Social Media Project

Evan Smith1325530

Marketing 161A

May 2015

Company Overview – Pinterest

FunctionalityPinterest is a web and mobile application company that has

created the Pinterest application as a free visual discovery, collection, and storage tool of images. The concept behind the application is relatively simply: users are able to save images and categorize them based on various “boards” that group similar qualities together.i A main directory page exists that allows users to browse through chronologically ordered popular content or pages that they subscribe to. Users can follow other users or vice versa if the users have similar tastes. Images are posted by ‘pinning’ an image, and other users can repost an image by ‘repinning’ it or they can simply ‘like’ the image. Users can also send their pins to other users directly, to either their personal profile of their email account. While the application is free, it requires the users register an account that helps to collectivize their data. Content is not created by Pinterest but instead uploaded from outside sources, including both Internet sources and the users themselves. Accounts can be linked with Facebook or Twitter accounts in order to greater establish user profiles for advertising.ii

The application also divides search terms up into core elements in order to offer greater division of categories along with greater customization of individual searches. For example, if one were to search for “Men’s hair styles 2015,” each term would be considered a separate element of the search. If one were to search these terms and then decide that one instead wanted the more broad “Men’s styles 2015” as my search, one would delete the term ‘hair’ and the application would redefine their search to display more relevant categories. While the preliminary concept behind Pinterest seems simple, the categorization and indexing of terms that goes into creating the massive whole of Pinterest’s aggregated content is what is so utterly valuable about the company. When considering the wealth of customizable information that is user-created by the website, it is not much of a surprise that the company is valued at an incredibly high $11 billion valuation,iii despite the fact that the company has virtually no method of monetization or major streams of revenue until very recently when they introduced promoted pins that advertisers can purchase.

History of PinterestDevelopment for Pinterest started in December 2009 and

entered a closed beta in March 2010.iv Creator Ben Silbermann took great strides in ensuring touch points between him and the testers during the product development by offering his own personal phone number and sometimes meeting with users.v After launch, the website had 10,000 users,vi but the site was still operated out of a small apartment until the summer of 2011. The real breakthrough in users came with the development and launch of an iPhone application in early March of 2011. The influx of new users brought in greater recognition of the company, with Pinterest receiving a spot on Time Magazine’s list of “50 Best Websites of 2011” as well as becoming one of top 10 largest social networking services, with 11 million total visits per week according to Hitwise data.vii In this same year the company was named the best new startup of 2011 by TechCrunch. Pinterest continued on this incredible growth into 2012 where comScore reported that the site had 11.7 million unique users, which made it the fastest site to break through the 10 million unique visitor mark.viii Following this massive trend of growth, Pinterest updated its terms of service that eliminated a policy that gave it the right to sell its users’ content. Finally, in 2012, Pinterest updated the site to allow for widespread use by anyone without an invitation or request.

S.W.O.T. Analysis of Pinterest

A S.W.OT. analysis that reads into the strengths, weaknesses, opportunities, and strengths of Pinterest is able to provide a more

Figure 1. Pinterest Home Page

developed insight into potential problems that Pinterest may face and how these problems can be solved.

StrengthsAs a whole, Pinterest has an initial strength over brick-and-

mortar style distribution since it requires far less capital to have the entirety of a business based off of online content. Pinterest’s growth has also become a major asset for the company similar to any online behemoth: the major economy of scale that the business has set up is something difficult for any copycats to approach without making their product superior to Pinterest in some shape or form. This economy of scale is also a strength in the sense that it encourages a positive chain reaction of growth as more users and popularity encourages the spread of the website leading to more users and popularity. The structure of Pinterest is also a major strength of the website as the concept of Pinterest basically encourages people to build their own marketing profile based on their wants and desires; this is also a strength in the sense that Pinterest appeals to the entirety of people’s wants and desires as opposed to fulfilling one aspect or element of their wants and desires. This structure also encourages what is essentially peer-to-peer advertising of products between users. Users ability to customize their profile is also a strength of Pinterest in the sense that consumers create market niches and don’t have to fall within broad categorizations. Pinterest’s structure is also successful in the sense that it doesn’t dissuade casual consumers by being a free service. While it was once invitation only, the free and open style of the website means it can be used by anyone with internet accessibility. The fact that Pinterest is a very basic, visually oriented website and application is a major strength, and also contributes to the idea of being able to more simply transition to international

markets.

WeaknessesThe largest weakness of Pinterest is the fact that it may be

majorly limiting itself in terms of the markets it appeals to. Pinterest has a connotation of being a site mainly for women since it deals heavily with clothing, accessories, crafting, and haircare. Men typically stray away from the site due to this, leaving that market to be filled by competitors such as Gentlemint (a similar app targeting entirely towards men). While the structure of the site as is may be massively successful with the market it currently has, if the site is to change the overall structure in order to monetize there may be consequences. First and foremost, if the site begins to have heavy ad placement or require a monthly fee, users may leave the service for

copycats who do it for cheaper or free. Unfortunately as is, many companies are unlikely to acquire the app and fail to change it. The changes to the website may vary depending on the company, such as Facebook could be foreseen making the website into purely a marketplace, but despite whatever company would acquire it the structure of Pinterest could undergo major changes upon acquisition. It is simply too “ripe” and undeveloped of a concept right now to not be changed. Another factor of Pinterest’s weaknesses is the fact that the site is entirely free to register and use, so spam is easily created. While the site has a reporting feature in order for users to assist in identifying spammers, it can’t compare to sites such as eBay, which have far greater controls on users. The most glaring factor isn’t something that can’t be treated, but instead is indicative of Pinterest’s lack of monetization strategy. Out of the vast number of sales generated by the website, most have given Pinterest absolutely no commission. The site is able to promote products extremely well and is a major channel of distribution for sellers, but the structure of the site means that Pinterest doesn’t track how sales are made and doesn’t make money off of the sale.

OpportunitiesPinterest has a plethora of opportunities available for creating a

product more able to generate revenue. The massive valuation of the company is based off of the observation that the social media site has so many opportunities based on the assets they have created. The biggest opportunity is that Pinterest has established itself as such a major channel of distribution for so many businesses that if they were to become more of an online marketplace, most businesses would keep Pinterest as a channel of distribution since it is already such a valuable resource. This could lead to Pinterest becoming the consumer’s foremost source of discovering new online products while they take a cut of the sale. Pinterest has actually made their content more accessible for journalists so that posting articles is a more streamlined and tailored process. This could be done similarly for businesses so that the site is an even greater asset for other businesses looking to sell through Pinterest. Another major opportunity for Pinterest is the idea of utilizing the user data collected from user’s choices in pinning and liking images. While Pinterest did in fact change their policy agreement to state that they would not sell their direct information to companies, this says nothing for establishing and reporting trends. Pinterest has accumulated massive amounts of metadata from all of the users of their site and application, and selling information about trends is perhaps even more useful to companies. Pinterest is also connected to other social media sites

such as Facebook and Twitter and has the opportunity for greater integration between these sites. If properly executed there could be a greater continuum created between the sites. This could establish a well-rounded market profile for an individual person. The final major opportunity for Pinterest is to expand more directly into international markets. Currently, Pinterest has small footholds in some international markets but the product has not been fully developed to appeal to those individual markets themselves.

ThreatsPinterest has a few threats mainly related to the speed at which

it creates a model for monetization. Given that Pinterest has been sitting on a very successful platform for this long without taking the major steps towards monetization, they’ve paved the path for copycats to imitate Pinterest’s platform and absorb their user base. This is the main issue that all the threats from Pinterest stem from. A major issue with this is that while other companies may not have the wherewithal to capture the user base of Pinterest, the market segments that Pinterest has yet to corner are ripe for the pickings for any other company. In this vein, a company known as Gentlemint has taken the male market for a similar platform to Pinterest. International copycats are another major threat to Pinterest as they attempt to move into international markets. International copycats have resources and insights more tailored to the international markets which they reside, so Pinterest should invest heavily into ensuring successful market capture of giants such as Japan, China, or Russia. This hesitance towards monetization may also be a major issue for investors who want a return on their investment. Investors can be finicky and liable to be overly reactionary in regards to fluctuations in a start-up’s performance. Pinterest could lose much of its funding through this, but in all likelihood the sheer size of the valuation is likely to just draw in more investors (albeit more bullish in nature).

Summary of S.W.O.T. AnalysisStrengths

Only online presence lowers cost Economy of scale with massive

amount of users Users establish their own

marketing profile by choosing their content

Free registration means there is a ‘no-cost’ incentive for users

Connected to other social networking sites to create well-compiled profiles

Weaknesses Known for being used primarily

by women so the male demographic tends not to use the site

Inclusion of revenue generating features may scare off users who have low loyalty to the site

Since the registration process doesn’t require a check of reputability, anyone can pin anything which can create spam

One of the most used websites in the world

Site customization allows for any market niche to exist

Encourages indirect advertising of products by other users

Simple, follows Google’s initial KISS strategy and has an easily navigable interface

Deals with people’s passions, wants, and desires

Primarily visual

Many sales occur because of Pinterest, but Pinterest receives no commission for an overwhelming majority of them

Pinterest’s policy towards user data means they cannot sell user data directly to advertising companies

The current conceptualization may be too ‘ripe’ for being molded into something usable by a major corporation and would change the structure of the website

Opportunities Businesses have established

selling through Pinterest already so they most likely will want to use it as a channel of distribution through its lifecycle

Connections to Facebook and Twitter means that there can be greater exposure of Pinterest through their sites

The massive amounts of user data created by Pinterest can still be used without violating privacy rights in some form

Since they’ve made a custom functionality for journalist on the website, something similar could be done for businesses

Pinterest has yet to expand heavily into international markets and has the ability to do so

Threats Companies with similar concepts

(such as Gentlemint) may corner markets that Pinterest doesn’t have and push Pinterest to only serving women

If Pinterest doesn’t create methods to monetize quickly, investors may lose interest

If Pinterest doesn’t begin to monetize, users may migrate to copycat sites and they will lose their economy of scale

International copycats could take major market potential from Pinterest

Identification of Pinterest’s Problems

Using the SWOT analysis provided above, one can more readily identify the major problems Pinterest must overcome to find greater success with their social media company. The weaknesses and threats are indicative of the issues that Pinterest must solve, and by using the SWOT analysis and the four P’s of marketing (Price, Promotion, Place, and Product) one can develop a well-rounded approach to solving these problems. Using the information gathered above, one could conclude that Pinterest has a few problems but all are based around an encompassing issue: Pinterest has no developed strategy for monetization.

Using the four P’s of marketing, one can identify the two major lacking areas of Pinterest. While there are many users, there is basically no product when you consider the fact that the actual website is free. Along with this there is no actual place for sale of product that makes monetization a more realistic endeavor. Price is another issue of course but it becomes more relevant once a monetization strategy has been developed. Promotion is the least important ‘P of marketing’ to focus on considering the site is one of the most visited sites in the world.

ProductAs with many of the free social networking sites such as

Facebook or Google+, actual site is not the product the company wishes to sell. The site is actually a method to gather information about users through voluntary usage of the site or application so that these companies can sell that data to marketers and advertisers. In this sense, the product is more or less the users themselves. Pinterest has gathered a massive userbase (70% women) that has created extremely valuable data for any relevant marketers or advertisers. The structure of the Pinterest has users inputing their desires, wants, and products and images that the user enjoys. Pinterest has amassed huge quantities of this valuable data, but they lack the methodology for selling this data in a productive manner. Pinterest created a policy that stated they would not sell individual persons data to companies for sale, which renders the concept of users being the product relatively useless unless there are other ways to sell relevant meta-data to companies.

PlaceAs Pinterest currently functions, there is no place for a sale to

take place unless the user is a company who wants to create a ‘promoted pin’ that will show up more often on users’ main page. A mass amount of sales are made through Pinterest, but Pinterest only acts as a free channel of distribution for the vast majority of them. Pinterest acts as an extremely personalized search engine for your likes, wants, and desires but they do not capitalize on this fact. While this may be a strategy for Pinterest to accumulate a large amount of people selling through the site before they move forward with any one monetization strategy, the company has arguably reached a peak in its currently relevant markets and needs to address this problem in some shape or form.

Solutions and Implementation

ProductIn order to create a viable product that utilizes the assets that

Pinterest has accumulated over the course of their existence, the company must find a way to use the meta-data produced by their platform. Given that Pinterest has enacted policies that claim the company will not sell individual’s data to companies for profit, Pinterest cannot so simply create a product based off of this. Instead of using individual people’s data, the most lucrative and viable product would be to establish trends based on the metadata produced by the platform and sell these observations to companies. Trends are actually a more relevant resource to a company who would typically seek out marketing information from Pinterest. Given the fact that mainly women use Pinterest and much of the products that circulate through Pinterest are physical products that follow trends such as clothing, hair-products, accessories, and decorations, trends are able to serve as a better indicator for the future, present, or past viability of a product.

While search engines and other platforms such as Twitter are relatively easy to establish trends from due to the fact that these are text-based social media, Pinterest is a visually based social media platform. Pinterest does use segmented searching, which means that the company can establish trends based off of the entry of various terms and how they are stringed together. However, the prevalent medium of content on both the website and application is images posted by users. Images are a difficult medium to attempt to establish trends from since standard software for image recognition can usually only identify images that are exactly the same and how often they occur. This means that trends could established based on one individual picture, but it would be difficult to align this with a single product given the fact that there are multiple pictures of certain products or similar products.

Pinterest could focus their efforts on creating image recognition algorithms for establishing trends based on user content, but this would be a major investment for a company that whose coding experience is more emphasized in software and application development. The company is also lacking in time as a resource since the lack of monetization is a looming threat (as seen by the S.W.O.T. analysis provided above). The most cost and time effective strategy would be to find an external group to outsource their image analytics to. Luckily for Pinterest, a software development team has created an image analytics suite known as Curalate, which is made specifically for visually based social media. Curalate applies image-recognition

algorithms to social media platforms (which includes Instagram, Tumblr, Pinterest, and others) in order to create trends. Curalate’s software is developed enough that consumers can track return-on-investment through the software by aligning the frequency of visits, average duration of visit, and estimated revenue to the image associated. The software is extremely important for a visually based social media platform like Pinterest because Curalate is able to identify common denominators between different pictures. For example, the company Nasty Gal may have a sundress that they wish to track the trending nature of the product. Pinterest may have lots of occurrences of the same picture of the original posting of the dress on Nasty Gal’s online store, but it may also have pictures posted from various blogs of women wearing the dress. These pictures are entirely different in terms of file-type and data actually present in the image, but Curalate is able to identify that the dress is found in both pictures. This allows for more accurate trend data that is extremely valuable for the relevant company.

Place

Pinterest has always acted as channel of distribution for businesses that have products in online stores, but it lacks the ability to generate revenue for this service. For the amount of sales that take place due to Pinterest’s ability to create exposure for products, the return for Pinterest is virtually nothing unless companies use their ‘promoted pin’ service, which absolutely pales in comparison to the sheer amount of free exposure generated for other products. Since Pinterest functions so well as a personalized search engine for relevant products, the company should capitalize on this by creating a thoroughfare for businesses who are going to promote their products through the application or website. The most applicable form of this is to create an online marketplace that Pinterest uses to gain a commission on each sale.

Implementing an online marketplace would have to be a fairly seamless experience less the major change by adding this feature begins to scare off previous users. The most seamless method of doing this would be to use the Curalate software to identify products and associate the product to whatever company sells the product. Then, when the user brings up pictures that feature said products, there is a “Buy now” button. Pressing the “buy now” button brings up an in-app webstore that is directly connected to the online webstore of whatever company makes the product. The user then can either enter their information for purchase on that prompt, or have the application/website log their purchasing information for convenience

whenever the user wishes to purchase an item. The item is basically still purchased through the original webstore of the item, but Pinterest takes a commission of the item since they are essentially the salespeople of the product. Users could also have a ‘wishlist’ where the can create a log of items they want and build a shopping cart for later purchases. The webstore part of the application would essentially aggregate a large set of purchase orders for products and make purchasing a wide variety of products from various businesses a streamlined process through the application. The application could then use the user information, not to sell to other businesses, but to find products that the user might like based on their purchasing history (similar to Amazon). The application could also show items that may go with these products, or other items that said company sells.

If this goes as planned, Pinterest could also create a webstore that businesses could simply post listings of items on. This is of course more of an invasive and uncouth method of creating a marketplace, but if this aspect was mainly tailored towards small businesses and individual artists, Pinterest could make this much more of a ‘community’ focused aspect of its application. Currently, the channel of distribution for businesses of similar sizes to this concept is Etsy, where businesses and artists can post listings of their products for a small commissioned gathered. Etsy doesn’t nearly have the economy of scale that Pinterest does, and it certainly doesn’t have the assets of identifying user desires, wants, and needs to the extent that Pinterest does. Pinterest could effectively push Etsy out as the leader in online marketplaces for small businesses and artists. Pinterest’s visual social media structure is also extremely conducive to this concept since these products are typically focused heavily on art and design.

ConclusionPinterest currently has major issues with monetization, and

being a slow mover towards creating a viable solution to this is a huge threat to the company that leaves them open to copycats. Pinterest’s main issue with the four P’s of marketing is their product and place. Pinterest currently has assets created by having user-generated content aggregated into meta-data available for analysis, but they have no methodology for addressing this problem. Pinterest also lacks in a viable place to sell products, or at least in the case of Pinterest, be a channel of distribution that makes a commission off of the sale of products. In order to address these, Pinterest should adopt the Curalate software for creating trends that can be sold to companies, as well as creating a marketplace that Pinterest can generate revenue from based on commission. The combination of these concepts will

give Pinterest a strategy towards monetization that will eliminate much of the potential threats against the company.

Works CitedImages:Fig. 1. http://blog.mainstreethost.com/wp-content/uploads/2012/10/Pinterest-Home-Page.png

i http://thehistoryofpinterest.blogspot.com/ii http://en.wikipedia.org/wiki/Pinterestiii http://www.nytimes.com/2015/03/17/business/dealbook/pinterest-valuation-at-11-billion-after-new-round-of-fund-raising.html?_r=0iv http://thehistoryofpinterest.blogspot.com/v http://thehistoryofpinterest.blogspot.com/vi http://thehistoryofpinterest.blogspot.com/vii http://thehistoryofpinterest.blogspot.com/viii http://thehistoryofpinterest.blogspot.com/