The latest Silicon Valley company to file an IPO is Pinterest, the San Francisco-based social media and image board that in recent years has built a huge advertising and commerce business from its growing user base. . The company, while not yet profitable, says it made more than $ 750 million in revenue last year, and has cut its losses from nearly $ 200 million in 2016 to just under $ 75 million annually. Pinterest says it was, in fact, profitable in Q4 2018, but not profitable enough to go offline for the entire calendar year.
The company, headed by original co-founder and CEO Ben Silbermann, plans to go public on the New York Stock Exchange. Joins horseback riding giants Uber and Lyft, on-demand delivery company Postmates, communications platform Slack, and hotel and short-term rental housing service Airbnb as one of the few Silicon Valley companies. planning an IPO this year (or next). Such an influx of money could drastically shake the Bay Area landscape by creating waves of new millionaires, an injection of capital that could reshape San Francisco and, as a result, the tech industry itself due to the effects it could have. in new companies and investments.
Pinterest, which launched in 2010, primarily makes money by attracting advertisers to its platform, where users create self-identifying dashboards of their interests and through which advertisers can test and sell products. Pinterest says its more than 250 million monthly active users have created more than 4 billion boards with a cumulative 175 billion saved pins. The platform itself has processed more than 2 billion searches, many of which Pinterest tries to process visually using machine learning-based methods such as object and image recognition.
Pinterest isn’t profitable yet, but it’s coming
Indeed, Pinterest does not compete so much with Facebook or traditional e-commerce sites like Amazon, but with search engines and search-based product advertising tools, as well as sites that curate products manually or algorithmically against which advertisers can. post ads. “We compete primarily with Internet companies that are tools (search, e-commerce) or media (news, videos, social networks),” writes Pinterest in its S-1 file.
“In this way, Pinterest is unique. “The company argues that most consumer Internet companies are tools (search, e-commerce) or media (news, videos, social networks).” “Pinterest is not a pure media channel, nor is it a pure utility. It is a rich media utility that meets both emotional and functional needs by solving a widespread consumer problem that is not addressed by many other platforms. We call it discovery. “
That makes Google one of its main competitors, but also more and more Instagram as Facebook moves to monetize its image-sharing network as a type of visual search engine that helps people find and buy products based on your interests and the interests of influencers and celebrities you follow. .
Pinterest describes a number of other obstacles it faces in the risk factors section of its S-1:
We are in the early stages of our monetization efforts and we are still growing and expanding our revenue model. Our growth strategy depends, among other things, on attracting more advertisers (which includes serving more advertisers from middle and unmanaged markets and expanding our sales efforts to reach advertisers in additional international markets), scaling our business with the existing advertisers and expand our advertising product offerings, such as self-service tools. There is no assurance that this revenue model will continue to be successful or that we will generate increasing revenue.
Pinterest also says that ad-blocking tools may, in the future, hurt your profitability. “Existing ad blocking technologies that have not been effective on our service may become effective as we make certain changes to the products, and new ad blocking technologies may develop,” the company explains.
To further complicate matters, Pinterest’s reliance on the biggest tech platform players. “Developers of web and mobile browsers, such as Apple, Microsoft or Google, may implement changes to the functionality of the browser or device that impede our ability to measure the effectiveness of advertising on our platform, including limiting the use of third-party cookies or other Tracking technology ”. Pinterest specifically mentions the changes Apple made to its Safari browser two years ago to reduce ad tracking.
At the moment, it is unclear how much money Pinterest intends to raise, making it difficult to monitor the company’s potential market capitalization. Investors have invested more than $ 1.5 billion in the company, with its latest valuation placing Pinterest at around $ 12 billion. According to The New York TimesPinterest’s main shareholders and those who benefit the most from an IPO are Bessemer Venture Partners, FirstMark Capital, Andreessen Horowitz, Fidelity Investments and Valiant Capital Management.