Pinterest Raises $225 Million at $3.8 Billion Valuation
allthingsd.com
allthingsd.com
At what point will my personal decision to opt out off the leading social networks (Twitter, and LinkedIn to a lesser extent, are exceptions) start affecting my professional insight into where the Internet and the bulk of its users are headed? I frankly don't know.
I rationalize the renunciation of social media by remembering that I'm looking to build something incredibly innovative. And to build something incredibly innovative, it helps to (first) step away from the crowd, (second) find a boon, and (third) bring it back.
I think you can worry about the crowd after the first 2. At least then you have direction amidst the chaos.
Internet, at its root, is a communication medium. Things like facebook, google+, pinterest, snapchat, etc. are part of a VERY natural evolution of this medium.
Being part of the chaos doesnt mean you cant see order amidst it. That's where great entrepreneurs come from. They dont go away from all society and magically, one day, reappear with a brilliant idea. They are in the middle of the chaos, figuring out what works, why it works and how to make it work even better...
I guess that begs the question: how is a web app that reposts content that doesn't belong to them and with zero revenue a "$3.8 billion company" again? I won't accept any answer from an investor or web "entrepreneur" type that has everything to gain from cashing in. The real lesson here is speculation and shortsightedness never changes and this is 1999 all over again.
Looking forward to the coming IPOs of Pinterest, Snapchat, Rap Genius!
It turns out that EVERY SINGLE TIME someone builds a product that zillions of people love in an enduring way, they are able to hire world-class value-extraction experts who can make zillions of dollars.
Pinterest has the extra advantage of intent-- shoppers pinning products that they want/love gives Pinterest a lot more power to advertise cleverly than Facebook/Twitter. Unsure about Snapchat and RapGenius, but the key question is "With that audience and that growth, what could the smartest people in the industry turn them into if they were armed with functionally infinite spending money?"
Ad-ridden, privacy-destroying malware I'd imagine. Since that's all the "smartest people" in the biz are working on: getting people to click ads and subverting the web.
The Facebook Jr's out there won't like to hear it but that's the cold truth.
I was commenting on the revenue potential, not the ethics or quality of the product at the end of the process.
That said, I still love Google Search-- it's nigh magical how it shortens the distance between my brain and the answers it craves at any given moment. And I still watch youtube (yet another service that some said would never make money), even with the ads. And I still use Facebook to stay connected with friends while I travel the world for the next 6 months or so. I don't see any (present or future) privacy consequences with these services, and the ads hover right around the "tolerable" range.
You can take your pick here and see what's most important to you: http://pleasedeletefacebook.com/
The consequences range from enabling the surveillance state, data theft, NSA slurping, job loss, employer intrusion, bullying, lowering of credit scores, depression, stalking, jail.
These are some interesting ones to name a few:
http://www.npr.org/blogs/alltechconsidered/2013/07/03/198129...
http://money.cnn.com/2013/08/26/technology/social/facebook-c...
http://www.schneier.com/blog/archives/2013/06/finding_sociop...
http://yro.slashdot.org/story/12/07/13/1247257/facebook-scan...
> Doesn't take many of those for wholesale evacuation of Facebook, does it?
Sadly, I wouldn't bet on it.
It's still legitimate to question whether or not a company with no revenue is worth $3.8 billion.
Pinterest is a digital representation of exactly that page, but now anyone can be the curator (not just Cosmo) and more importantly, it has the ability to make the buying process more frictionless. You want the hat, sunglasses, and skirt? Great, just click the button and buy.
A bridal magazine curated by your bff is not just a bridal magazine.
I think people really underestimate the impact of purchase intent, and overestimate the impact of value propositions that work with women.
Even though I would have wanted a new kitchen as well I would have negotiated with my wife to allow me to spend some of the money from selling my company (you know what I'm referring to) on a fast car or other similar toy while she was distracted with the joy of the new kitchen. And before the bathroom is torn up down to the studs.
That said it provides no where near the enjoyment that playing with computers does or negotiation (which is fun and a game for me). Both I never get tired of. Had a boat for years but I would get bored if I used it more than every week or two. (Sold that). I'm renting out a vacation place since I only used it twice over the summer. Same thing tired of it at this point.
I get more thrill out of writing a shell script that automates something than from driving the car.
But people who see the car (especially younger guys on the way up) think it's the greatest thing in the world.
The best I can do with it on the local road is say hang at 15mph and take it to 75 which gives perhaps 2 to 2.5 seconds of thrill. (Not going to go from a dead start and burn the clutch or wear tires or anything). Once at 75 you are done. I could take it to a track but that is miles away and well I don't want to put to many miles on the car.
Come to think of it cooking is more fun as well.
Him: "You live in San Francisco. What do you need a car for?"
Me: "Loving, mostly."
I get more enjoyment out of having and caring for and loving the car than driving it. But that sort of love does diminish when I start to covet other models or newer model years.
The question is whether they can monetize despite lack of purchasing intent (as compared to Google, Amazon, Yelp, etc). However from some anecdotal evidence[0], it appears that growing revenue may not be as difficult for Pinterest as it is for Facebook or Twitter.
I'm pretty bullish on Pinterest, and a $3.8B valuation doesn't seem out of line compared to Twitter ($20B) and Facebook (~$80B pre-IPO), Instagram ($500M).
I have less purchasing intent while browsing Pinterest than I do while looking at Yelp or Amazon (or Etsy), but I spend more time on Pinterest than on shopping sites. I've bought several things I had originally pinned just because they were interesting and then later realized would make a good gift for somebody.
If I were to sort social media properties by purchasing intent, I'd put pinterest near the top - certainly far above facebook or twitter, probably above google too. Still below Amazon, but Amazon is also not fundamentally social, whereas Pinterest is.
(1) https://blog.shareaholic.com/social-media-traffic-trends-10-...
Works for Google, Facebook, Twitter!
1Bi for Instagram seems excessive as well, but well, looks saner now.
There is also another segment that Pinterest appeals to and it's massive: women. Pinterest is used by a lot of women to create wishlists and curate their own look collections. My girlfriend has an avid interest in vintage clothing & decor and the TV show Mad Men and she uses Pinterest to create outfits that match those of the TV show. But not only that, she uses it as a shopping basket/wishlist of sorts and that kind of data is surely valuable. I know for a fact she has made purchases as a result of collections she has created on Pinterest, more times than I can count and I assume many other people have as well.
Many might not see the appeal in what appears to be from the outside an over-glorified image collecting service, but it's obvious it's a lot easier for Pinterest to make money in comparison to the likes of Facebook which currently struggle with monetisation. Don't underestimate Pinterest.
It really failed on all levels for me. It's just boring. The content is sooo mediocre.
Their service is trivial, and can't scale. They have a great user base, but I can't imagine them moving in the right direction. At the moment, it looks like a glorified wishlist.
At one point, the paradox of choice will kick in, and they'll realize that too much (without proper curation) is as bad as not enough.
I hope they will do the right thing (it's quite obvious what they should do), but I predict that they won't. They'll miss the big picture, focus on scaling in quantity (not quality), and burn through their money in no time. That's what happen to startups that think they have won.
But that's just my prediction. We will see what will happen.
In a world where Tumblr and Instagram hit star-studded exits, I would be incredibly surprised to see Pinterest fail.
Its probably not a coincidence that its also the only one that you can derive value from as a user without engaging in "social" mode. I bet Amazon will scoop them up like they did Goodreads - same sort of thing, much bigger niche.
There are a lot of websites with a lot of users but they die quickly too.
Somewhat similarly, USV has a well-known blog post detailing how they really liked the Airbnb team, but they "didn't get" the idea, missing out from investing at the seed stage in a multi-billion dollar company.
There is a reason that metrics (growth) and/or a stellar team are commonly cited by investors as being more important than (getting) the idea.
Notwithstanding that Pinterest is a great idea.
The money coming in to Pinterest at a $3.8 billion valuation is no different than the money that flowed in to Twitter in its round G financing.
Has it ever worked out badly when an invesor invested in a startup with insane metrics?
If a startup has insane metrics but you don't "understand" their secret sauce, it may still be a sound investment, but I imagine you'd ask yourself if it was too good to be true, or due to temporary conditions, or rigged data, or something else, since you lack the expertise to understand why the numbers are so good.
And a lot of more conventionally-minded investors look to truely understand what a companies value proposition and product is. If you could invest earlier in Pinboard, or a company which has found a revolutionarily cheap way to manufacture toilet paper - you know which one has a more steady and obvious demand, right?
Although SV, the YC/VC world, operates very different. Just a few ideas.
The most obvious example in recent memory is Groupon. They had insane metrics, huge revenue growth, and lots of adoption. The problem is that their value proposition was based on companies selling at a loss, treating it as a marketing expense, and then making it up in repeat business later. Many companies bought into that proposition at first, tried it, but then the repeat business failed to materialize, and they vowed never to go near Groupon again. When Groupon exhausted their initial market, sales collapsed. Groupon may survive based on the smaller market of companies where their value proposition holds, but they aren't going to meet initial investors' expectations.
An older example would be online retailers like Webvan and Kosmo.com that sold below cost, hoping to make it up in volumes. Here the problem is that the investors were looking at the wrong metric; the stocks climbed to astronomical heights based on userbase and revenue, but the key metric for a retailer is operating margin, and this was negative for these companies.
I disagree. Metrics only indicate what people think they want, not what they need. Metrics are only accurate if you look for trends. Long-lasting businesses don't rely on trends.
> In a talk at Startup School 2012, he said that he "didn't get" Facebook.
Facebook, just like AirBnb, make a lot of sense. You don't need metrics to understand that.
The big problem with most investors today (not all of them) is their mindset and lack of vision. They're sheeps, just like everybody else. The only difference is that they had success and experience, which skew reality and reinforces old ways of thinking, which they try to apply to future investments. It doesn't work that way.
Do you want to live in a world where investors all throw their money at the next Instagram? Or do you want to live in a world where they invest in the next Xerox Parc?
People used to have dreams, people used to have big ideas. Now, it's all about quick money. Heck, the goal of many startups now is to get acquired by larger players. How sad is that?
Pinterest is not an awful idea, but unless they have a larger vision in mind, they're going nowhere.
This really does not make any sense. Metrics as a general concept can and do encapsulate all the positive things you just mentioned (long-lasting value, what people need, etc). Just because a subset is shitty/misleading does not invalidate my argument. Obviously an investor must sift shitty metrics from good metrics, and shitty teams (that appear good) from good teams.
> Facebook, just like AirBnb, make a lot of sense. You don't need metrics to understand that.
Firstly, hindsight is 20/20, so that's easy for you to say. Obviously everyone now believes Facebook is a good idea; the same is not true back in 2004. Good investors recognize that they cannot necessarily tell the good ideas from the bad ideas, so they focus on team/metrics. The most revolutionary ideas typically seem like bad ideas.
> Do you want to live in a world where investors all throw their money at the next Instagram? Or do you want to live in a world where they invest in the next Xerox Parc?
You have not provided a reason we cannot have a world with both. Those are not mutually exclusive.
How does week-on-week or month-on-month growth encapsulate "long-lasting value", or "what people need"? I'm not seeing the connection.
But to say that Pinterest is a novel and future-resistant shopping interface is foolish. We can do much better than this. It reeks the web 2.0, where content has no meaning.
Links, captions and pictures? Come on, any 12 year old has the ability to produce a better system than that.
Curation is done like subreddits. People have their own pinterest boards. Like Reddit, only the front page is nonsense, but if you have a specific interest, you can find a subreddit/board for it.
Basically I use it like NotCot on steroids.
The reason is that there's a strong purchasing intent associated with Pinterest. Facebook has trouble monetizing because the intent is social; when you inject commercial posts into a social stream, people get turned off. Pinterest focuses around projects that people want to do, and it's very typical to need to purchase supplies for a crafting or home improvement project. They can monetize very easily without pissing off their userbase, and their total potential market size is huge. They may rival Google someday; much of Google's revenues comes from a very similar market.
Not all value comes from purchasing goods.
In other words, Pinterest is a fad. However, "things" (which are a big part of Pinterest) will become the next big thing.
The future "next big things" in tech/web is quite obvious:
- Facebook for Things
- Personal inventories
- Decentralized "semantic" marketplace
- Smart contracts
- Task management everywhere (the future of operating systems)
- The death of privacy
- Cryptocurrencies
- Personal democracy (filter bubble on steroid)
- Universal "trust" score
- The death of the government (at last)
Of course, all of this is intuitive speculation. But I wouldn't be surprised to be right. Actually, it would be surprising if I were wrong.
NSA has that market cornered!
It's all too easy to dismiss a service of which you are obviously not the target market. How can you honestly say Pinterest aren't worth what investors think they are? Did you see those engagement metrics? Facebook which is arguably the most active social network currently in existence has nowhere near the level of engagement Pinterest does.
The strong purchasing intent coupled with invaluable data that companies would be clamouring for on what consumers like and what they don't is MASSIVE. Pinterest needs to exploit and utilise their massive trove of data and continue growing it and I think they'll eventually beat out Facebook.
People were once proclaiming that Twitter was a fad too, look them now...
Google in 1998: "Their service is trivial, and can't scale."
Linkedin in 2003: "Their service is trivial, and can't scale."
Facebook in 2004: "Their service is trivial, and can't scale."
Twitter in 2007: "Their service is trivial, and can't scale."
I can give you an equally invalid example of failure bias: Groupon, Friendster, Myspace, Digg, Zynga, etc
Friendster failed because users migrated, ditto Myspace, Bebo and whatever else. Even Diggs downfall could be partially attributed to the ready made life boat of Reddit.
I've found it can be helpful for research too as just an organizational tool. For example I'm building an LED display so I've been collecting useful links or cool applications of LEDs on a board.
Here's my pinterest if you're interested:
My sister loves it, I however could never get into it.
"Investment in the core Pinterest service, especially mobile which has grown 50% since the beginning of the year to become more than three-fourths of all usage"
from:
http://allthingsd.com/20131023/explaining-what-its-going-to-...
Curious that they're raising so much after having just raised $200 million in February. What are they planning to do with all of this capital?