Nonetheless, once the story broke that Pinterest was quietly making money off its users (the horror!), the company started to backpedal on its practices. That reached full bloom in a Wall Street Journal article yesterday in which various Pinterest parties (CEO, board member) fell all over themselves to declaim that the company knew anything about making money.
"Pinterest's monetization strategy isn't in the oven and it's not even
off the baking table. We have one
hundred ideas but no execution as of yet," Jeremy Levine, a board member of Pinterest
and a venture capitalist at Bessemer Venture Partners, told the WSJ.
Ben Silberman, Pinterest's CEO, struck the same "Money, well, golly?!" chord. "My hope is that if we build a service that a lot of people use to
plan and discover things, that will be really valuable," Silberman said.
Now, all of this is pretty standard Silicon Valley speak. They pretend that they don't care about making money off of users and we users pretend that we aren't the product. It's all about "building value" and "creating a better experience" and all that. Which is fine and good. I find the Valley's deep and starry-eyed belief that money flows to all the right people to be very endearing.
But let's get real here: Silberman's company had been happily using and making money with SkimLinks for 2 YEARS. Then, suddenly, $37 million of venture capital falls into their hands and suddenly all they care about is building that "a lot of people use to plan and discover things."
An anonymous source also told the WSJ that the company, VC-valued at $200
million, "isn't yet making much revenue and is unprofitable" and
furthermore, "affiliate marketing isn't a major part of Pinterest's
right now, according to the company and its venture capitalists."
This is a bit strange because:
1)We know Pinterest is driving truly massive traffic to retail sites, by some accounts more than YouTube, LinkedIn, and Google+ combined. It is, after all, a platform that's perfect for shopping!
2) We know Pinterest used SkimLinks to add affiliate links.
3) Affiliate links generate revenue.
Should this add up to chump change? Let's do the math just to get an order of magnitude estimate.
Commissions on sales for affiliate links vary widely, but they average around 5 percent. After SkimLinks cut, that'd be 3.75 percent (although SkimLinks says they can sometimes negotiate deals that would keep the percentage closer to the original number).
So, Pinterest has 10 million users. Let's say that the average across all of them is that they buy items valued at $10 in a month through affiliate links on Pinterest. That's $100,000,000 of sales for which Pinterest would get credit. That's $3.75 million in monthly revenue, or $45 million of annual revenue.
Is that going to make you the next Facebook? It doesn't look like it when your user base is 10 million. But what about when the site has 100 million users? Assuming revenue scales linearly, affiliate revenue would stand at $450 million. And if the site had 800 million users like Facebook? That revenue would go to $3.6 billion, just $100 million less than Facebook's 2011 haul.