Pinterest has shied away from identifying itself as a social network and yet has identified social media platforms as competitors.
The technology behind Pinterest’s photo-sharing app is an advanced search engine and image recognition software that uses machine-learning which it says helps set it apart from its competitors.
Chief among its competitors are the likes of Google and Facebook who have more financial power, which may explain why Pinterest decided to launch its IPO now.
Revenue has increased healthily over the last three years, rising from $298.9 million in 2016 to $472.9 million in 2017, representing an increase of 58.2% year-on-year.
Annual revenues increased further in 2018 by 59.9% to reach $755.9 million. Though costs have been rising, the company’s net losses have reduced gradually to $63m.
The company admits in its S1 filing with the US Securities and Exchange Commission that it is in the early stages of monetisation and scaling its revenue model. While management does not offer assurances the revenue model selected for going public will be successful or generate revenue growth, the company is being realistic in its expectations which should help attract long-term investors.
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Dependence on advertising business model creates vulnerability
Recent financial results have revealed plenty of facts about the company and its users. There were 265 million active users in 2018, with two-thirds of them women. In the US, Pinterest commanded 43% of unique internet users, highlighting a huge prospect for advertisers, and therefore an attractive opportunity for investors.
Increases in ad-blocking technology is a huge concern for Pinterest. The company generates all of its revenue from adverts, so consumers using ad-blocking software embedded into their internet browsers will affect revenues, as fewer consumers will be subjected to paid advertisements.
Search engines like Google are able to internally alter how people access results within Pinterest. In early 2018, Google de-indexed Pinterest keyword landing pages, making it more difficult for the company to monetise its adverts, as many users were negatively affected by the world’s biggest search engine.
The success of the IPO is why it is important Pinterest strengthens its brand image, so people don’t have to use the likes of Google to access its website.