Item — HN Reader

The visual scrapbook platform should be printing money. Its predominantly female audience browses Pinterest's various boards for inspiration about their next fashion purchases, vacation destination, or on how to decorate a house — and they also act as free brand representatives by "pinning" their favorite products, making them visible to others.

It may come as a surprise to some, but making money is not important. That's why so many people lost their shirts shorting the 'unprofitable' Amazon.com

Rather, it's the the demonstrated ability to make money, which is more important. Should the time come to turn on the advertising money printing press, Pinterest and Snapchat, like Facebook, should have no difficulty making money. There's already a huge line of advertisers ready to plow hundreds of millions of dollars into Pinterest ads. Investors are patient, knowing that Pinterest will start printing money when the time is right. But right now, Pinterest is still building the userbase and perfecting their ad platform. Like Facebook, Pinterest's profit margins will be extremely high, and it would not surprise me if this company is worth $50 billion soon. But right now, Pinterest, like many web successful web 2.0 companies, is more interested in taking its time to build positive user and advertiser experience, than milking every user for every last dime.

4 comments

Demonstrated ability to make money is usually demonstrated by actually making it though. I mean, the most obvious point for comparison in revenue growth figures at the same point in their history would be Twitter, and I don't think there are many people who backed its IPO that feel it's lived up to its promise after turning the money tap on. Just because Pinterest's revenues will grow sharply over the next three years doesn't mean it isn't overvalued and under-monetised for its age.

Amazon told investors they'd have to wait because the internet was in its infancy, and profits would taken even longer because they were reinvested in building logistics operations but they were doing a billion in revenue by their sixth year, even as the rest of the dotcom world crashed around them because not enough people were online yet. Facebook's management were decidedly unfocused on revenue, in an era where the idea of socially targeted advertising was a relative novelty, but it was also fast approaching a billion in revenue by its sixth year.

Pinterest's entry into a much more mature market should in theory mean fewer problems to solve, it's probably maxed out the "US women" niche that's the core of its value proposition to advertisers, and those advertisers are not impressed with its attempts to "build positive experience" for them. Seems a bit optimistic to compare it with other companies that achieved much higher revenue after six years in more difficult circumstances.

> Investors are patient, knowing that Pinterest will start printing money when the time is right.

Someone isn't patient, otherwise this article wouldn't have been written.

Not necessarily. It's trendy these days to bash unicorns.

This whole VC mentality of a company having to explode with growth reminds me of shows about the old day traders snorting coke and running out on the trading floor, crushing deals.

It seems short-sighted and aimed only at huge payouts for the early investors- no consideration or thought of building a brand that people will love 50 years from now. They want their payout NOW!

There is time value of money. Opportunity costs, for example if a VC could invest in company x that is growing at rate y instead of pinterest. Also VC raise rounds for a fixed number of years so they need to cash out.