How Does Pinterest Work And Make Money? Pinterest Business Model In A Nutshell

Pinterest makes money by selling advertising for marketers and companies that can gain visibility for their brands and more sales for their shops. In 2023, Pinterest generated over $3 billion in advertising revenue, with nearly 500 million monthly active users and a net loss of $35 million.

Business Model Element	Analysis	Implications	Examples
Social Media Platform	Pinterest operates as a visual discovery and social media platform where users can discover and save ideas for various interests, including fashion, home decor, recipes, and more.	Provides a platform for users to explore, discover, and organize content based on their interests. Attracts a user base interested in lifestyle, hobbies, and creative inspiration.	Users create boards and pin images, videos, and articles related to their interests, building a personalized collection of content. They also engage with other users by following boards and liking pins.
Advertising Revenue	Pinterest generates revenue primarily through advertising. Businesses pay to promote their content, products, and services to Pinterest users through sponsored pins and ads.	Offers businesses a platform to reach a highly engaged and targeted audience. Provides a steady revenue stream tied to advertising spend.	Businesses create sponsored pins and ads to reach Pinterest users. These ads appear in users’ feeds and search results, allowing businesses to showcase their products and content.
Affiliate Marketing	Pinterest participates in affiliate marketing by allowing users to include affiliate links in their pins. When users click on these links and make a purchase, Pinterest may earn a commission.	Offers an additional revenue stream through affiliate marketing partnerships. Encourages users to create content with the potential to drive sales and earn commissions.	Users can include affiliate links in their pins, which may direct users to external websites. If users make purchases through these links, Pinterest may earn a commission as an affiliate marketer.
E-commerce Integration	Pinterest integrates with e-commerce platforms, allowing businesses to connect their product catalogs to Pinterest. Users can discover and shop for products directly on the platform.	Enhances the shopping experience for users by enabling them to discover and purchase products seamlessly. Attracts businesses looking to leverage Pinterest for e-commerce sales.	Businesses can integrate their product catalogs with Pinterest, making their products shoppable on the platform. Users can click on products within pins and make purchases without leaving Pinterest.
Business Accounts	Pinterest offers business accounts with additional features and analytics tools. These accounts cater to businesses and brands looking to enhance their presence and measure performance on the platform.	Provides businesses with tools to optimize their Pinterest strategy, track performance, and engage with their target audience effectively. Encourages businesses to use Pinterest as a marketing and advertising platform.	Businesses can create and manage business accounts on Pinterest, accessing features like Pinterest Analytics and promoted pins to enhance their marketing efforts on the platform.
Sponsored Content	Pinterest allows influencers and content creators to collaborate with brands and create sponsored content. Brands pay influencers to create and promote content that aligns with their products or services.	Enables brands to leverage the influence of content creators to reach a wider audience authentically. Provides content creators with opportunities to monetize their influence and creative content.	Influencers collaborate with brands to create pins and content that feature products or services. These sponsored pins reach the influencer’s audience and are labeled as “Paid Partnership.”
Data Analytics	Pinterest offers data analytics and insights to businesses, helping them understand user behavior, engagement, and trends on the platform. This data informs businesses’ content and advertising strategies.	Empowers businesses to make data-driven decisions, optimize their Pinterest presence, and create more effective advertising campaigns. Enhances businesses’ ability to target their audience effectively.	Businesses can access Pinterest Analytics to gain insights into their audience’s demographics, interests, and engagement with their pins and ads. This information helps businesses refine their strategies.
Value Proposition	Pinterest’s value proposition centers on providing a visually engaging platform where users can discover and curate content that inspires and guides them in various areas of life, from fashion and home decor to recipes and DIY projects.	Offers users a platform for creative inspiration, idea discovery, and project planning. Enhances users’ lifestyles by providing a source of ideas and solutions.	Users rely on Pinterest to explore new ideas, plan projects, and discover content that aligns with their interests and aspirations. The platform fosters creativity and helps users make informed decisions.
Customer Segments	Pinterest’s customer segments encompass individuals seeking inspiration and ideas for their hobbies, projects, and lifestyle choices. It also serves businesses, brands, and content creators looking to reach and engage with Pinterest’s highly engaged and creative user base.	Diverse customer segments cater to individual users looking for inspiration and solutions, as well as businesses aiming to connect with potential customers through advertising and content promotion.	Pinterest serves a broad range of users, from DIY enthusiasts and home decorators to businesses and influencers seeking to showcase their products and ideas to a receptive and creative audience.
Distribution Strategy	Pinterest distributes its platform primarily through digital channels, including app stores (iOS and Android) and its website. It also encourages users to share and discover content through social media, word of mouth, and email invitations.	Digital distribution ensures accessibility through mobile devices and web browsers. Encourages user-generated content sharing and organic growth through social sharing and referrals.	Users can download the Pinterest app from app stores or access the platform via the website. Pinterest encourages users to share content, create boards, and invite others to join, expanding its user base through social networks and referrals.
Marketing Strategy	Pinterest’s marketing strategy includes content curation, personalized recommendations, and email notifications to keep users engaged. It also collaborates with businesses and content creators to promote sponsored pins and advertising campaigns.	Drives user engagement and retention by providing a personalized experience. Generates revenue through sponsored content and advertising. Collaborates with businesses to showcase products and services.	Pinterest curates personalized content for users, sending notifications and emails to keep them engaged. It also partners with businesses and content creators to promote sponsored pins and advertising campaigns that align with users’ interests and preferences.

Breaking down Pinterest Business Model Essence

The foundation of any business model needs to be built on top of a solid value proposition.

That’s why we’ll start by breaking down Pinterest’s value proposition.

However, for digital businesses and, in general, for organizations built on top of more elaborated business models, there will be a few key players that make that business model viable in the first place.

The Pinterest mission is “to help people discover and do things they love.” Let’s see how it accomplishes that.

Who are Pinterest’s key customers?

The Pinterest business model targets two key players:

Pinners.
And advertisers.

Who is a Pinner, and why it matters for the Pinterest business model?

As Pinterest pointed out in its financial prospectus:

Pinterest is where more than 250 million people around the world go to get inspiration for their lives. They come to discover ideas for just about anything you can imagine: daily activities like cooking dinner or deciding what to wear, major commitments like remodeling a house or training for a marathon, ongoing passions like fly fishing or fashion and milestone events like planning a wedding or a dream vacation.

Pinterest calls those people “Pinners.”

The whole experience of Pinners moves around visual recommendations, which are called “Pins.” Those Pins are customized, contextualized, and organized around interests within boards.

Pinners get the service for free.

They don’t pay a dime. However, the Pinterest business model is built on top of its Pinners.

They are at the core of the Pinterest business model.

Indeed, without an engaged, consistent, and robust user base, there wouldn’t be any advertising business.

That’s why Pinterest focuses primarily on this segment by asking repeatedly, “How will this help Pinners?”

More precisely, Pinterest claims to work on creating the right context for its user base, which has three core principles:

Transparency: especially in the privacy and terms of use of the service
Enforcement: in taking down content that doesn’t comply
Accountability: in applying laws and regulations

Advertisers, instead, are at the core of the Pinterest monetization strategy. Let’s see why both Pinners and advertisers stick so far to Pinterest.

Breaking down the Pinterest value proposition

Pinterest’s value proposition must offer compelling reasons for Pinners and advertisers to keep returning to the platform.

Value Proposition for Pinners

The value proposition for Pinners moves around four key elements.

It is essential to remark how Pinterest wants to position itself differently from other tech giants like Google and Facebook.

Where those companies make massive use of algorithms (Facebook), web crawlers (in Google’s case), and in automatic text content generation, Pinterest is all about visual experience and human content curation:

Visual experience

Pinterest focuses on visual discovery and search, which makes Pinterest a unique place on the web.

Pinterest is not the only place that focuses on visual experiences. However, it has a core human curation and personalization that makes it unique.

Human curation and personalization

As pointed out on Pinterest’s financial prospectus, “Pins have been handpicked, saved and organized over the years by hundreds of millions of Pinners creating billions of boards; they are not the result of web crawling or indexing. We call this body of data the Pinterest taste graph.”

Designed for action

A visual experience makes people visualize the future and take action.

Empowering environment

Pinterest claims that most users feel empowered by using the platform.

Indeed, the Pinterest environment wants to be different from other social networks.

It doesn’t try to leverage the fear of missing out or people’s anxieties. It claims to generate inspiration for people.

Value Proposition for Advertisers

The Pinterest value proposition for advertisers is critical for a sustainable monetization strategy. It moves around three areas:

Empowering Environment.
Valuable Audience.
The Discovery Journey.

Pinterest claims to allow advertisers to cover the whole sales funnel, from awareness to conversion.

What draws advertisers to Pinterest? The objectives are usually:

Building brand awareness.
Increasing online traffic.
Driving sales.

Breaking down the Pinterest digital advertising target market

In 2014, Pinterest introduced advertising to its platform.

Initially, Pinterest focused on large organizations with large marketing budgets.

As the company grew, it also adapted its sales force and available tools to advertisers, allowing smaller organizations to take advantage of the Pinterest advertising platform.

That also made its revenues scale fast.

Pinterest is also focused on building a stronger international digital advertising platform at this stage.

Indeed Pinterest is in the digital advertising business.

Therefore, its competitors are companies like Google, Facebook (Instagram), and other companies offering digital advertising opportunities.

The Pinterest total addressable market includes brand advertising and performance-based advertising served in various formats:

Online Brand Advertising: attractive to advertisers looking to raise awareness at the top of the purchasing funnel.
Offline Brand Advertising: brand advertising is usually done offline. Pinterest draws part of that business online.
Online Performance Advertising: primarily based on conversion.

The Pinterest Sales Funnel (Source: Pinterest Financial Prospectus)

Pinners travel across this funnel from inspiration, organization, and action.

Advertisers can put their content in front of this audience and work from the top to the bottom of the funnel, thus, from awareness to conversion.

How does Pinterest work?

Pinterest focuses most of its effort on allowing users, its Pinners, to curate and handpick content.

Pinterest focuses on making this curated environment thrive.

Therefore, most Pins get handpicked, saved, and organized by their user base.

Those Pins are then matched with billions of boards to form the Pinterest taste graph.

Inside Pinterest taste graph

The process of Human Curation and Personalization (Source: Pinterest Financial Prospectus)

To better understand how Pinterest works, when a user saves or “pins” an image of Machu Picchu, this might get initially saved by the Pinner to a board name, for instance, “Bucket List.”

However, as that Pin will be available and discoverable, thousands of users will be able to save that image on other boards:

How The Pinterest Taste Graph Gets Shaped (Source: Pinterest Financial Prospectus)

What is a Pin?

Source: Pinterest Financial Prospectus

Pinterest defines a Pin as “an idea represented by an image or video, regularly linked to other websites that showcase a variety of content and ideas for Pinners to explore.”

Example of a Product Pin

There are various types of pins. For instance, with a product Pin, an item can be shoppable, with information like:

Up-to-date pricing.
Availability.
Links to the checkout page of the retailer’s website.

Other pins kinds of Pins comprise:

Recipe Pins that make it easy to cook a meal.
Shop the Look, which enables Pinners to shop for individual products.
Video Pins that mostly show how-to content about cooking and beauty.

Inside Pinterest discovery engine

Source: Pinterest Financial Prospectus

The Pinterest discovery mechanism moves around four key areas

Home feed.
Search.
Related search.
And visual search.

This helps users refine and find the visual content they’re looking for. It allows Pinterest to anticipate the tastes of its users.

And it also makes it easier for advertisers to attract the attention of Pinterest users through paid campaigns.

Breaking down Pinterest monetization strategy

Pinterest makes money by selling advertising to marketers and companies that want to gain brand visibility and drive sales to their websites.

In 2023, Pinterest generated over $3 billion in advertising revenue, with nearly 500 million monthly active users and a net loss of $35 million.

Pinterest, like Facebook, monetizes its users by offering targeted advertising on the platform.

As media business, therefore, has two critical metrics: MAU and ARPU.

Pinterest MAU

MAUs: monthly active users, defined as “a logged-in Pinterest user who visits the website or opens the mobile application at least once during the 30 days ending on the date of measurement.”

Pinterest ARPU

ARPU: or average revenue per user, which tells us how good Pinterest is at monetizing its user base

Those two metrics drive Pinterest’s strategy.

Pinterest still has to tap into its growth potential; for instance, it is about 10X of Facebook’s ARPU.

Facebook vs. Pinterest ARPU

The ARPU, or average revenue per user, is a key metric to track the success of Facebook – now Meta – family of products. For instance, by the end of 2021, Meta’s ARPU worldwide was $11.57. While in US & Canada, it was $60.57; in Europe, it was $19.68; in Asia, it was $4.89; and in the rest of the world, it was $3.43.

Key Highlights

Revenue Generation: Pinterest generates its revenue primarily through selling advertising to marketers and companies. In 2022, the company generated $2.8 billion in advertising revenue. Advertisers use Pinterest to gain brand visibility and drive sales to their websites.
User Base: Pinterest has a user base of 450 million monthly active users (MAUs), who use the platform to discover and explore ideas for various aspects of their lives.
Key Customers: Pinterest’s business model focuses on two key customer groups: Pinners (users of the platform) and advertisers.
- Pinners: Pinterest’s value proposition for users (Pinners) revolves around visual discovery, human curation, personalization, and empowerment. Pins, which are visual recommendations, are handpicked and organized by users into boards. Pinterest provides a unique visual experience compared to other platforms like Google and Facebook.
- Advertisers: The platform’s value proposition for advertisers centers on creating an empowering environment, offering access to a valuable audience, and facilitating the discovery journey. Advertisers are drawn to Pinterest to achieve objectives like brand awareness, increasing online traffic, and driving sales.
Monetization Strategy: Pinterest monetizes its platform through advertising. Advertisers pay to have their content displayed to Pinterest users, allowing them to cover the entire sales funnel from awareness to conversion. Pinterest provides various types of Pins that cater to different objectives, such as product Pins, recipe Pins, shop-the-look Pins, and video Pins.
Advertising Market: Pinterest entered the digital advertising market in 2014, initially targeting larger organizations with sizable marketing budgets. Over time, it expanded its sales force and tools to cater to smaller businesses as well. The platform competes with companies like Google and Facebook (including Instagram) in the digital advertising space.
Metrics: Key metrics that drive Pinterest’s strategy include Monthly Active Users (MAU) and Average Revenue Per User (ARPU). As of now, Pinterest’s ARPU is lower compared to Facebook’s, indicating room for growth and potential for increased monetization.