Why does Pinterest view Google as its primary competitor?

Case Study 1 Pinterest: A Picture Is Worth a Thousand Words Like all successful e-commerce companies, Pinterest taps into a simple truth. In Pinterest’s case, the simple truth is that people love to collect things, and show off their collections to others. Founded in 2009 by Ben Silbermann, Evan Sharp, and Paul Sciarra and launched in March 2010, Pinterest allows you to create virtual scrapbooks of images, video, and other content that you “pin” to a virtual bulletin board or pin board on the Web site. Categories range from Animals to Videos, with Food & Drink, DIY & Crafts, Home Décor, and Women’s Fashion among the most popular. Find something that you particularly like? In addition to “liking” and perhaps commenting on it, you can re-pin it to your own board, or follow a link back to the original source. Find someone whose taste you admire or who shares your passions? You can follow one or more of that pinner’s boards to keep track of everything she or he pins. As of April 2015, there were over 50 billion pins on Pinterest on more than 1 billion different boards.

© Blaize Pascall/Alamy

Pinterest originally positioned itself as a social network. Recently, however, it has changed its tune. It now describes itself as a visual bookmarking tool for discovering and saving creative ideas



(and potential purchases), with less emphasis on sharing with friends. Search has become the core part of its mission, with Google, rather than Facebook, Twitter, or Instagram, viewed as its primary competition.

In September 2015, Pinterest announced that it had reached the 100 million monthly active member mark. About 70% of those members are women, but men are its fastest growing demographic, growing by almost 75% in 2014. Pinterest is one of the “stickiest” sites on the Web, with women spending over 1.5 hours (96 minutes) per session, and men about 1.25 hours (75 minutes). According to a recent survey by the Pew Research Center, the percentage of online adults in the United States who use Pinterest has more than doubled since 2012.

Over the past five years, investors such as well-known Silicon Valley venture capital firms Andreessen Horowitz and Bessemer Venture Partners, hedge fund Valiant Capital Partners, and Japanese e-commerce company Rakuten have poured $1.3 billion in venture capital into Pinterest, with its latest round of funding in March 2015 valuing the company at $11 billion, more than double its 2014 valuation. Like Facebook, Twitter, and many other start-up companies, Pinterest focused initially on refining its product and building its user base, but not surprisingly, its investors have begun to push it to begin generating revenue. Pinterest’s first step was to offer business accounts that provided additional resources for brands. In 2013, it introduced Rich Pins, which allowed companies to embed information, such as current pricing and availability, as well as a direct link to a product page. In 2014, Pinterest took the official leap into the advertising arena, launching a beta version of ads it called Promoted Pins that appear in search results and category feeds. Around the same time, Pinterest also introduced a search engine, called Guided Search, which suggests related terms to refine a search. Guided Search is based on user metadata, such as board titles, captions, and comments related to pins, to create different categories and subcategories. In January 2015, Pinterest further enhanced Guided Search by allowing users to personalize search results based on gender. According to Pinterest, the number of searches has increased by 80% over the last year.

In 2015, Pinterest has gotten serious about monetization. In January 2015, it rolled out Promoted Pins to all its U.S.-based partners. Pinterest claims that these ads are perceived as less intrusive than ads on other social networks and that the average customer coming from Pinterest spends 50% more than regular customers. In May 2015, it added paid video ads (Cinematic Pins), with brands such as Unilever, Target, Walgreens, L’Oréal, Wendy’s and Visa among the first takers. Unlike Facebook’s autoplay video ads, Cinematic Pins display a short animation when the user scrolls down through the ad, and only play a full-length version when the user clicks on the ad, providing more user control over the experience. Pinterest also introduced new ad-targeting and pricing options. Advertisers can target users by interests, life stage, or persona such as Millennial, prospective parent, or foodie, and rather than being limited to paying for ads on just a pay-per- view or pay-per-click basis, can now also choose a cost-per-engagement (CPE) or cost-per-action (CPA) model. Using the CPE model, advertisers only pay when a user engages with a pin, such as through re-pinning, and with the CPA model, only when the user clicks through to a Web site and makes a purchase or downloads an app. Pinterest had previously partnered with Apple to introduce App Pins, which allows users to discover new iOS apps that can be downloaded directly from Pinterest.



In June 2015, Pinterest launched Buyable Pins, which allow users to directly purchase products by clicking a blue Buy It button within the pin, for its iPhone and iPad apps; versions for Android devices and desktop computers are still in the works. According to Pinterest, 30 billion of its 50 billion pins are buyable, from merchants both large (such as Macy’s, Nordstrom, Neiman Marcus) and small. Pinterest says its data shows that Buyable Pins are generating a significant percentage of brand-new customers for merchants.

The fact that Pinterest launched Buyable Pins on its iOS mobile platform rather than the desktop is just one indication of how important the mobile platform is to Pinterest. Pinterest provides apps for iPhone, iPad, Android, and Windows Phone, as well as a mobile version of its Web site using HTML5. Pinterest Mobile runs inside the smartphone’s browser rather than as a stand- alone program. Mobile has been a huge success for Pinterest, with 80% of its traffic coming from mobile devices in 2015. Pinterest releases a new version of its iOS and Android mobile apps every few weeks, enabling it to quickly test new features. According to Pinterest co-founder Evan Sharp, the smartphone is the platform Pinterest focuses on when it develops new features and products.

International expansion is another major focus in 2015. Pinterest introduced its first localized site, for the United Kingdom in May 2013, and it is now available in 31 different languages. Pinterest is aiming to make its platform feel more regional, focusing specifically on the United Kingdom, France, Germany, Japan, and Brazil. Currently about 55% of its user base is located in the United States, with 45% coming from other parts of the world. Looking to the future, Pinterest believes that eventually, a majority of its users will be from outside the United States, and that international expansion will provide it with the greatest growth opportunities.

Despite all the good news for Pinterest, there are some issues lurking just behind the scenes that may cloud its future, such as the issue of copyright infringement. The basis of Pinterest’s business model involves users potentially violating others’ copyrights by posting images without permission and/or attribution. Although Pinterest’s Terms of Service puts the onus on its users to avoid doing so, the site knowingly facilitates such actions by, for example, providing a Pin It tool embedded in the user’s browser toolbar. Much content on the site reportedly violates its Terms of Service. Pinterest has provided an opt-out code to enable other sites to bar its content from being shared on Pinterest, but some question why they should have to take action when Pinterest is creating the problem. Another thing Pinterest has done to try to ameliorate the problem is to automatically add citations (attribution) to content coming from certain specified sources, such as Flickr, YouTube, Vimeo, Etsy, Kickstarter, and SlideShare, among others. In 2013, it entered into an agreement with Getty Images in which it agreed to provide attribution for Getty content and pay Getty a fee. Pinterest says it complies with the Digital Millennium Copyright Act, which requires sites to remove images that violate copyright, but this too requires the copyright holder to be proactive and take action to demand the images be removed. Christopher Boffoli, a well-known photographer, filed a federal lawsuit against Pinterest in late 2014 alleging that Pinterest users have used his photographs without his permission, and Pinterest has failed to take adequate measures to remove them. How this issue is resolved may have a significant impact on Pinterest’s ultimate success.

Pinterest is also not immune to the spam and scams that plague many e-commerce initiatives. Security analysts believe Pinterest will have to adapt its systems to deal with scammers and warn



users to be wary of requests to pin content before viewing it and to be suspicious of “free” offers, surveys, and links with questionable titles. Pinterest has acknowledged the problem and has promised to improve its technology. In 2015, for instance, Pinterest migrated its Web site to the HTTPS protocol, which provides more security than the more common HTTP protocol typically used to access Web pages. Pinterest also employs a system known as Stingray that enables it to quickly react to spam and other types of malicious behavior, and has created a program that pays a bounty to white hat hackers who discover security issues.

At the moment, however, the future looks very bright for Pinterest. Although it may encounter some growing pains in the process of implementing its new business model, it has the potential to generate significant revenue based on advertising.

Case Study Questions 1. Why does Pinterest view Google as its primary competitor?
 2. Why does Pinterest focus on the smartphone platform when it develops new features

and products?
 3. Why is copyright infringement a potential issue for Pinterest?

Laudon, Kenneth C. E-Commerce 2016, 12th Edition. Pearson, 20160218. VitalBook file.



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