Pinterest readies $1.4-billion IPO with anti social media marketing campaign

The logo of mobile app “Pinterest,” shares of which are expected to start trading Thursday on the New York Stock Exchange.
(Lionel Bonaventure / AFP/Getty Images)

Pinterest Inc.’s message to investors: Don’t compare us to social media or a search engine.

But as it wraps up a short roadshow and gets ready to list shares as soon as Thursday, such a comparison could help Pinterest drum up demand amid a flood of new listings this year.

Pinterest operates in a crowded digital marketing space, where Google and Facebook Inc. get the lion’s share of advertising dollars, and a smattering of smaller platforms like Twitter Inc. and Snap Inc. get the rest.

The San Francisco-based start-up, which serves as a sort of digital bulletin board for pictures and ideas for furniture, fashion, weddings, recipes and more, has a direct line to millions of people who are online looking for specific things to buy. That gives it an edge in making money from its user base compared with some of its peers.


Chief Executive Ben Silbermann likes to project a more virtuistic, less competitive vision of Pinterest, but investors will still be scrutinizing its advertising model when they decide whether to buy in.

There are a lot of options for investors who wanth to place bets on hot technology companies: IPO heavyweight Uber Technologies Inc. is likely to list its shares in May and ride-hailing company Lyft Inc. made its debut earlier this month but has since seen its shares fade, which has dulled some of the hype over money-losing unicorns.

Videoconferencing company Zoom Video Communications Inc. is pricing its shares Wednesday and will begin trading Thursday along with Pinterest. Slack Technologies Inc. and Postmates Inc. are expected to follow soon.

Pinterest is raising at least $1.4 billion, selling shares for $19 apiece. It could raise more if underwriters exercise their option to purchase additional shares. At that price, the company would be valued at about $10 billion, less than the $12 billion valuation it had in its last private funding round in 2017. Zoom boosted its IPO price to as much as $35 a share. A rare example of a profitable tech start-up launching a public listing, Zoom could seek a market valuation of almost $9 billion.


Pinterest has taken a slow and steady approach to growth and making money from its service compared with the faster expansion rates of Facebook, Twitter, and Snap when they went public. Analysts expect revenue will probably come more from squeezing additional ad dollars from the base of users Pinterest already has rather than growing its total audience.

Despite Pinterest’s efforts to distance itself from the label of a “social media company,” analysts say it can be a useful benchmark for valuation. According to James Cordwell, an analyst at Atlantic Equities, Pinterest is worth as much as Snap, about $16 billion, and could be much more.

“The ability to monetize that audience is much higher,” Cordwell said of Pinterest. “When you’re at Snap you’re in the business of communicating with friends or wasting time; when you’re going to Pinterest there’s high purchasing intent: you’re planning something, looking for a product. That’s exactly what advertisers are looking for.”

Cordwell gave Pinterest its first bullish review last week with the equivalent of a buy rating. He set a 12-month price target of $23, implying the company may return as much as 53% if the IPO prices at the low end of its expected range, or $15.

Pinterest calls itself a “visual discovery” platform for people to get ideas for different aspects of their lives, whether that’s curating a wardrobe, planning a vacation or wedding, or furnishing a new home. In a video to investors, Silbermann illustrates why Pinterest is unique. He describes social media platforms as a way to document the past and entertain oneself; while Pinterest is a “utility” for future activities.

“Social media at its best makes you feel socially validated, while Pinterest at best makes you feel creative and empowered to act,” Silbermann says.

It’s not like Google either. Silbermann says Pinterest users often don’t have exact words to describe what they’re searching for. For instance, if someone is looking for inspiration for home design, they may not know what to type into Google, but if they were to see images proposed to them in Pinterest, they’d be able to identify what they liked, and “pin” it to their online board of ideas.

Pinterest said in its IPO filing that it reaches more than 250 million monthly active users, two-thirds of whom are female. That includes 43% of internet users in the U.S. and 8 out of 10 moms. Pinterest highlights that statistic as an advantage over other platforms, given that mothers are “primary decision-makers when it comes to buying products and services for their household.”


Ali Mogharabi, an analyst at Morningstar Research, says Pinterest’s appeal can help it attract more online ad dollars and ``opportunities exist’’ for it to gradually increase its share of the $500 billion global digital advertising market.

“While we don’t expect Pinterest to displace online advertising behemoths Google and Facebook or up-and-coming Amazon, we do expect it to attract a small pinch of digital ad spending,’’ said Mogharabi, who expects a 35% compound annual growth rate for Pinterest through 2023, partly driven by the digital advertising market.

In a dig at social media services, Pinterest made its position clear in its video to investors that ads are a tax to the user on social media. Even if the item is relevant, people aren’t interested in seeing an ad for a pair of shoes they may have looked at casually a while back when they were trying to talk to their friends. In contrast, when people are looking to make a purchase, the ads can be helpful. If a mother were browsing through baby carriages, an ad for one would be useful, not invasive. Plus, it means there’s a higher likelihood she will click on the ad.

“Pinterest should have among the most valuable ad impressions, second only to the Google search ad,” said Andrew Lipsman, an analyst at EMarketer. “You could argue that Facebook is also an amazing ad unit, but the fact that I’m talking about Pinterest in the same breath as Google means it has real potential.”

One of the primary criticisms of Pinterest is that the majority of its user growth is coming from international markets, where the average revenue per user is much lower than in the U.S. In 2018, more than 80% of new users were from outside the U.S. but they generated about 25 cents per person compared with $9.04 for those based in the U.S. Investors will have to decide whether the company will be able to bring its international revenue in line with that in the U.S. For comparison, Twitter now generates about half of its revenue from foreign countries.

Investors are also aware of the potential threat that Instagram poses. The company just started testing a new shopping feature that allows people to buy things they see directly through the Instagram app.

On the other hand, Pinterest may also benefit from the heightened global scrutiny of Facebook, Google’s YouTube and Twitter as those platforms struggle to remove hate speech, violent content and misinformation. Advertisers are very dependent on Google and Facebook, but, “I think you’ll see brands reduce their spend and diversify, when you see how sentiment has shifted against those platforms.” Lipsman said.

“Pinterest is one of the few friendly corners of the internet,” he said.


Wang and Zaleski write for Bloomberg

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