Yahoo Finance Pinterest Files for an IPO: What Investors Need to Know
Pinterest this week became the latest tech unicorn to file for an IPO. The photo-sharing social media app is seeking a valuation of at least $12 billion, according to The Wall Street Journal (paywall), that would match its valuation from mid-2017, when it raised $150 million. That valuation would also match the current market cap of Snap (NYSE: SNAP) -- owner of another photocentric social media app, Snapchat.
But will Pinterest have a trajectory that more closely resembles that of Snapchat or Facebook's (NASDAQ: FB) Instagram? Let's take a closer look at the company and how it fits into the social media landscape.
Image source: Pinterest.
How does Pinterest differentiate itself?
Pinterest encourages users to follow accounts and topics that reflect their interests in a manner that is similar to Instagram. But where Instagram users might share a photo they took of a meal they ate and describe how great it was, Pinterest users might "pin" a photo of a meal they ate or want to make that links to a separate website where they found the recipe.
In this way, Pinterest is even more of a discovery platform than Instagram, and it's capable of driving traffic to websites organically. As such, the social media site can provide direct-response ad products that fit in with users' normal behavior on the platform. In comparison, most Instagram or Snapchat content is designed to keep users within the app instead of sending them to another website.
Facebook has been touting the potential for commerce on Instagram. It's even reportedly working on a stand-alone Instagram shopping app. Snapchat is working to make it easy to find where to buy items users see in the real world just by taking a photo. Meanwhile, retailers and influencers have been promoting items including clothes, accessories, and self-care products on Pinterest for years. The company introduced a "buy" button in 2015, and it's one of the few instances of social commerce that actually works. The company expanded the product in October to further simplify the shopping experience from the platform.
Pinterest's ability to easily drive traffic to other websites makes it appealing to marketers and advertisers.
Taking a look at the competition
Pinterest is most similar to Instagram and Snapchat. While their parent companies don't provide exact comparable statistics on their respective apps, the data can help us gauge where Pinterest stands.
Snapchat | |||
|---|---|---|---|
Monthly users | 250 million | 1 billion | 267 million* |
2018 revenue | $700 million | $8.9 billion* | $1.18 billion |
2018 revenue growth | ~50% | 107%* | 43% |
*estimate
Data source: New York Times, Facebook, KeyBanc Capital Markets analyst Andy Hargreaves via Recode, eMarketer, Snap.
Instagram is way ahead of the game financially, bolstered by the advantages of having Facebook as its parent company. Pinterest and Snapchat are similar financially and exhibit comparable revenue growth rates. Pinterest's revenue base is still significantly smaller than Snap's though.
That gap might start closing this year. While Snap hopes to kick-start its revenue growth over the next four quarters, its first-quarter outlook calls for a continued slowdown to just 24% to 34%. Snap is still struggling to attract new users to its platform.
Conversely, Pinterest has steadily added 50 million new users to its platform about every 12 months for the past few years. While that's not quite as fast as Instagram has grown, it's still quite impressive and bodes well for the future growth of the business.
Although Pinterest's current financials look a lot like Snapchat's, it has the potential to look more like Instagram in the future. By seeking a $12 billion valuation, which is comparable to Snap's, Pinterest's IPO is worth paying attention to. The company is currently targeting a June market debut, so the Securities and Exchange Commission should release Pinterest's confidential S-1 filing details sometime in May, and that's when investors can really dig into the offering.
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Randi Zuckerberg, a former Director of Market Development and Spokeswoman for Facebook and sister to CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.
