Why Pinterest has a unique business model

When it comes to rankings of the most popular social media platforms worldwide, Pinterest belongs to the group of the largest and best-known platforms along with Facebook, Twitter, Instagram, Snapchat, Linked-In, etc.

Interestingly, Pinterest clearly is much more than just a social media platform. Then why Pinterest’s Business Model is unique and attractive?

What is Pinterest? It is an image sharing and publishing service which allows its users to “pin” pictures and upload recommendations on “pinboards”. The services resp. applications are designed to enable the discovery and sharing of ideas and information. And here we see a crucial difference for instance to other social media platforms.

On Pinterest, it’s to a great extent about creativity and ideas. You don’t share news or opinions in the first place (unlike Twitter or Facebook). If one wants to find inspiring ideas and great images about her/his hobby like home improvement, fashion, recipes, etc., well, then Pinterest is definitively the place to go.

Pinterest became a huge library for ideas. Its users can visit other “pinboards”, they can “re-pin” pictures to their own “pinboards”, they can “like” photos and connect with other users.

Pinterest has inherently a huge economic moat as its very platform- and service set-up and design is absolutely unique. Or do you know any platform that works the same way and offers the same user experience?

Pinterest’s co-founders once said that the platform might become “the last positive corner on the internet”, and there is great truth in that. It’s that positivity and focuses on creativity that is extremely appealing which can be seen with Pinterest’s highly engaged audience. People invest time and money in their passions, learning things, shopping, etc.

The platforms’ algorithms suggest more new pins based on the user’s interest and previous activities. And of course, that’s where the huge business potential lies, some of those suggestions can be advertising.

From a perspective of an investor, Pinterest for business is interesting due to its amazing growth potential. The company is relatively young, it was founded in 2010 and the monetizing venture really has just begun.

The platform is well established and running at full steam, user engagement is great and Pinterest visitors show an exceptionally strong buying power. Pinterest is increasingly venturing into e-commerce and will find ways to effectively monetizing its platform which at the core can be a very capital-light business model. Operating in a niche that shows explosive growth gives the company economies of scale and will Pinterest allow capitalizing on that in form of steady margin expansion.

You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

About Savy Fox

SavyFox is an investment blog that writes about various interesting investment topics and shares research and opinions with respect to Stocks, Peer 2 Peer Lending, or Crypto Currency investment opportunities.

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