How Pinterest Is Making Money and Why Facebook Should Be Scared

How Pinterest Makes MoneyPinterest: How This Hot Potential IPO Is Making Money

Frankly, I don’t know any men who have a Pinterest account, but I know a lot of women who do. And that’s one reason Pinterest makes money. It has the perfect demographic for advertisers, and now that it’s making money, Pinterest could be one of the more interesting initial public offerings (IPOs) of 2015.

While other social media platforms deal with discussing the past and present, Pinterest is all about the future. Designed with the retail consumer in mind, Pinterest is about finding things you want to buy, bake, make, renovate, or see.

Launched in March 2010, Pinterest is an online social media portal where users “pin” things that they like on a virtual bulletin board. The site’s 70 million users and counting can then “repin,” like, and comment on what appeals to them over and over again, thousands of times over, significantly expanding a brand’s target audience. And that’s the attraction of Pinterest.

Sure, sites like Facebook and Twitter might have significantly more members, but as we’ve seen over the years, it can be hard to monetize users. Pinterest, on the other hand, is a marketer’s dream.

What does Pinterest have that advertisers want? Everything. Women account for 80% of all Pinterest users; 60% of all Pinterest users are American; and 20% of Internet-using women in the U.S. use Pinterest.(1)

On top of that, Pinterest attracts members across every age category: 27% of Generation Z (born between 1995 and the present) use Pinterest monthly; 27% of Generation Y (1977–1994) use the social media site; and 19% of Generation X (1965–1976) hold Pinterest accounts as well. What’s most exciting for marketers is that 33% of all 18–29-year-olds in the U.S. have an account.

These statistics are even more dramatic when you consider 85% of all brand purchases are made by women(2) and 19–39-year-olds make up the fastest-growing consumer segment in America.(3)

What Makes Pinterest Users So Appealing to Advertisers?

Demographics aside, Pinterest has a loyal fan base. According to the most recent data, a whopping 84% of female users and 50% of men who signed up five years ago are still using the site.(4) By comparison, only 10.7% of Twitter users who signed up in 2012 are still active.(5)

Pinterest members also have deep pockets: 90% of users earn more than $30,000 a year, while approximately 20% bring in more than $75,000 per year. And more than half (52%) of Pinterest users consult the site before making an in-store purchase. Almost the same number (47%) of U.S. shoppers purchased something as a result of a recommendation from Pinterest.

Aside from ease of use, why do so many users consult Pinterest before making a purchase? For starters, more than 90% of Pinterest usage is conducted on mobile devices. It’s because the half-life of a single Pinterest pin lasts for 3.5 months. The half-life is the time it takes to earn 50% of all clicks and views. By comparison, on Facebook, the half-life of a post is only 90 minutes. The lifespan of content on Twitter is just four minutes.(6)

That’s more good news for brands interested in advertising with Pinterest.

Pinterest More Valuable Than Facebook?

To date, tens of millions of people have added more than 30 billion pins to Pinterest. If a product or service has a high number of repins, it tells the brand that it’s popular with the Pinterest community. And Pinterest now lets marketers access the data. Not only can they see what’s popular, brands can also read the comments to see what people like or don’t like about it.

When it comes to localized, long-lasting, brand-friendly social media sites, nothing beats Pinterest. And that might explain why the company has a $5.0-billion valuation—even though it only recently started to generate revenue.

Back in May, Pinterest announced it was starting to sell ads (promoted pins) to about a dozen sponsors, including Gap, Kraft, Target, and ABC Family.(7) Eventually, Pinterest will open up its platform to additional marketers, but for now, only big brands were invited to the bulletin board. That’s because it costs a lot of money to get your brand in front of Pinterest users.

The company is looking for a spending commitment of between $1.0 million and $2.0 million. That would put Pinterest’s CPM (cost per thousand views) at roughly $30.00 to $40.00; that’s several times higher than what Facebook demands.(8)

Some analysts project Pinterest could sell $500 million in advertising in just a couple years. With the buying power of its growing user base, Pinterest is an advertiser’s dream. And that means it could be a great long-term play for investors if it goes public in 2015.