How much money would you pay for a company that allows you to post pictures linked to a web page? Would you pay 10 million? Would you pay 100 million? You are probably thinking I am crazy if I asked you if you would pay 1 billion dollars. You have to understand that this company is not making that much money, and if you think 1 billion is too much check this out. Pinterest, their scrapbooking website is seeking an 11-billion dollar valuation with another round of funding. Where does all these sky-high figures come from? What is fueling this idea that this company is worth, what, 11 billion dollars? It all boils down to that magical internet metric: website visitors.
All told Pinterest’s unique U.S. visitors reached an all-time high of 75.8 million last January. This is a dramatic 37% improvement from its January 2014 performance. This is not a number directly from Pinterest, this is from a third party source. This is going to be an interesting company to watch because it is still unclear whether its advertising technology can fully monetize its traffic. Don’t get me wrong. Pinterest does have a tremendous potential. It is visited primarily by females who are looking to buy fashion accessories, clothes, and other items. This is a very lucrative demographic. However, you have to play this demographic right.
For the longest time, affiliate marketers were just simply milking Pinterest for revenue because they were simply linking pictures directly to their affiliate links. Well, recently Pinterest changed that policy and is no longer allowing such linking. I suspect that Pinterest will move to milk as much ad revenue from its lucrative traffic base as possible. If I was the head of a venture capital firm approached by this company, that is the very least I would insist on.