I think Pinterest is in a great condition ... at this time.
Like they have tons of users who religiously use their product, and it's actually coupled with intent to buy, which makes monetizing easy.
However, you can't change the fact, that pinterest is riding on a "trendy" wave right now. There is not a whole lot that keeps you threre. Just in two years, there can be another spot where all the women in world woo about their lives.
It's an inherent social problem which accounts for the so far pretty short lives of social companies. You gotta have to be able to tie/commit your users much like Facebook does (owning your diginal private life).
This is just one data point, but my mom and I run a cooking blog that makes a decent amount of money from the Amazon affiliate program, and people from Pinterest definitely come to her site with an intent to buy. Given how much money we making from Pinterest visitors, it doesn't seem crazy to think that they could figure out a way to monetize their user base.
The amount of ideas my wife, her sister, and many other women in their lives get from Pinterest is amazing. It's a household name now in our family. From birthday gifts to children's crafts, I'd venture to guess
at least 1 idea every 1-2 days.
There's something there in terms of monetization. I'm just not sure what yet.
It is worth pointing out they are using AWS. Gave a really interesting talk at PuppetConf '12 . Talks about the stack and how they use it. Seems they used AWS to their advantage, to keep up/ahead of the hunger for computing power.
It depends on your criteria. Many people on here like to discuss sustainable businesses. Being acquired prior to reaching profitability is obviously a huge hit for the entrepreneurs, but it's irrelevant to the other conversation.
Pinterest as compared to Instagram is better deserving of this kind of valuation, I think. Their product is so good (pretty much a picture focused front-end) that thousands of others (myself included) have copied. And it works, brilliantly.
I'm confident that they can drive sales... however, can they do something interesting with that.
The "where is the revenue?" line is tired when talking about Pinterest. Unlike sites like Instagram and Facebook it's pretty obvious they can start making a shitton of money at any time. The biggest question is how sustainable this product is. People focusing on revenue for a product like Pinterest are missing the point: I would want the company to be focused on growing the user base, not toying around with revenue models at this point.
They have purchase intent up the wazoo. They could cut a rev share deal with one or two of the big vendors easily. They could add paid placements. They could cut affiliate deals on behalf of their curators. They could add a payments system for people to directly purchase items they browse on Pinterest. Etc etc
Pinterest is in a great spot. Everybody pins products - they'll be able to monetize. I'm betting this'll be a decent investment. I see why Tapiture is doing the same thing for the men's market here in LA http://wp.me/p1fNUP-gK
$200m is a lot to throw at a company that only has a lot of users.
They have little to no revenue at this point and no current revenue streams that point to being able to generate anything worthy of a $2.5b valuation. I guess my point was that I'd like to know what revenue streams they are anticipating creating that would warrant such a high valuation.
The investors at this stage still don't care about revenue. The main question is whether or not they can flip the investment to some other firm later (that is to say, will the picture look rosy enough in the future that someone else will buy in at a higher valuation).
Revenue starts to matter in the last round before the IPO (if it goes that route). If the sequence ends in an acquisition, revenues won't really matter..
Pinterest is millions of people freely marketing consumer products to each other. The potential for both referral commissions and data mining is huge. Reddit is a fancy meme and porn sharing forum (the main subreddits dwarf all the 'intellectual' ones combined), which few advertisers are interested in, and which has been unable to produce enough revenue to maintain more than a skeleton staff with self-serve ads and premium accounts.
This is a complicated question with many angles. First, Reddit is now apart of bigger company. Obviously, this changes anything to do with valuation. Do investors want a "piece" of a company that is within a bigger company? Maybe, but if they do the valuation is going to be a lot lower compared to if Reddit was independent.
The other issue is that Reddit makes money therefore the valuation is based on earnings. Their earnings might be low for the amount of traffic they get. Sometimes it's better to not generate any money because the valuation would be based solely user growth+engagement.
With this being said, if Reddit was an independent company then they too would have a crazy valuation. I am sure the founders think they sold way too early but at the time, it was the best option. Kudos to the buyer who didn't let it enter the M&A dead pool.
If they were an independent company and didn't have any revenue history to go by I think they would be worth more. Part of the Pinterest valuation would be speculating on how much they could generate through various forms of advertising.
If you accept that facebook was worth $100 billion, and if you accept that instagram was a credible threat to facebook, then it follows that instagram was perhaps worth 1% of facebook. Reddit is not facebook's or google's threat so its valuation is not based on a big company's valuation.