Heed the buzz and you may conclude that Pinterest is the next great social network — the next-best successor to mega-successes Facebook and Twitter.
But those two companies are generating substantial revenue for someone; in Facebook’s case, it’s for both the company itself and the countless businesses that use it. For Twitter, it’s a big hit for the businesses and publishers using it, and Twitter itself is slowly figuring out how to get results too.
We’re concerned with measurable results, not buzz. Does Pinterest have the same potential to generate real, trackable revenue for businesses the world over — including itself? Let’s take a look and find out.
How Pinterest Makes Its Own Money
Pinterest is still sussing out its business model (and these days business models are always evolving anyway) but at present the site’s main source of revenue is affiliate marketing. That means that sellers of merchandise either pay Pinterest a referral fee or give the site a cut of revenue or profits when an item is sold to a visitor that arrived at a digital storefront through Pinterest.
This was brought to public attention in February of this year; Pinterest uses affiliate marketing services to add tracking codes to product links on user-generated pins. While it’s a good practice for publishers to disclose these sorts of things, Pinterest didn’t — perhaps because it’s small enough that its team didn’t have the knowledge or time required.
Regardless, there’s a disclosure now. There are other monetization opportunities for Pinterest (the company’s on the record saying that it’s open to doing display ads at some point, though it hasn’t happened yet) but for now, the affiliate links are all you’ll find. Investors seem to think they’re a great start, though; Pinterest currently stands at a $1.5 billion valuation.
How Other Businesses Use Pinterest For Profit
In February of this year, measurement data by Shareholic showed that within its own sample, Pinterest drove more traffic to publishers than Twitter. Another study found that Pinterest referrals are more likely to make purchases. Jeffrey Zwelling of e-commerce marketing tracker Convertro also stepped forward to say that it was driving more revenue per click for his venture than Twitter, too.
Here’s how it works for publishers. Either readers or the publishers themselves can use “Pin It” buttons (an embeddable button you can place on your website) or just copy and paste web addresses into Pinterest’s interface to generate pins from an article. They can pick which image they’d like to pin; Shareholic notes that websites and blogs that cover home decor, arts and crafts, style and food perform the best.
Shareaholic noted that Pinterest drove 1.05% of traffic in its data, beating Twitter at 0.82%. For e-commerce, the numbers are more dramatic; Convertro reports that Pinterest accounted for 1.2% of social medie revenue for e-commerce sites in Q2 of 2011, but that it shot up to 17.4% in Q1 of 2012 — and the sky’s the limit, with projections for Q2 hanging around 40%.
Convertro tracked referrals from Pinterest (for example, from a pin in which a user shared an image of a clothing item with her friends) and determined that over all Pinterest generates over four times as much revenue per click as Twitter, and 27% more than Facebook.
Making Pinterest Part of a Complete Strategy
When building a tool for companies that are navigating social media for the first time, we knew that you should try your best not to build a business around just one social media platform; you need to be present everywhere that people are talking about your brand or your products.
Maybe Pinterest is a fad, but that doesn’t change the landscape today: Right now, it’s occupying the top of the heap with Facebook and Twitter, especially for publishers and digital storefronts within certain verticals. Take the time to add Pin It buttons to your website and deploy your own Pinterest account. Promote it in your other social networks. It’s clear that for the right kinds of businesses, measurable financial results can follow.
But don’t lose sight of Facebook and Twitter. It takes a cross-platform approach to market in a field driven by social media. If we’ve learned anything, it’s that you need to commit resources to social to succeed.