Is the 2.5 Billion Pinterest valuation crazy?

This week there was some shocking news from digital scrapbook site Pinterest- a 2.5 billion valuation and a 200 million funding round. Are these just crazy numbers for a site that has no ads, no dues, and no announced projected revenue source?


Pinterest is now worth more than publicly traded Internet companies Zynga Inc. (ZNGA), Yelp Inc. and Pandora Media Inc., even though it has yet to generate revenue.

Just my humble opinion as one marketer who's been through the boom and bust here in SF: not crazy at all. Want to know why?

  Because Pinterest is beautiful, easy and useful.

I got on Pinterest here at T324, because our wiki guy said he was getting a lot of Twitter followers through Pinterest. And I fell in love.  I found myself obsessed, enchanted, delighted by the collections of beautiful images endlessly scrolling before me. And notably, they scroll fast and smooth, especially for a site that's scaling so quickly.

Am I the core demographic? Yes, but that demographic is shifting.

A critical strategy for social media marketing is to have a presence on a site your audience will frequent before they get there.

With 15% of internet users now using Pinterest, only 1% less than Twitter, do you want to be behind the curve?

You can see a great infographic about Pinterest users here, pinned to our Business Tips board. Pinterest is infographic heaven, and lots of tech service businesses and content producers are staking out ground.

According to Nielsen’s 2012 social media report, at the close of 2012 Pinterest was the year’s most distinguished social network: the company experienced a 1,047% increase in unique PC-based visitors. Compared to the 80% and 55% changes in Google+ and Tumblr respectively, that percentage change is astronomical.

There is no learning curve for Pinterest- if you're on it, you're using it.

It's absurdly simple, and missing some key search and organization features. The 200 million funding round will pay for engineers to keep up with the insane, unprecedented scaling demand.

Hopefully they'll also smooth the new navigation rollout, and add basics like more granular search. Users can't yet search their own pins or move pins on a board, which seems ridiculous.

Yet that hasn't stopped the site from hitting over 10 million monthly unique US visitors faster than any standalone site in history.

Soon it will be time for Pinterest to monetize all that traffic, and it seems likely that they'll use ads and branded pins to do it. I think that's a terrible idea.

While I find the 2.5 billion valuation entirely reasonable for a site with this kind of growth, users love Pinterest for its beauty and its personal inspirational/aspirational value. Ads will jank that right up. Personally, I'd love to see Pinterest go the Freemium route.

Pinterest already has something to sell to its users, who are overwhelmingly prosperous and educated and likely quite happy to pay- features like more secret boards.

I'd love to have a dozen more, myself, and I'd pay, oh, $20 a year for it, starting today. The same amount I pay for Flickr Pro and for my ancient Hotmail account. That's a nice little chunk of change, if 1% of the 11 million users kicked in- and that's on the low side for freemium conversion. But not in the "worth 2.5 billion" range.

Charging businesses when links to their products get click-through could drum up some more revenue without maiming the site's beauty. So could the unpleasant Facebook "fan hostage" model, where you charge businesses to show their own boards to their own fans. Nasty as it is, it's better than ads.

If I was an expert at site monetization, I'd have other ideas.  But I'm only a Pinterest lover who doesn't want ads in my feed, and I'll probably just have to suck it up.

Oh- and as far that valuation goes, what about the Instagram Suicide Note problem? What exactly are Pinterest's Terms of Use?

Changes made last year removed a disturbing placementof the word "sell" that implied Pinterest could profit from the creative content of users.

But the Terms still state that Pinterest can "modify User Content for any reason" (a frightening idea for artists), and that both Pinterest and its users can "create derivative works" from your content, even if only within the Pinterest environment.

Also, if you terminate your account, your content stays with Pinterest, and they and all users can continue to do everything they could with it before.

That's a pretty big deal. So think carefully before putting content on the internet, right? And think before investing in companies like Pinterest, if you have a spare mil, because the valuation the user giveth, the user can take away.