[cletus]

Well I'm going to head off the predictable and boring "bubble" comments and say this:

Pinterest has real value and a clear path to monetization through affiliate and/or advertising revenue. It's really a stupidly simple idea (essentially scrapbooking on the Web) executed incredibly well.

Is it worth $1.5B? I don't know. I would say it's definitely worth more than Instagram for whatever that's worth (not a lot). I guess we'd need stats on number of active users, engagement and revenue to make that determination--something we're not likely to get.

The only concerning point to me is that that it's foreign money, only because foreign money seems to be less discerning, at least based on DST and similar investments.

Anyway, congrats to the team. They've done exceptionally well.

[stroboskop]

Well I'm going to head off the predictable and boring "bubble" comments and say this

Saying that predictably gets you upvotes for sure. But it's not about "bubble" comments being "boring" or not. The question is whether bubble claims have any substance. If they have, the bubble won't simply go away just because some people wish it would.

Is it worth $1.5B? I don't know. I would say it's definitely worth more than...

Comparisons like this are inflationary. It seems you really don't care about bubbles. But a bubble would affect many people here at HN.

It doesn't matter whether bubble comments are boring or not, it's about the importance of a bubble.

[heyitsnick]

Sounds to me like he just wants to add something different to the discussion rather that the inevitable "it's a bubble", and for that it made an interesting comment that deserves an upvote.

[madaxe]

Bingo. Valuations should be based on.... drumroll profits and retained value - EBITDA. When we started basing valuations on arbitrary "well if facebook are $100bn, X must be $y", we set sail for another glorious future of people losing their shirts.

Frankly, it just pisses me off - we're a profitable business which has grown 150% YOY for 6 years, and our value is barely £3M, based on our profits and growth. Why an infant company with little discernable revenue should have an astronomical value is beyond me.

[jon_dahl]

You're ultimately right, though future EBITDA (or future dividends) is more interesting than current EBITDA. Otherwise a pre-launch startup with no revenue and interesting technology would be worth $0, and a declining company with $1B of EBITDA would be worth the same as a growing company with $1B.

The question is whether Instagram can eventually contribute enough to Facebook's bottom line to justify the $1B valuation. Its current (lack of) revenues obviously don't get it there, but it's the future that matters.

[arethuza]

Valuations are based on what someone else might pay - and they might pay a few billion for Pinterest.

[grey-area]

That's precisely the sort of bubble economics that the parent was objecting to. The objection is to speculation as opposed to investment - investment expects a steady return based on real profits/assets, speculation expects a greater fool to come along later and pay more for this asset, regardless of what it might actually be worth based on revenue/assets alone.

In a bubble (tulips, houses, stock markets) there seems to be an unending supply of greater fools, until all of a sudden there isn't, and someone (who of course expected to find some other fool to sell to) is left picking up the tab for assets which are now close to worthless.

If your valuations are based on what someone else might pay in future, you are speculating, and will be lucky if you manage to get out before other people realise the assets you have bought are not worth $1B or whatever you paid for them. If on the other hand you bought because there is a steady income stream from an investment which will eventually pay off the investment and add returns, and thus underpins the price, you don't have to worry about whether this is a bubble or not.

[chucknelson]

Agreed. We can't justify these prices by going "well, that is the perceived value by population X, so it's OK!". Sure, market forces are fine, but when market forces start to be influenced more by hype and popularity than actual business fundamentals, we should shake ourselves and snap out of it.

This has already happened so many times in different markets and the SAME market in the late 90s. I guess it's human nature to just fall in the same trap eventually? Money makes us foolish?

[arethuza]

"If your valuations are based on what someone else might pay in future, you are speculating"

Isn't that what angels and VCs always do then?

[grey-area]

Pretty much, yes, though you could argue that the best ones speculate not on what others will be prepared to pay for a company in the future, but on what they think a company could earn.

Pinterest, Instagram etc will likely never earn enough to pay back their current crazy valuations, so their valuations are the first kind of speculation, not the latter. Personally I feel Facebook is also in this group, and is overvalued right now, given their current and likely future revenue.

[wtvanhest]

Frankly, it just pisses me off - we're a profitable business which has grown 150% YOY for 6 years, and our value is barely £3M, based on our profits and growth. Why an infant company with little discernable revenue should have an astronomical value is beyond me.

Having a £3M business is insanely awesome. If you want an answer to your question about why your business isn't worth $1.5B, please give detials on your business and people will surely tell you.

[strlen]

The other interesting part about Pinterest is that they mostly gained traction outside of the traditional early adopter segments.

Not sure any what's the right way to value this kind of company: obviously if it was an established public company, a $1.5b figure might be scary (as far as I understand Pinterest does not yet have revenue). However, it isn't: venture capitalists valued it this high, in the hopes that there's a realistic (compared to similar companies, funded at the same stage) chance that they will have a $7.5b-$15b exit.

It _would_ be a sign of bubble if Pinterest were to go public without revenue (which has happened during the 1990s) , with pension funds (that have a very different risk/reward profile from VCs) buying the shares. You could say "it's 1999 again" if as a result Sun (hey anyone remember them?), Cisco, and Oracle stock rose exorbitantly as a result of Pinterest buying a record number of servers, routers, and commercial databases (hey, remember when companies used to do that?) and their shareholders expecting (with great certainty) that there will be more and more companies like Pinterest sprouting up, i.e., that sales will keep growing.

I've only caught the tail end of the bubble (I had an internship in a startup junior/senior year of HS, 2000-2002 -- and participated in SVLUG, meeting folks who worked for Webvan, RedHat, Va Linux, et al).

I still remember just how differently it felt from today: for starters you couldn't drive from Sunnyvale to Fremont (over the bridge) without being completely stuck in traffic (as early as 3pm, and as late as after 8pm), and without driving past at least 3 or 4 Sun campuses.

Nowadays: there is still commercial real-estate in that area that is empty (including the former Sun East Bay campus, where manufacturing happened), the Dunbarton Bridge is fairly traffic-free even during the rush hour.

[k-mcgrady]

>> (as far as I understand Pinterest does not yet have revenue)

They use a service which scans all links on the site and where possible converts them to affiliate links (they don;t change affiliate links users have set). So if someone pins an Amazon product and another user clicks through and buys that Pinterest is getting a cut. So Pinterest is already making money. I have no idea how much but it seems like it could provide a decent revenue stream.

[andrewhillman]

I think they stopped using skimlinks a few months ago.

[joshuahedlund]

And they started stripping user affiliate links (at least to amazon) about a month ago (aka soon after the story came out about the guy spamming pinterest for thousands a day). I know, it's hard to keep up!

[k-mcgrady]

Wow, things move fast. I thought they only started using skimlinks a few months ago! Thanks.

[waterlesscloud]

There may be signs it's not a bubble, but is traffic one of them? Part of the deal now is that it just takes fewer people to run a startup than it did then.

[jdavid]

pinterest was profitable before the court case that made it more difficult to use skimlinks.

[Alex3917]

"Essentially scrapbooking on the Web"

A better analogy is probably delicious for women, at least in terms of having a mental framework to estimate the value.

[joshu]

oh, if only.

[zackzackzack]

^ This may be the hardest I have ever laughed at something from Hacker News.

Context: joshu founded Delicious.

[runako]

Or more neutrally (and accurately): delicious with pictures.

[Alex3917]

The userbase is 80% women, and the percentage of active users who are women is probably even greater. Not sure of the demographics of delicious, but I'd guess roughly the inverse.

Also, the fact that the userbase is mostly women is materially important in valuating the business, since female users are generally worth much more than male users.

[runako]

The functionality of Pinterest is gender-neutral. What makes it "delicious for women", other than that more women (in the US) use it right now?

According to Wikipedia, more men than women use Pinterest in the UK (https://en.wikipedia.org/wiki/Pintrest#Demographics).

[Alex3917]

IIRC in the US women drive about 80% of purchases, meaning each female user is worth several times what each male user is worth. In terms of communicating the value of the business to investors, the fact that the userbase is mostly female is arguably the most important aspect of the site.

[rudiger]

I've heard this figure cited before. Do you have a source? Also, is it true for online purchases, or just consumer spending in general?

[teyc]

+1 scrapbooking is a fad, bookmarking is a sign of interest.

[tommorris]

But I'd say Pinterest-style scrapbooking is a type of bookmarking, a visual style of bookmarking. And a lot of the things people get excited and interested in are at least in part visual: fashion, lifestyle goods, home and garden projects, wedding day stuff, arts and crafts, food and drink, cars etc.

I'm just looking at the comments on items on the Pinterest homepage: "Love this!", "WANT IT", "available now on Etsy", "Gift ideas", "can someone give me a link where i can buy it online". It's a veritable treasure trove of consumer information for people in the right markets. And it has just enough pictures of hot men, cute baby pictures and occasional silly memes to remain interesting.

Yes, it appeals more to women (and some gay men and arty types and so on), but in the right hands, it's a powerful tool for understanding and supplying the needs and wants of a significant market segment.

There's an interesting possibility for doing some kind of content partnership: imagine Pinterest TV, discussing all sorts of fashion and lifestyle stuff, with partnerships with existing media and retail brands - think Mumsnet or L'Oreal or Vogue or MTV...

[mtjl79]

I do agree with you - this possibly has real potential.

BUT I think they need more time to answer these questions:

- Is this a fad, or is Pinterest here to stay? - Can they really pump up revenues the way they think they can? And can they do it fast?

It's like buying condoms before the first date. (Sorry for the inappropriate inference.)

I just feel like they needed more time and history before pulling in these types of numbers.

[kenrikm]

It's like buying condoms before the first date. (Sorry for the inappropriate inference.)

Am I the only one that thinks that's a good idea? Seriously, people in cars cause accidents, accidents in cars cause people.

[AJ007]

When I first saw Pinterest's exponential traffic growth sequence, it altered the way I believed women think.

But at the end of the day, its just a very well executed image board, marketed to women. The concept in itself is not a fad, but they may need to add features that make a user feel penalized for moving elsewhere. (e.g. the network effect from Facebook, or a users library with Kindle)

[DanBC]

> clear path to monetization through affiliate

Pinterest tried affiliate links with Skimlinks. They didn't have a great time, and they've dropped skimlinks.

Personally, I think they should work out a way to try it again.

[kefeizhou]

These "bubble" comments may become self-fulfilling. Even if there's no substance behind the claims, enough talk of a possible bubble can shift investor and consumer mentality and end up causing a bubble down the line.

[zevyoura]

How does that work? I would think that people yelling "Bubble!" about any investment would decrease investor demand in that area, other than a minority of people who are dumb enough to think they can time an exit pre-bubble-burst.

[its_so_on]

Let me help you out with this part "Is it worth $1.5B?"

If you are left holding the bag, and they have to generate 1.5B in sales over their lifetime from this money to make it a worthwhile investment, then no: pinterest will never accrue 1.5B in revenue over its lifetime.

If you are not left holding the bag and this bubble keeps inflating, yes. It's easy to see how Pinterest can raise money at an even higher valuation with just a little more "spectacular" growth. (It's not really spectacular. More like a fad.)

[emmett]

On what basis could you not have said the exact same thing about Facebook 5 years ago?

[its_so_on]

I don't remember where I was five years ago and what Facebook was saying, but if you look at this graph http://en.wikipedia.org/wiki/File:Facebook_popularity.PNG at 2007, and remember what Facebook is (since day 1), it's pretty easy to see Facebook making the argument that it will be used by pretty much everyone, everywhere. It's pretty obvious that pinterest has no such claim. That is one such basis.

Other such bases include network effects that come with the whole Facebook model (what it is, i.e. social graph) and that in some way it may even be a "natural monopoly". (People completely miss this when comparing it to myspace, which was never a literal, programmatic social graph).

Finally, again I don't know where this was five years ago, but credibility and buy-in based on how Facebook rolled out (Harvard, universities, etc...) may have been a factor.

Also due to the Facebook model it doesn't make sense for ANYONE to start a profile on a site that doesn't have any profiles on it. It's all about having friends on there. By contrast, Pinterest has already been ripped off by the German Pinspire: http://www.readwriteweb.com/archives/pinspire_the_hottest_ne...

If I want to sign up on Pinterest, I can sign up on Pinspire and it still makes SOME sense. (As opposed to signing up to a competitor to Facebook when all my friends are on Facebook).

So, there are several bases that I could have used to put Facebook at a completely different valuation.

Mark my words: (you can bookmark this). Pinterest will not make 1.5Billion in revenue over its whole lifetime, unless the bubble keeps expanding and it gets at a similar amount of cold, hard cash to spend on customer acquisition: the "Groupon model". (Which I consider possible! See my comment you replied to. I am definitely not saying that it can't get another investment at a 50 billion dollar valuation and make the people who just invested 200 million very, very happy. Nor am I saying it won't be able to use the fifty billion dollar valuation. I am saying that, indeed, it depends on it - or will never be able to justify the 1.5billion valuation it just received.)

In other words, yes, I am saying that it will not be able to turn the 200 million it just raised into 1.5 billion cash over its whole lifetime, without raising more money.

You might disagree with me, but at least I am being direct and not wishy-washy. You can falsify me soon enough if you are right.

[jamiequint]

You're being pedantic about the 5 year thing, if anything Pinterest's current growth outpaces that of Facebook. At 2 years old they're sitting at somewhere around 30M users, even Facebook didn't grow that quickly (per your own graph).

In addition, Pinterest sits much closer to transactions than Facebook does. Facebook currently makes around $5/user/year, just given Pinterest's proximity to the transaction its relatively easy to imagine how they could hit a 3-5x multiple of that. It's feasible that Pinterest could hit Facebook style revenues at 1/4 of Facebook's userbase, and they are already 1/30th of the way there. With this investment thesis $1.5BN is a hell of a deal.

Right now I think there are only two real major risks (neither of which I personally believe to be true): 1. Pinterest may be a fad with no staying power. 2. Pinterest has a much smaller target demographic than Facebook and their growth may soon cap out.

With regards to your argument about Pinspire that's just bogus. There were plenty of Facebook clones that got early traction in other markets, none of them won.

You may be direct, but you're getting down voted because your 'argument' is nonexistent and lacks any real substance. (For one, no pure software company is taking a 1x multiple) The reality is that Pinterest is probably already undervalued at $1.5BN and barring the risks above coming to fruition has a real shot at becoming worth $25BN+ within 5-7 years based on revenues alone.

[objclxt]

I don't think the OP is being pedantic: you're wrong to compare the first two years of Facebook with Pinterest.

For one thing, Facebook was .edu limited for its first two years, so its growth was constrained. Rather than that, look at Facebook's growth from 2007-2009.

[mccon104]

Why is everyone in such a rush to compare this to facebook? I believe emmett was just trying to point out that OP's argument was essentially "they're not going to make $1.5b ever, trust me". Which frankly sounds a lot like "No wireless. Less space than a Nomad. Lame."

To give such a definitive "never" answer and say their only hope is if the "bubble keeps inflating" without offering a shred of evidence makes you sound like any critic of anything that has ever gone big.

If you're going to educate me re: the valuation, then by all means educate me. Don't give me some confidently worded finite opinion and expect to pass it off as fact.

[tommorris]

Hey, Pinterest being cloned by Pinspire? Google "pinterest for porn". It's an easy enough model to clone. So is Flickr and Wikipedia (hey, they'll give you the software for free!) and lots of other sites, but it's hard to recreate the same passionate community.

I think the important value that Pinterest has is the community of pinners and their collective aggregated opinions. That community has the potential to actually be quite a useful testbed and market research mechanism (or even sales channel) for a lot of consumer brands. Maybe not $1.5bn worth of value, but there's quite a bit of space in the social web for more of a female-oriented, arts-and-craftsy, fashionable, aspirational type of site.

Go to your local magazine seller: there's a lot of women's oriented magazines, lifestyle oriented magazines... that's where I think the value in Pinterest is, as a sort of online complement to "aspirational lifestyle" brands.

[antidaily]

Plus... chicks dig it.