
Pinterest Raises $100 MM at $1.5Bn Valuation - forgot_password
http://allthingsd.com/20120516/exclusive-japans-rakuten-wins-the-heart-of-pinterest-founder-in-funding-race/?mod=tweet
======
cletus
Well I'm going to head off the predictable and boring "bubble" comments and
say this:

Pinterest has real value and a clear path to monetization through affiliate
and/or advertising revenue. It's really a stupidly simple idea (essentially
scrapbooking on the Web) executed incredibly well.

Is it worth $1.5B? I don't know. I would say it's definitely worth more than
Instagram for whatever that's worth (not a lot). I guess we'd need stats on
number of active users, engagement and revenue to make that determination--
something we're not likely to get.

The only concerning point to me is that that it's foreign money, only because
foreign money seems to be less discerning, at least based on DST and similar
investments.

Anyway, congrats to the team. They've done exceptionally well.

~~~
strlen
The other interesting part about Pinterest is that they mostly gained traction
outside of the traditional early adopter segments.

Not sure any what's the right way to value this kind of company: obviously if
it was an established public company, a $1.5b figure might be scary (as far as
I understand Pinterest does not yet have revenue). However, it isn't: venture
capitalists valued it this high, in the hopes that there's a realistic
(compared to similar companies, funded at the same stage) chance that they
will have a $7.5b-$15b exit.

It _would_ be a sign of bubble if Pinterest were to go public without revenue
(which has happened during the 1990s) , with pension funds (that have a very
different risk/reward profile from VCs) buying the shares. You could say "it's
1999 again" if as a result Sun (hey anyone remember them?), Cisco, and Oracle
stock rose exorbitantly as a result of Pinterest buying a record number of
servers, routers, and commercial databases (hey, remember when companies used
to do that?) and their shareholders expecting (with great certainty) that
there will be more and more companies like Pinterest sprouting up, i.e., that
sales will keep growing.

I've only caught the tail end of the bubble (I had an internship in a startup
junior/senior year of HS, 2000-2002 -- and participated in SVLUG, meeting
folks who worked for Webvan, RedHat, Va Linux, et al).

I still remember just how differently it felt from today: for starters you
couldn't drive from Sunnyvale to Fremont (over the bridge) without being
completely stuck in traffic (as early as 3pm, and as late as after 8pm), and
without driving past at least 3 or 4 Sun campuses.

Nowadays: there is still commercial real-estate in that area that is empty
(including the former Sun East Bay campus, where manufacturing happened), the
Dunbarton Bridge is fairly traffic-free even during the rush hour.

~~~
k-mcgrady
>> (as far as I understand Pinterest does not yet have revenue)

They use a service which scans all links on the site and where possible
converts them to affiliate links (they don;t change affiliate links users have
set). So if someone pins an Amazon product and another user clicks through and
buys that Pinterest is getting a cut. So Pinterest is already making money. I
have no idea how much but it seems like it could provide a decent revenue
stream.

~~~
andrewhillman
I think they stopped using skimlinks a few months ago.

~~~
joshuahedlund
And they started stripping user affiliate links (at least to amazon) about a
month ago (aka soon after the story came out about the guy spamming pinterest
for thousands a day). I know, it's hard to keep up!

------
petercooper
2005: Yahoo acquired Flickr for $35m, Delicious for $15-20m; 2012: Pinterest
is now valued at $1500m, Instagram at $1000m.

I'd rather have 75 del.icio.us's than 1 Pinterest but.. I readily admit I'm
getting old ;-) So my question is, did the folks 7 years ago get a bad deal or
are the valuations now over the top?

~~~
runako
>> did the folks 7 years ago get a bad deal or are the valuations now over the
top?

More likely Option 3: Vastly more people are connected to the Internet, which
now has far superior paths to monetization.

~~~
petercooper
I imagine there is some of that involved but perhaps more importantly is the
overall _usage_ of the Internet by those people (i.e. time spent online, using
mobile devices, etc)?

On the people count front, Google's numbers show %-wise between 2006 and 2010
we went from 68.21% to 79.3% population wise (and population generally went up
4%) so there was a growth in the user base but not one to justify 40x growth
in value on similar headlining companies IMHO.

~~~
runako
I think we may be talking about two different sets of numbers. It sounds like
you're quoting GOOG's penetration into US (or OECD) total population. (I'm
guessing from the percentages.)

I'm saying that the aggregate number of people using the Internet has grown
much, much faster. I don't have exact numbers handy, but it's certainly
possible that the total Internet population has grown more than 100% over this
period.

You also raise an interesting point about frequency of usage, which would also
contribute to valuations.

In 2012 it doesn't require huge leaps to see how a company Pinterest rapidly
could get to revenue numbers that support this valuation. At YHOO's current
revenue-multiple-margin mix, this would imply revenues of around $400m-$500m.
I don't know what their revenues are now, but given their growth and reach I'd
be surprised if investors didn't pay a higher multiple for Pinterest than for
YHOO.

~~~
jarek
Total number of people using the internet seems like a questionable metric for
valuating U.S.-based internet startups, most of which (understandably given
their business stage) focus primarily on the U.S. and maybe OECD for feature
development, user base growth, and monetization. It's currently a bit
laughable to imagine Pinterest monetizing their Nigerian and Indonesian user
bases. Is there any particular datapoint that would lead us to believe their
userbase significantly extends or will extend beyond the OECD?

It's like valuating a paper products company by the total number of people in
the world. Sure, they all might be able to or even want to use a paper
product, but what's important when making the call is the company's ability to
sell to them while still making money.

~~~
robryan
People are also far more comfortable spending online now, this helps both in
directly monetizing users an the amount people will pay for ads.

------
mtjl79
Normally I am not one to comment on fundraising, and I have stayed out of the
whole "bubble" debate. But, honestly, this is really getting a little out of
hand now. The whole funding situation is getting really frothy.

$1.5b pretty much prices them out of any real acquisition now for the most
part. So is Pinterest going to go IPO?

Where do they go from here? That's the question of the day.

~~~
fruchtose
I think the natural path for Pinterest will be to merge with Groupon, another
shopping-related site and one that has survived an IPO--at least for now. This
new site will combine the deals of Groupon with the design of Pinterest. Users
will coupons, which are automatically pinned to the appropriate boards with
automatically chosen photos.

Of course, Pinterest is all about design, which is why Groupon will also have
to acquire Instragram. This will allow the merged company to select the right
photo for any coupon and, if necessary, saturate the yellows, unfocus the
background, and add a creatively misaligned border. That night your friends
enjoyed the half-price alcohol they bought at Jerry's Drive-In Liquor will
look extra cool when the photo has been processed through the "1977" filter.
And on the plus side, Groupon/Pinterest/Instagram gets to keep it for their
next liquor-oriented deal, giving them free advertising material. It's too
early to tell what this new supergroup of startups will be called, but I want
some credit if it becomes Groupstagram.

I'm only half-kidding, of course.

~~~
CharlieA
I don't know about the half kidding...it seems like you might legitimately be
on to something there in the area of private deal "experiences" for you and
close friends.

But I'm thinking, more so than Pinterest it's closer to "Path" where you and
your small network of close friends collectively get a deal (at Jerry's
liquor, lovely example) then post cute photos of your night/experience (sans
the trip on the porcelain bus) which become public on "Jerry's Drive-In
Liquor" or whatever, and exposes the deal to other people in the private
networks of those who were in your private network... a sort of "local viral"
marketing effect which works as advertising and as the regular "look how
awesome my saturday night was" that we (what? just me?) use Facebook/Instagram
for anyway.

I think it perfectly combines the innate desire to show off and receive value
while maintaining an air of exclusivity plus the whole validation thing, from
strangers and friends alike.

------
ricardobeat
Serious question: how does a company like pinterest spend $100 million? That's
enough money to keep SpaceX running for an year, hundreds of engineers
building space rockets.

They don't seem to have, or need, a sales force. They hire mostly developers
and designers, and I imagine having hundreds of them isn't of much use unless
their service will change radically in the future. Ideas?

~~~
moocow01
I'd imagine a notable chunk is likely going to servers and infrastructure
costs and another chunk will be reserved for current or potential legal
expenditures.

But yes I agree its hard to understand how they are able to put all of that
money to work - probably a lot goes into an "emergency fund".

~~~
frabcus
Acquiring competitors, international expansion, a team to do deals with
ecommerce sites.

------
abijlani
The justification for this frothy valuation is that somehow they will turn the
browsers of pictures into buyers of products. It is a difficult task and wish
them luck but I still don't understand why they would need $120 MM to
accomplish it.

~~~
fusiongyro
"Turning the browsers of pictures into buyers of products" is an excellent
turn of phrase, but I think it kind of misses the point. In actuality,
Pinterest is about to become the HSN of the internet. It plays to all of
Facebook's weaknesses:

\- Pinterest makes money on sales rather than ads, through referral links

\- Pinterest makes identical money on users with accounts and anonymous users

\- Pinterest has exactly the users who have money and want to spend it

\- Pinterest runs on greed, envy and materialism rather than lust and boredom

It will be interesting to see how it plays out. They've already had a big
setback in that they were rewriting or inserting referral links and they had
to stop. I'm not sure what the conception is moving forward, but I'm sure
$120M will help them figure it out. Unlike a lot of the other big names being
bandied around now, there is a sense that they're trying to build a company
rather than find the fastest largest way to sell out.

------
cageface
I think this really cements the notion that design is king now. Just about all
the big startup hits lately are way more about design than any serious
engineering. Sure there's some smart people making things like Facebook scale
but the new crop of winners are all about UI.

~~~
ErikHuisman
Consumer focused products are about user experience as it should be. Serious
engineering can only help achieve this goal.

------
jacktea65
Pinterest got this valuation because their story is that it's related to
ecommerce. The thing is it doesn't seem like that's turning out to be very
true at all.

It seems like what has made Pinterest really successful is that it's basically
9gag/tumblr photo/meme sharing. If you look at their content it's mostly of
that type.

Products seem to be a relatively tiny portion of the content. I'm sure they
can make a nice chunk of money off that content, but it's unlikely to be a
really big business I think, especially if their content skews more and more
towards memes/photo sharing which it has been.

I think we'll look back on Pinterest as an over-hyped fad I'm sorry to say.
People love to rag on it but Groupon will probably look very good in
comparison.

~~~
koeselitz
A counterpoint:

Lately there's been a lot of discussion about some difficulties Facebook has
had in the advertising sector. Jason Bigler of Google was snarking about this
earlier today. [1] I realize this is largely because all the snarks come out
of the woodwork before an IPO, but to a certain degree - they're right.
Facebook just isn't a place that puts people into a "transactional mindset."
People go to interact, and they kind of seem to like pictures, but only
insofar as they're sharing pictures that are (a) funny or (b) very personal
and of themselves or their pets.

Pinterest is different. People go on Pinterest to look at pictures of stuff
that they like or that they think is cool. Yeah, I can't get into the
Pinterest thing either, but I know a few people who do, and I have to say that
that model - getting people to amass collections of stuff they think is neat
or cool - is much, much more likely to put people in an buyer mindset than
most social networking models.

And as a few people have shared above, it seems as though advertising on
Pinterest has a lot of momentum; many companies have reported extremely good
results. My feeling is that this will continue. The whole metaphor of
Pinterest seems to be extremely similar to shopping and acquiring - collecting
stuff, putting it on your page, browsing other people's collections.

[1] [http://www.businessinsider.com/gleeful-google-exec-takes-
a-s...](http://www.businessinsider.com/gleeful-google-exec-takes-a-shot-at-
facebooks-lousy-ad-business-2012-5)

~~~
cageface
But are people posting photos of the kinds of things that sell in large
volumes and generate a lot of revenue? The attraction of a lot of these sites
is that they initially feel like a cosy insider community but that feeling
fades fast as they become mainstream. This is happening to FB already.

Are people going to be posting and clicking on pictures of ketchup or cleaning
products or life insurance policies?

~~~
koeselitz
Given the (sizeable) advertising contracts Pinterest has already landed,
people are posting and clicking on pictures of awesome clothes they like and
might want to own, and other luxury stuff like cooking utensils; movies and
books also seem to be pretty popular, and I've seen a lot of character
diagrams from TV shows and fantasy series.

Yeah, there are certainly random things like ketchup and cleaning products and
life insurance policies that don't lend themselves well to selling via images
on the internet. But that has nothing to do with Pinterest; and given some
time, somebody will probably figure out the angles for life insurance and
ketchup.

------
koeselitz
Facebook got a $15B valuation from investors including Microsoft way back in
2007 [1] when they had only 50 million users (MySpace had 100 million users)
and absolutely no advertising infrastructure in place whatsoever; they got
this valuation and made $240 million in investor funding before they'd made a
penny directly in advertising.

Meanwhile, Pinterest already has amassed well over 10 million users in a very
short time, sees enough hits daily to be a top-ten social networking site, and
already has a number of advertising arrangements, particularly with retailers
like the Gap and Nordstrom.

If this is a bubble, it's been around for a while; and this doesn't seem like
the most sterling example. If anything, this is less stunning than valuations
of tech companies we've been seeing for many, many years.

[1]
[http://www.wired.com/techbiz/startups/news/2007/10/facebook_...](http://www.wired.com/techbiz/startups/news/2007/10/facebook_future)

~~~
bentlegen
That $15 billion number was inflated. It was valued at $10 billion in January
2009, at which point it had "made a penny directly in advertising". It also
had 175 million users the following month, or 17.5x the number of users of
Pinterest.

<http://online.wsj.com/article/SB124335674958054943.html>

[http://www.insidefacebook.com/2009/02/14/facebook-
surpasses-...](http://www.insidefacebook.com/2009/02/14/facebook-
surpasses-175-million-users-continuing-to-grow-by-600k-usersday/)

~~~
muhfuhkuh
So, pricing it around 1/10th the price for 1/17th the users is execessive, but
it should be worth at least a billion, right?

~~~
Travis
All else equal, maybe.

You know what screams "bubble" to me? Everyone defending valuations by
comparing the company du jour to Facebook.

It's like arguing that Webvan wasn't overvalued because Amazon.com has been
successful. Unless a seriously meaningful connection between Facebook and
Pinterest is drawn, the comparison is meaningless.

------
nchuhoai
Two points people should be thinking about:

Yes, Pinterest has a good monetization scheme compared to Facebook
(<http://cdixon.org/2012/05/15/facebooks-business-model/>), because of the
natural placement of affiliate links and purchase intent.

But, Pinterest is so new (relatively), we don't really know whether it's just
a fad or something to stay and I oftentimes feel like that risk of being
replaced or simply forgotton about is not taken into account. We have seen
dozens of growing companies that ended up nowhere, the sheer number of users
just covers that up these days.

~~~
notatoad
>But, Pinterest is so new (relatively), we don't really know whether it's just
a fad or something to stay

i think we can confidently say that it's a fad. social content aggregators
don't last. it's just a fact of the industry. kudos to pinterest for
collecting some cash while they're hot, but it's only a matter of time before
they go the same way as all their predecessors.

~~~
emmett
Would you care to set any kind of specific timeline on your very confident
sounding prediction? Put your (reputational) money down?

------
cheebla
Anyone have any insight on what they're gonna spend it on?

I don't know anything about valuations but why would a company like Pinterest
need 100 million dollars cash?

------
ironchief
Numbers for thought

Playing a thought game, let us say the money is supposed to last 18 months
till the next round (with a higher valuation!?) Let us also assume engineers
cost a flat rate of 100,000 per year.

120,000,000 dollars / 1.5 years (18 months) / 100,000 per engineer per year =
800 engineers for 18 months or 400 for 3 years

Pinterest: 31 employees <http://pinterest.com/about/team/> 2.9 million DAU
(Daily active users) 11.4 million MAU (Monthly active users)
<http://www.appdata.com/apps/facebook/274266067164-pinterest>

Instagram: 13 employees 2.0 million DAU 16.8 million MAU
[http://www.appdata.com/apps/facebook/124024574287414-instagr...](http://www.appdata.com/apps/facebook/124024574287414-instagram)

They must envision hyper growth continuing ~14% a month (to see 10x increase
over 18 months).

~~~
emmett
You're missing monetization. I love instagram, but it's a lot harder to
monetize than a service which amounts to a giant online shopping guide.

------
sparknlaunch12
So essentially, if you can create a community with enough followers, referrals
and photos you can make a billion dollar company.

They suggest Pinterest will use the money to expand internationally. What does
this mean? Buy infrastructure internationally or just pursue overseas
advertisers?

If anyone is interested in building Hacker News with photos get in contact.

~~~
joering2
> If anyone is interested in building Hacker News with photos get in contact.

I think you are totally not getting whats the value in HN. Seriously, do you
see at least one picture on this site, except their logo?

If anything, it would be interesting to see Pinterest for HN comments. So
often I miss out reading amazing comment because I either skip it or did not
come back to the board when it showed up. Perhaps an idea where hackers could
"pin" awesome comments to their boards and then I could lookup hackers by
their karma (or karma/their lifetime here to see high karma on average per
post) and follow hackers that pin awesome comments (so I can read more amazing
comments in less time, with a "comb"), perhaps that idea would fly.

But not photos for HN for cry out loud.

------
akrymski
Sites like this seem to indicate there are tonnes of fake accounts on
Pinterest: www.buyrealpinterestfollowers.com

My guess is that the _majority_ of accounts are fake, and _most_ posts are
uploaded by spammers. However, this may be not much of a problem - like the HN
/ Digg / Reddit community the core Pinterest community is enough to rise the
"good" stuff to the top I guess. If "social filtering" does work better than
Google's algorithmic filtering and can't be gamed - Pinterest will succeed.

In some ways Amazon has had similar functionality for a while, called the
"wish-list". They could easily have build something similar based on their
existing data.

~~~
DanBC
I've not seen fake profiles or fake posts on my Pinterest.

Maybe the fakes are good enough to look real?

------
kingsidharth
So by this math, if I buy a company's 0.001% for $1000 its valuation becomes
$1B? huh!

~~~
BlackJack
Well if you bought a 0.001% stake for $1000, then the valuation would be
$100M, not $1B. You probably mean either $10000 or 0.0001%. Regardless, that's
the idea, yes. If a company had a million shares, and you bought one for
$1000, you're essentially saying that the present value each of those shares
is worth $1000, so the company is worth $1B.

------
sskates
For everyone talking about a bubble, 1.5B might actually be low. If you agree
that Facebook is worth about 100B, according to Alexa, Pinterest is about
1/20th of the size by uniques (by pageviews it's about 1/30th). 1/20th means
that Pinterest should be valued at about 5B, not 1.5B.

<http://www.alexa.com/siteinfo/facebook.com>

<http://www.alexa.com/siteinfo/pinterest.com>

~~~
johnrob
Interestingly, most bubbles end in a scenario where the decline of a popular
asset causes a domino effect through out the system. Silicon valley might by
in a 'facebook bubble' - we anchor all of our prices on facebook, and then
hope like hell that it isn't over valued.

------
giltotherescue
What about all the copyright holders, such as Getty Images, that are circling
the water, waiting for Pinterest to start making money so the rights holders
can charge licensing fees? Any business model they come up with has to factor
in the costs of legally acquiring all the photos they use.

------
vagarwa
1.go to pinterest.com 2.make sure, you are not logged in. 3.search 'food' With
all the money they have raised, can't they figure out a solution to this most
juvenile of spams!!! It of-course doesn't matter since they still managed a
$1.5BN valuation

------
barrynolan
Outside Facebook, Pinterest is the only app the my wife, and most of her
friends, use. It's not a tech early adopter story. And it has obvious
monetization given the taste graph its curating, and affiliate opportunities.

------
freshfey
Do the investors get to see the company's exact exact numbers (DAU, MAU,
Revenue, etc) before they invest? I assume they do, but wouldn't those numbers
get to the public somehow?

------
atularora
It is 100M. Not 120. AllThingsD corrected their headline

------
napolux
The word "bubble" (counting this comment) appears 12 times in this page :)

------
va_coder
Is it possible to short stock in a non public company?

~~~
marvin
Nope. It's not even possibly to buy any unless you're an accredited investor.

------
usatechie
Get the money now before it fizzles!

------
bbayer
sharing pictures always works
(imageshack,flicker,imgur,instagram,pinterest...)

------
pitdesi
If you want some justification, read this
[http://www.shopify.com/blog/6058268-how-pinterest-drives-
eco...](http://www.shopify.com/blog/6058268-how-pinterest-drives-ecommerce-
sales)

TL;DR - Pinterest drives as much ecommerce traffic as twitter with
significantly more purchase intent

~~~
rbn
I saw an interview with Gary Vaynerchuck in the Nordic eCommerce summit and
one of the things that stuck out for me was when he said that "Pinterest sells
more wine for them than Twitter and Facebook combined"

~~~
jacktea65
Is that like "my monthly revenues are 2000% month-over-month" when your total
revenues are $200?

~~~
redslazer
The thing is if your revenues are up 2000% month-over-month and you start with
$200 the next month you have $4000, then $80,000 etc. Those are pretty nice
numbers very quickly.

------
zbowling
I cheerfully await several more "Are we in a bubble?" blog posts to get posed
to HN shortly after this.

~~~
drivebyacct2
These days, I cheerfully await any flame or karma bait posts that can come
from any brand or celebrity name post. Bring on the "do(n't) learn to not use
semicolons on privacy-hating Facebook or ship-jumpinging Google and (don't)
hack Github" posts.

