Why Pinterest can be the perfect social media site for advertisers

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Social media platforms make money from advertising, with varying degrees of success. For example, Facebook (NASDAQ: FB) has increased its turnover by 341% over the past five years, while Twitter (NYSE: TWTR) turnover only increased by 55% over the same period. Twitter has struggled to monetize its user base, while Facebook has become increasingly attractive to advertisers.

But even with Facebook’s success attracting money from marketers, it may not be the best social media platform for advertisers. In the October 23 edition of “The Wrap” on Motley Fool Live, host Jason Hall spoke with Motley Fool contributors Danny Vena and Daniel Sparks why Pinterest (NYSE: PINS) maybe the social media platform that advertisers will want to spend the most money on moving forward.

Transcription:

Jason Hall: Daniel Sparks, if you want to talk a bit about the specifics of how Pinterest makes money, that would be a useful thing to hear.

Daniel Sparks: It is mainly advertising. I think they might have market solutions and a few things like that, but it’s mostly advertising.

Jason Hall: Danny, do you have a comment on this?

Danny Vena: I do not. As you said, it’s mostly advertising. I haven’t really delved into their finances, but I think a lot of their business model follows what you’ve seen with most other social media companies; Facebook, Pinterest, Etsy, Twitter. Basically, they make the majority of their money from digital advertising, from advertising on their platform.

Jason Hall: One of the things that I love. Go ahead, Daniel.

Daniel Sparks: Very good. I’ll go first. I was just going to have this, if you intuitively think of Pinterest, it really is an advertiser’s dream, because people are there. Probably, I don’t know, my wife, at least I see her using Pinterest, like having some shopping ideas at the same time. I think a lot of people use it this way because you can literally click on it and then buy it. It really is an advertiser who has a captive audience that is willing to spend the money. Because a lot of times they come over there to get ideas on how to decorate something or whatever. I just think it’s interesting.

Jason Hall: You really got the words out of my mouth, Daniel. This is a social media platform that is not about people engaging with other people and fighting for politics or looking at their nephew’s birthday photos. You’re going to be looking for ideas, and a lot of those things are ideas to attach to a potential transaction. My wife and I use it a lot for recipes. I used it for some carpentry projects to get some ideas. I actually bought plans to get into a bed that I built for my son. Then I was able to edit it from there, but it’s perfect for that.

If you think of Facebook, most of the ads I get on Facebook, I consider them boring. I don’t see them as something that adds value to my experience on Facebook. Besides understanding, this is how Facebook pays the bills and I follow their product. I understand. This is the model. But with Pinterest, the ads can add a lot of value and be positive for the experience. I love it. I think it’s … understanding what I’m thinking is really, really helpful.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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