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Well I'm going to head off the predictable and boring "bubble" comments and say this: Pinterest has real value and a clear path to monetization through affilia

by cletus 14y ago

Well I'm going to head off the predictable and boring "bubble" comments and say this: Pinterest has real value and a clear path to monetization through affiliate and/or advertising revenue. It's really a stupidly simple idea (essentially scrapbooking on the Web) executed incredibly well. Is it worth $1.5B? I don't know. I would say it's definitely worth more than Instagram for whatever that's worth (not a lot). I guess we'd need stats on number of active users, engagement and revenue to make that determination--something we're not likely to get. The only concerning point to me is that that it's foreign money, only because foreign money seems to be less discerning, at least based on DST and similar investments. Anyway, congrats to the team. They've done exceptionally well.

mtjl79 14y ago
I do agree with you - this possibly has real potential. BUT I think they need more time to answer these questions: - Is this a fad, or is Pinterest here to stay? - Can they really pump up revenues the way they think they can? And can they do it fast? It's like buying condoms before the first date. (Sorry for the inappropriate inference.) I just feel like they needed more time and history before pulling in these types of numbers.
- AJ007 14y ago
  When I first saw Pinterest's exponential traffic growth sequence, it altered the way I believed women think. But at the end of the day, its just a very well executed image board, marketed to women. The concept in itself is not a fad, but they may need to add features that make a user feel penalized for moving elsewhere. (e.g. the network effect from Facebook, or a users library with Kindle)
- kenrikm 14y ago
  It's like buying condoms before the first date. (Sorry for the inappropriate inference.) Am I the only one that thinks that's a good idea? Seriously, people in cars cause accidents, accidents in cars cause people.
Alex3917 14y ago
"Essentially scrapbooking on the Web" A better analogy is probably delicious for women, at least in terms of having a mental framework to estimate the value.
- joshu 14y ago
  oh, if only.
  - zackzackzack 14y ago
    ^ This may be the hardest I have ever laughed at something from Hacker News. Context: joshu founded Delicious.
- runako 14y ago
  Or more neutrally (and accurately): delicious with pictures.
  - Alex3917 14y ago
    The userbase is 80% women, and the percentage of active users who are women is probably even greater. Not sure of the demographics of delicious, but I'd guess roughly the inverse. Also, the fact that the userbase is mostly women is materially important in valuating the business, since female users are generally worth much more than male users.
    - runako 14y ago
      The functionality of Pinterest is gender-neutral. What makes it "delicious for women", other than that more women (in the US) use it right now? According to Wikipedia, more men than women use Pinterest in the UK (https://en.wikipedia.org/wiki/Pintrest#Demographics https://en.wikipedia.org/wiki/Pintrest#Demographics).
      - Alex3917 14y ago
        IIRC in the US women drive about 80% of purchases, meaning each female user is worth several times what each male user is worth. In terms of communicating the value of the business to investors, the fact that the userbase is mostly female is arguably the most important aspect of the site.
strlen 14y ago
The other interesting part about Pinterest is that they mostly gained traction outside of the traditional early adopter segments. Not sure any what's the right way to value this kind of company: obviously if it was an established public company, a $1.5b figure might be scary (as far as I understand Pinterest does not yet have revenue). However, it isn't: venture capitalists valued it this high, in the hopes that there's a realistic (compared to similar companies, funded at the same stage) chance that they will have a $7.5b-$15b exit. It _would_ be a sign of bubble if Pinterest were to go public without revenue (which has happened during the 1990s) , with pension funds (that have a very different risk/reward profile from VCs) buying the shares. You could say "it's 1999 again" if as a result Sun (hey anyone remember them?), Cisco, and Oracle stock rose exorbitantly as a result of Pinterest buying a record number of servers, routers, and commercial databases (hey, remember when companies used to do that?) and their shareholders expecting (with great certainty) that there will be more and more companies like Pinterest sprouting up, i.e., that sales will keep growing. I've only caught the tail end of the bubble (I had an internship in a startup junior/senior year of HS, 2000-2002 -- and participated in SVLUG, meeting folks who worked for Webvan, RedHat, Va Linux, et al). I still remember just how differently it felt from today: for starters you couldn't drive from Sunnyvale to Fremont (over the bridge) without being completely stuck in traffic (as early as 3pm, and as late as after 8pm), and without driving past at least 3 or 4 Sun campuses. Nowadays: there is still commercial real-estate in that area that is empty (including the former Sun East Bay campus, where manufacturing happened), the Dunbarton Bridge is fairly traffic-free even during the rush hour.
- k-mcgrady 14y ago
  >> (as far as I understand Pinterest does not yet have revenue) They use a service which scans all links on the site and where possible converts them to affiliate links (they don;t change affiliate links users have set). So if someone pins an Amazon product and another user clicks through and buys that Pinterest is getting a cut. So Pinterest is already making money. I have no idea how much but it seems like it could provide a decent revenue stream.
  - andrewhillman 14y ago
its_so_on 14y ago
Let me help you out with this part "Is it worth $1.5B?" If you are left holding the bag, and they have to generate 1.5B in sales over their lifetime from this money to make it a worthwhile investment, then no: pinterest will never accrue 1.5B in revenue over its lifetime. If you are not left holding the bag and this bubble keeps inflating, yes. It's easy to see how Pinterest can raise money at an even higher valuation with just a little more "spectacular" growth. (It's not really spectacular. More like a fad.)
- emmett 14y ago
  On what basis could you not have said the exact same thing about Facebook 5 years ago?
  - its_so_on 14y ago
    I don't remember where I was five years ago and what Facebook was saying, but if you look at this graph http://en.wikipedia.org/wiki/File:Facebook_popularity.PNG http://en.wikipedia.org/wiki/File:Facebook_popularity.PNG at 2007, and remember what Facebook is (since day 1), it's pretty easy to see Facebook making the argument that it will be used by pretty much everyone, everywhere. It's pretty obvious that pinterest has no such claim. That is one such basis. Other such bases include network effects that come with the whole Facebook model (what it is, i.e. social graph) and that in some way it may even be a "natural monopoly". (People completely miss this when comparing it to myspace, which was never a literal, programmatic social graph). Finally, again I don't know where this was five years ago, but credibility and buy-in based on how Facebook rolled out (Harvard, universities, etc...) may have been a factor. Also due to the Facebook model it doesn't make sense for ANYONE to start a profile on a site that doesn't have any profiles on it. It's all about having friends on there. By contrast, Pinterest has already been ripped off by the German Pinspire: http://www.readwriteweb.com/archives/pinspire_the_hottest_new_startup_to_completely_rip.php http://www.readwriteweb.com/archives/pinspire_the_hottest_ne... If I want to sign up on Pinterest, I can sign up on Pinspire and it still makes SOME sense. (As opposed to signing up to a competitor to Facebook when all my friends are on Facebook). So, there are several bases that I could have used to put Facebook at a completely different valuation. Mark my words: (you can bookmark this). Pinterest will not make 1.5Billion in revenue over its whole lifetime, unless the bubble keeps expanding and it gets at a similar amount of cold, hard cash to spend on customer acquisition: the "Groupon model". (Which I consider possible! See my comment you replied to. I am definitely not saying that it can't get another investment at a 50 billion dollar valuation and make the people who just invested 200 million very, very happy. Nor am I saying it won't be able to use the fifty billion dollar valuation. I am saying that, indeed, it depends on it - or will never be able to justify the 1.5billion valuation it just received.) In other words, yes, I am saying that it will not be able to turn the 200 million it just raised into 1.5 billion cash over its whole lifetime, without raising more money. You might disagree with me, but at least I am being direct and not wishy-washy. You can falsify me soon enough if you are right.
stroboskop 14y ago
Well I'm going to head off the predictable and boring "bubble" comments and say this Saying that predictably gets you upvotes for sure. But it's not about "bubble" comments being "boring" or not. The question is whether bubble claims have any substance. If they have, the bubble won't simply go away just because some people wish it would. Is it worth $1.5B? I don't know. I would say it's definitely worth more than... Comparisons like this are inflationary. It seems you really don't care about bubbles. But a bubble would affect many people here at HN. It doesn't matter whether bubble comments are boring or not, it's about the importance of a bubble.
- madaxe 14y ago
  Bingo. Valuations should be based on.... drumroll profits and retained value - EBITDA. When we started basing valuations on arbitrary "well if facebook are $100bn, X must be $y", we set sail for another glorious future of people losing their shirts. Frankly, it just pisses me off - we're a profitable business which has grown 150% YOY for 6 years, and our value is barely £3M, based on our profits and growth. Why an infant company with little discernable revenue should have an astronomical value is beyond me.
  - arethuza 14y ago
    Valuations are based on what someone else might pay - and they might pay a few billion for Pinterest.
    - grey-area 14y ago
      That's precisely the sort of bubble economics that the parent was objecting to. The objection is to speculation as opposed to investment - investment expects a steady return based on real profits/assets, speculation expects a greater fool to come along later and pay more for this asset, regardless of what it might actually be worth based on revenue/assets alone. In a bubble (tulips, houses, stock markets) there seems to be an unending supply of greater fools, until all of a sudden there isn't, and someone (who of course expected to find some other fool to sell to) is left picking up the tab for assets which are now close to worthless. If your valuations are based on what someone else might pay in future, you are speculating, and will be lucky if you manage to get out before other people realise the assets you have bought are not worth $1B or whatever you paid for them. If on the other hand you bought because there is a steady income stream from an investment which will eventually pay off the investment and add returns, and thus underpins the price, you don't have to worry about whether this is a bubble or not.
antidaily 14y ago
Plus... chicks dig it.
kefeizhou 14y ago
These "bubble" comments may become self-fulfilling. Even if there's no substance behind the claims, enough talk of a possible bubble can shift investor and consumer mentality and end up causing a bubble down the line.
- zevyoura 14y ago
  How does that work? I would think that people yelling "Bubble!" about any investment would decrease investor demand in that area, other than a minority of people who are dumb enough to think they can time an exit pre-bubble-burst.
DanBC 14y ago
> clear path to monetization through affiliate Pinterest tried affiliate links with Skimlinks. They didn't have a great time, and they've dropped skimlinks. Personally, I think they should work out a way to try it again.

by cletus 14y ago

mtjl79 14y ago

I do agree with you - this possibly has real potential. BUT I think they need more time to answer these questions: - Is this a fad, or is Pinterest here to stay? - Can they really pump up revenues the way they think they can? And can they do it fast? It's like buying condoms before the first date. (Sorry for the inappropriate inference.) I just feel like they needed more time and history before pulling in these types of numbers.

AJ007 14y ago
When I first saw Pinterest's exponential traffic growth sequence, it altered the way I believed women think. But at the end of the day, its just a very well executed image board, marketed to women. The concept in itself is not a fad, but they may need to add features that make a user feel penalized for moving elsewhere. (e.g. the network effect from Facebook, or a users library with Kindle)
kenrikm 14y ago
It's like buying condoms before the first date. (Sorry for the inappropriate inference.) Am I the only one that thinks that's a good idea? Seriously, people in cars cause accidents, accidents in cars cause people.

Alex3917 14y ago

"Essentially scrapbooking on the Web" A better analogy is probably delicious for women, at least in terms of having a mental framework to estimate the value.

joshu 14y ago
oh, if only.
- zackzackzack 14y ago
  ^ This may be the hardest I have ever laughed at something from Hacker News. Context: joshu founded Delicious.
runako 14y ago
Or more neutrally (and accurately): delicious with pictures.
- Alex3917 14y ago
  The userbase is 80% women, and the percentage of active users who are women is probably even greater. Not sure of the demographics of delicious, but I'd guess roughly the inverse. Also, the fact that the userbase is mostly women is materially important in valuating the business, since female users are generally worth much more than male users.
  - runako 14y ago
    The functionality of Pinterest is gender-neutral. What makes it "delicious for women", other than that more women (in the US) use it right now? According to Wikipedia, more men than women use Pinterest in the UK (https://en.wikipedia.org/wiki/Pintrest#Demographics https://en.wikipedia.org/wiki/Pintrest#Demographics).
    - Alex3917 14y ago
      IIRC in the US women drive about 80% of purchases, meaning each female user is worth several times what each male user is worth. In terms of communicating the value of the business to investors, the fact that the userbase is mostly female is arguably the most important aspect of the site.

strlen 14y ago

The other interesting part about Pinterest is that they mostly gained traction outside of the traditional early adopter segments. Not sure any what's the right way to value this kind of company: obviously if it was an established public company, a $1.5b figure might be scary (as far as I understand Pinterest does not yet have revenue). However, it isn't: venture capitalists valued it this high, in the hopes that there's a realistic (compared to similar companies, funded at the same stage) chance that they will have a $7.5b-$15b exit. It _would_ be a sign of bubble if Pinterest were to go public without revenue (which has happened during the 1990s) , with pension funds (that have a very different risk/reward profile from VCs) buying the shares. You could say "it's 1999 again" if as a result Sun (hey anyone remember them?), Cisco, and Oracle stock rose exorbitantly as a result of Pinterest buying a record number of servers, routers, and commercial databases (hey, remember when companies used to do that?) and their shareholders expecting (with great certainty) that there will be more and more companies like Pinterest sprouting up, i.e., that sales will keep growing. I've only caught the tail end of the bubble (I had an internship in a startup junior/senior year of HS, 2000-2002 -- and participated in SVLUG, meeting folks who worked for Webvan, RedHat, Va Linux, et al). I still remember just how differently it felt from today: for starters you couldn't drive from Sunnyvale to Fremont (over the bridge) without being completely stuck in traffic (as early as 3pm, and as late as after 8pm), and without driving past at least 3 or 4 Sun campuses. Nowadays: there is still commercial real-estate in that area that is empty (including the former Sun East Bay campus, where manufacturing happened), the Dunbarton Bridge is fairly traffic-free even during the rush hour.

k-mcgrady 14y ago
>> (as far as I understand Pinterest does not yet have revenue) They use a service which scans all links on the site and where possible converts them to affiliate links (they don;t change affiliate links users have set). So if someone pins an Amazon product and another user clicks through and buys that Pinterest is getting a cut. So Pinterest is already making money. I have no idea how much but it seems like it could provide a decent revenue stream.
- andrewhillman 14y ago

its_so_on 14y ago

Let me help you out with this part "Is it worth $1.5B?" If you are left holding the bag, and they have to generate 1.5B in sales over their lifetime from this money to make it a worthwhile investment, then no: pinterest will never accrue 1.5B in revenue over its lifetime. If you are not left holding the bag and this bubble keeps inflating, yes. It's easy to see how Pinterest can raise money at an even higher valuation with just a little more "spectacular" growth. (It's not really spectacular. More like a fad.)

emmett 14y ago
On what basis could you not have said the exact same thing about Facebook 5 years ago?
- its_so_on 14y ago
  I don't remember where I was five years ago and what Facebook was saying, but if you look at this graph http://en.wikipedia.org/wiki/File:Facebook_popularity.PNG http://en.wikipedia.org/wiki/File:Facebook_popularity.PNG at 2007, and remember what Facebook is (since day 1), it's pretty easy to see Facebook making the argument that it will be used by pretty much everyone, everywhere. It's pretty obvious that pinterest has no such claim. That is one such basis. Other such bases include network effects that come with the whole Facebook model (what it is, i.e. social graph) and that in some way it may even be a "natural monopoly". (People completely miss this when comparing it to myspace, which was never a literal, programmatic social graph). Finally, again I don't know where this was five years ago, but credibility and buy-in based on how Facebook rolled out (Harvard, universities, etc...) may have been a factor. Also due to the Facebook model it doesn't make sense for ANYONE to start a profile on a site that doesn't have any profiles on it. It's all about having friends on there. By contrast, Pinterest has already been ripped off by the German Pinspire: http://www.readwriteweb.com/archives/pinspire_the_hottest_new_startup_to_completely_rip.php http://www.readwriteweb.com/archives/pinspire_the_hottest_ne... If I want to sign up on Pinterest, I can sign up on Pinspire and it still makes SOME sense. (As opposed to signing up to a competitor to Facebook when all my friends are on Facebook). So, there are several bases that I could have used to put Facebook at a completely different valuation. Mark my words: (you can bookmark this). Pinterest will not make 1.5Billion in revenue over its whole lifetime, unless the bubble keeps expanding and it gets at a similar amount of cold, hard cash to spend on customer acquisition: the "Groupon model". (Which I consider possible! See my comment you replied to. I am definitely not saying that it can't get another investment at a 50 billion dollar valuation and make the people who just invested 200 million very, very happy. Nor am I saying it won't be able to use the fifty billion dollar valuation. I am saying that, indeed, it depends on it - or will never be able to justify the 1.5billion valuation it just received.) In other words, yes, I am saying that it will not be able to turn the 200 million it just raised into 1.5 billion cash over its whole lifetime, without raising more money. You might disagree with me, but at least I am being direct and not wishy-washy. You can falsify me soon enough if you are right.

stroboskop 14y ago

Well I'm going to head off the predictable and boring "bubble" comments and say this Saying that predictably gets you upvotes for sure. But it's not about "bubble" comments being "boring" or not. The question is whether bubble claims have any substance. If they have, the bubble won't simply go away just because some people wish it would. Is it worth $1.5B? I don't know. I would say it's definitely worth more than... Comparisons like this are inflationary. It seems you really don't care about bubbles. But a bubble would affect many people here at HN. It doesn't matter whether bubble comments are boring or not, it's about the importance of a bubble.

madaxe 14y ago
Bingo. Valuations should be based on.... drumroll profits and retained value - EBITDA. When we started basing valuations on arbitrary "well if facebook are $100bn, X must be $y", we set sail for another glorious future of people losing their shirts. Frankly, it just pisses me off - we're a profitable business which has grown 150% YOY for 6 years, and our value is barely £3M, based on our profits and growth. Why an infant company with little discernable revenue should have an astronomical value is beyond me.
- arethuza 14y ago
  Valuations are based on what someone else might pay - and they might pay a few billion for Pinterest.
  - grey-area 14y ago
    That's precisely the sort of bubble economics that the parent was objecting to. The objection is to speculation as opposed to investment - investment expects a steady return based on real profits/assets, speculation expects a greater fool to come along later and pay more for this asset, regardless of what it might actually be worth based on revenue/assets alone. In a bubble (tulips, houses, stock markets) there seems to be an unending supply of greater fools, until all of a sudden there isn't, and someone (who of course expected to find some other fool to sell to) is left picking up the tab for assets which are now close to worthless. If your valuations are based on what someone else might pay in future, you are speculating, and will be lucky if you manage to get out before other people realise the assets you have bought are not worth $1B or whatever you paid for them. If on the other hand you bought because there is a steady income stream from an investment which will eventually pay off the investment and add returns, and thus underpins the price, you don't have to worry about whether this is a bubble or not.

antidaily 14y ago

Plus... chicks dig it.

kefeizhou 14y ago

These "bubble" comments may become self-fulfilling. Even if there's no substance behind the claims, enough talk of a possible bubble can shift investor and consumer mentality and end up causing a bubble down the line.

zevyoura 14y ago
How does that work? I would think that people yelling "Bubble!" about any investment would decrease investor demand in that area, other than a minority of people who are dumb enough to think they can time an exit pre-bubble-burst.

DanBC 14y ago

> clear path to monetization through affiliate Pinterest tried affiliate links with Skimlinks. They didn't have a great time, and they've dropped skimlinks. Personally, I think they should work out a way to try it again.