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How Pinterest Really Makes Money: Should You Care?

How else did you expect the site to make money? My company uses the same business model--and there's nothing unethical about it.

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How else did you think Pinterest was supposed to keep the lights on?

That was my first question after I read an article forwarded to me recently about how the visual bookmarking tool makes money off of users' pins. For anyone who doesn't know what Pinterest is, it's a site where people "pin" images and videos from around the Web to a virtual pinboard that other users can follow. It's a lovely and compelling site and growing fast. According to Hitwise, the site had 11 million visits in one week in December—a 40-fold growth spurt over the last six months. The other big news is that Pinterest is driving major traffic to retailers, which has suddenly made everyone sit up and take notice.

What they noticed this week, however, about Pinterest's business model has caused something of an uproar.

Here's what tech blogger Hillel Fuld wrote about it:

(W)hen my followers click on my photo and end up buying the product on the site to which it was linked, the site/business gets paid and you know who else gets paid? Pinterest! On my back. Without my permission. And with no transparency of telling me that they are monetizing my content.

Now, it may be due to the super simple Pinterest sign-up process (you connect through Facebook or Twitter) that makes users overlook this, but you do need to agree to the site's Terms of Use, which state:

By making available any Member Content through the Site, Application or Services, you hereby grant to Cold Brew Labs a worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license, with the right to sublicense, to use, copy, adapt, modify, distribute, license, sell, transfer, publicly display, publicly perform, transmit, stream, broadcast, access, view, and otherwise exploit such Member Content only on, through or by means of the Site, Application or Services.

Now, those are pretty straightforward and common terms for the Web. But even if you just checked the box without reading it, I have to wonder, why isn't this assumed?

My company Buyosphere monetizes content on our site similarly. We use Skimlinks—the same third-party affiliate network that Pinterest uses. I know from experience that even with the traffic Pinterest gets, this model doesn't add up to a major amount of money. A quick skim of pins reveals that very few of them are affiliate product links. Many of the items that Pinterest users share and re-share are images taken from Tumblr and blogs—links that do not have affiliate programs associated with them. I don't have solid numbers to back this up, but I'm assuming that a small percentage of Pinterest's content is actually monetizable through Skimlinks.

Fuld's article makes it sound like there is someone going through all of the images and changing the URLs to affiliate links, but that's not how Skimlinks integration works. Skimlinks simply detects URLs with affiliate programs associated to them and embeds the affiliate code. That's it (unless there is something deeper going on, which I don't see in my stream).

I know that Pinterest is a success because of its community, but in order to continue serving that community, it needs to make money and this just seems like the most obvious, seamless way to do so. Users wouldn't want ads messing up the interface nor would they appreciate brands taking over and ruining the community feel. And, ahem, venture capital is not a business model.

I see the Skimlinks integration as the least invasive of options to monetize the site that millions are starting to rely on. So, then, I'll ask again, "How did you expect Pinterest to make money?" I, personally, assumed they would monetize product links. What was your impression?

IMAGE: Flickr/Pinterest
Last updated: Feb 9, 2012

TARA HUNT is the CEO & co-founder of Buyosphere and previously worked with over 30 startups, including Like.com (acquired by Google in 2010). She wrote the bestseller, The Power of Social Networking.
@missrogue




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