerce business.
And it appears the patience is paying off. The digital scrapbooking site has accumulated 100 million users who come back every month. It’s considered one of tech’s most valuable private companies, worth $11 billion by its investors. And with revenue starting to take off, 2016 looks to be the year Pinterest puts it all together.
Pinterest’s value is inherently tied to the fact it’s a natural fit for retailers. Unlike Facebook or Twitter, which respectively focus on sharing moments from the past and present, Pinterest is all about the future—specifically the things people want in the future. In its early days, it gained traction among women who used the digital scrapbook to “pin” photos and collect ideas for their weddings, dream vacations, and home-decorating projects.
Because of Pinterest’s aspirational nature, merchants are eager to work the social network to get in front of potential customers. A survey conducted by Shopify in May found that 96% of Pinterest users go to the site to research products before buying.
But it took Pinterest a long time to ramp up its commerce business. Part of the wait had to do with Pinterest’s perfectionist nature. Unlike Facebook, which operates with a “move fast and break things” mantra, Pinterest has exhibited an unwillingness to add or expand new features until it feels they are ready for primetime.
In June of this year, it finally rolled out its “buy” button—which makes it possible for users to purchase products they find on the site. Getting there took years of painstaking labor.
Before Pinterest could even start making money, it needed to solve a fundamental problem: discovery. For tech companies, helping people find new content—whether it be music on Spotify, shows on Netflix, or news stories on Facebook—is key to keeping them engaged.
From the start, Pinterest boards—virtual cork boards that organized pins by topics—have played a key role in discovery. While early pinners were willing to put in the effort to find new and interesting things, this was perhaps too much of an ask of users as Pinterest eyed global expansion. Because Pinterest is so heavy on visuals, unlocking discovery would require it to understand what people were pinning. In 2014, it acquired and shut down a startup called Icebergs to enhance its own computer-vision capabilities. This helped the company “see” the subjects of pinned images and make recommendations based on them.
That year, Pinterest also launched a feature called guided search, which helps users narrow down their queries to find what they’re looking for. For example, if someone typed in a broad term like “decorating” in the search bar, Pinterest can help refine that query by suggesting related terms, such as “dorms,” “farmhouses,” “master bedrooms,” and the like. In November, Pinterest also added the ability to identify and find products in pinned images, even if they’re not prominently featured, such as a lamp in the background of a photo. In December, it acquired a startup called the Hunt to further enhance its discovery technology.
All the while, Pinterest also needed to make its pins actionable. In 2013, it launched “rich pins,” which automatically pulled metadata, information like product pricing and availability, into the pins’ description. In May, it made a suite of APIs available for developers to build Pinterest integrations into their apps.
Pinterest didn’t start generating substantial revenue until 2014, when it formally launched “promoted pins,” its form of advertising on the social network. Early in its history, Pinterest had made some money off affiliate links but ultimately scrapped the program because it provided a poor experience for users, the company told Quartz in May. The affiliate links promoted “spammy behavior” and often directed users to outdated or nonfunctioning webpages.
If the company wanted to one day become profitable, it decided it had to control the entire experience, something that came on the heels of its enhancements to discovery and addition of rich pins. True to Pinterest’s perfectionism, it took eight months of beta testing before the site opened promoted pins to all its US partners in December 2014. It said this month that all US businesses will be able to buy ads on the social network starting in January 2016.
Last year, Pinterest reportedly brought in $25 million in revenue, according to investor documents reviewed by the Wall Street Journal. The same documents show forecasts of $2.8 billion in revenue and 329 million users by 2018. Though Pinterest has not verified the veracity of these documents and declined to make any executives available to Quartz for this story, the figures suggest the company is at the cusp of hockey-stick-like growth.
To continue its momentum, Pinterest in June launched buyable pins. Like regular pins, buyable pins, of which there are more than 60 million currently, can be found through Pinterest’s discovery technology. The company is also working to add search filters to help users narrow down products based on price and color.
Yet contrary to expectations, Pinterest has no intention to make money directly off this new product. Michael Yamartino, head of commerce for Pinterest, told Quartz in June that Pinterest will not charge merchants any fees or take a cut of sales. Instead, the hope is that buyable pins will ultimately buoy its advertising business. With merchants eager to convert Pinterest users into customers, the company firmly believes merchants will be willing to advertise to get their products in front of pinners.
There is, of course, much speculation on the next step for Pinterest: an IPO. Each new year brings fresh rumors that Pinterest might finally decide to go public, and it’s no different for 2016. But if Pinterest’s product roadmap is any indication, it appears the company is in no rush.