Pinterest has gathered a lot of interest of late, with news around its impending IPO emerging every few months. The company had originally planned an IPO in 2018, but reports suggest that it now plans to go public in 2019, after it missed its 2017 revenue estimates. In its latest funding round in 2017, Pinterest was valued at $12.3 billion. However, with a strong growth in users and revenues, Pinterest could potentially command a much higher valuation if the company goes public next year.

Our interactive dashboard analyzes Pinterest’s key metrics and compares them to Twitter and Snap, the smaller (non-Facebook) to evaluate how much Pinterest could be worth. We encourage you to modify these assumptions to arrive at your own valuation of Pinterest.

Pinterest has around 200 million monthly active users currently, and this number has doubled from 100 million in 2015. While the growth in users has been exponential, Pinterest still lags behind Twitter’s 330 million monthly active users for 2017. It should be noted that Snap reports daily active users, and its DAU count for 2017 was 171 million.

However, Pinterest’s user base is strong and engaged, and this is likely to be a key factor in driving revenue growth and valuation.

 

Pinterest’s revenues in 2017 were around $473 million- lower than its $500 million expectations, and much lower than Snap ($827 million) and Twitter ($2.4 billion). Despite a strong and engaged user base, Pinterest has not been able to monetize its platform effectively, relative to the social media players. The key to its valuation in the next two years will be its ability to grow revenues significantly by attracting advertisers through a strong value proposition.

In 2015, Pinterest’s internal revenue target for 2018 was around $ 2.8 billion. The company also targeted a monthly active user base of 329 million by 2018.  These targets look extremely ambitious, given that Pinterest  only generated revenue of $473 million in 2017. Our dashboard projects Pinterest’s revenues based on its historical trends and outlook, and forecasts the company to generate revenues of around $750 million in 2018. With a revenue multiple of 25X, these revenues would give Pinterest a valuation of around $19 billion.

Our scenario shows how Pinterest’s valuation can be impacted if it is able to generate an average revenue per user in line with Twitter and command a revenue multiple in line with its peers. You can modify any of these assumptions – revenue per user, user base, revenue multiples, and more – to see how the company’s valuation would be impacted if the key drivers change.

 

 The below charts show how Pinterest’s valuation could be impacted by its ability to generate higher revenues, and a scenario where it can eventually command a $30 billion valuation.

The key to a $30 billion valuation for Pinterest would be a significant increase in revenue per user by attracting more advertisers to its platform. While data around the company’s key metrics is limited, sources suggest that Pinterest might already be profitable, with gross margins higher than 45%.

The company is taking several steps towards increasing revenues, such as the visual discovery technology unveiled in 2017. This tool for advertisers will allow more relevant ads based on the user’s image search, and could potentially improve the return on investment for advertisers. Pinterest is also looking to spend more on sales and marketing to publicize its unique value proposition for advertisers.

Pinterest’s users usually have a particular product in mind that they want to purchase, which makes the platform very attractive for advertisers. The platform has high engagement levels (average time spent per visit is 34 minutes) and 63% of millennials in the U.S. said that the website helps them discover new brands and products to buy. There are more than 2 billion searches on Pinterest every day, and 55% of Pinterest users shop on the site.  This differentiates Pinterest from other social media platforms since its users are likely to be focused on specific products, which could make them a better audience for advertisers. If Pinterest is able to exploit this advantage and grow its revenues significantly, a $30 billion valuation could be possible in the future (though not likely for at least a few years).

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