We live in a world where social media is everywhere, allowing people to share their lives and their thoughts with others. While the likes of Facebook and Twitter have come under significant criticism of late, the same cannot be said of the latest Silicon Valley “unicorn” in the shape of Pinterest. The company was floated on the US stock market early this week and the shares immediately leapt by 25%. So, is the Pinterest story different from Facebook and Twitter? Will the company avoid the latest raft of criticism hitting the social media sector?
What is Pinterest?
The best way to describe Pinterest is a digital scrapbook which allows users to pin pictures, recipes, images and much more onto their account page. They are then able to share these images with friends, family and other interested parties and so the network widens. At this moment in time the company boasts 250 million active users a month and in official documentation it is stated that the company reaches “8 out of 10 moms” in the USA. So, will Pinterest be any different from other social media companies? Will the shares perform better than recent “unicorns” such as Lyft?
Constant growth over the last few years
For some reason advertisers feel more at home on Pinterest than they do on the likes of Facebook and Twitter where users are more vocal and seem to attract more controversy. Pinterest revenues have increased by 60% between 2017 and 2018. The company also reduced net losses in recent times to just $63 million which reflects extremely well compared to other similar companies such as Snap with recent losses of $515 million.
The main difference between Pinterest and other social media type companies is the way in which the company has been run. Chairman Ben Silbermann (also a co-founder) refused to take on the quick fix solutions that other social media companies chose. Instead the company was slowly but surely developed “the right way” with reluctance to simply throw money at any issues which arose.
Billionaire founders
The three founders, two of which are still involved with the company, are paper billionaires overnight and certainly benefiting from a more cautious approach taken since inception of the company. We live in a world where investors want profits now, are unwilling to invest for the future and will sell off at the slightest inkling of a short-term slowdown in sales. However, technology investors seem to have taken a different approach to Pinterest.
What does the future hold for Pinterest?
The company was valued at just over $12 billion at the IPO price of a $19 share and after the first day rise was valued at in excess of $15 billion. Whether this is a sea change in the way investors look at technology companies remains to be seen. Pinterest has taken its time, refused to throw money at issues with no real strategy and gradually built up significant confidence with advertisers. The advertising angle is very important to social media websites/businesses as we have seen with the likes of Facebook and Twitter.
Yes, Facebook and Twitter have a far wider reach than Pinterest but this company is more focused and seems to have a better reputation amongst the advertising community. Time will tell whether the shares will succumbed to profit-taking after their sudden surge. However, whatever happens this is a well-run well respected and growing company. How many other technology outfits can boast that?