How can Pinterest make money? Interview with Semphonic

By Chris Lee

Social media sensation Pinterest continues to grow steadily and is proving to be a key referrer of traffic, redirecting more visitors to websites than YouTube, Google+ and LinkedIn. The site, which enables users to collect and share links that they like on the Web, now faces the challenge that used to be asked of Facebook and Twitter: how can it be monetised?

To learn how NMK spoke with Gary Angel of Web analytics consultancy Semphonic.

What makes Pinterest different?

According to Angel, Pinterest’s strategy is interesting as it runs counter to what he called the “island mentality” which he says most social networks create.

“Bottom line, Facebook and Twitter are happiest when you’re on Facebook and Twitter. And most social experiences are like that. They grow and flourish by creating an inward looking community,” he told NMK. “Pinterest, on the other hand, is driving huge amounts of referral traffic. Relative to its size, it is driving far more outbound traffic than platforms like Twitter or Facebook ever have, making Pinterest of special interest to the enterprise. Unlike Facebook or Twitter, Pinterest feels like it can be monetised by the enterprise. And if it can be monetised by the enterprise, surely it can be monetised by Pinterest?”

The challenge Pinterest faces

Angel believes that, unlike Facebook, which collects a fairly robust set of traditional demographic and interest information as part of users’ core profile, Pinterest has a collection of artefacts that may have very different levels of identification.

“When you pin something, the enterprise may know a great deal about that particular product but other enterprises, and Pinterest itself, may know next to nothing about it, which creates a real profiling challenge,” Angel explained. “This is important because it’s a combination of eyeballs and profiles that make a social platform interesting to the enterprise. Media dollars follow eyeballs, but they need to understand who those eyeballs belong to and what they are looking at to make ad-buying decisions. Building interesting marketing profiles based on Pins is a significant behavioural challenge, but it’s a problem that if solved, will significantly improve Pinterest’s monetisation opportunities – both on the ad side and, potentially, on the referring pass-off.”

Angel believes that Pinterest will also face challenges around content control. He cited the example of YouTube, which he said has been much less effective in monetising its service than rival site Hulu because serious advertising buyers want some degree of content control.

“Pinterest may not have quite the downside of YouTube but it lacks the upside of Hulu,” he said. “It is, at best, a content mishmash and the most obvious types of targeting may well leave a visitor viewing your ad next to a pinned product of a competitor. That’s interesting but not necessarily ideal.”

Pinterest’s unique selling point

Angel believes the biggest advantage Pinterest has over its competitors is the existing model of driving significant referrals. Pinterest can’t easily charge for those referrals, he argues, but it can add value to those referrals.

“One of the holy grails for most enterprise sites is to understand more about their anonymous visitors. Any enterprise worth its salt can find ways to understand their identified customers and optimise their experience. It’s much harder with anonymous traffic,” he said. “Given the high volume of referrals that Pinterest generates, we think there may be a monetisation opportunity to profile visitors during the pass-off. A standardised interest-based profile here would allow Pinterest to treat referrals almost as an advertising pass-off. They wouldn’t have to charge for the pass-off, they could charge for the Pinterest profile that could come along with it.”

This isn’t too different than Facebook’s strategy with Connect, according to Angel. But Pinterest has advantages that Facebook doesn’t because referring out to sites from Pinterest is a natural and constant function of the site.

“For the right kind of enterprise, the advantages of Pinterest as a marketing platform are obvious. If you have interesting or unusual products that appeal to the Pinterest demographics, you have a real shot at high marketing ROI (return on investment),” he argued. “Like any social channel, it takes a significant investment. But compared to Facebook or Twitter the ease of fitting Pinterest into a product-based ecommerce strategy is striking.”

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