Pinterest's most recent fundraising effort, in which the company raised $150 million from a group of previous investors, priced its shares at their 2015 value. That's a bad sign -- better than an actual "down round" raised at a lower valuation, but not by much.

Technically, it's not a flat round, but that has little to do with optimism about future growth. Bloomberg reports, "The last fundraising round was in April 2015, valuing the business at about $11 billion. Because the number of shares in the company has grown over time, its new valuation is $12.3 billion."

Worse, Pinterest's assessed value relative to its revenue has fallen steeply. On Twitter, Crunchbase News editor Alex Wilhelm noted, "At reported $300M in 2016 rev, Pinterest is valued at 41x rev. Using its full-2017 estimate of $500M, valued at 24.6x. Non-recurring to boot."

Pinterest is a "decacorn" that has 175 million monthly active users, many of them women with acquisitive tastes. The problem is that Pinterest is just not that popular by the standards of the digital platforms it's benchmarked against. Consider that its close competitor Instagram boasts four times the number of monthly active users.

Snapchat has almost as many daily active users as Pinterest does monthly ones, even though the product is a year younger. Despite this, Snapchat itself has been hammered by investors for insufficient growth. That doesn't bode well for Pinterest, although the company has yet to go public, which eases the immediate-term pressure.

In order to validate a multibillion-dollar valuation, an advertising platform needs to achieve considerable scale. Social media services rely on network effects to achieve that: Each additional user brings more users along with her, and the more people that join, the more attractive the product becomes. While nominally a social media service, Pinterest is actually quite nonsocial. The product lacks any "I'll hang out with my friends there" appeal.

Pinterest is oriented toward collecting images, not communicating with other users, and the latter seems to be people's preferred internet leisure activity. Instagram is similarly flooded with aspirational lifestyle content that is passively consumed, but it's organized around individual personalities rather than around topics, and many people's friends also document their daily lives on the platform.

The company told Inc. in a statement, "Pinterest is not a social media site, it's a visual discovery engine focused on helping people discover ideas, and not about socializing with friends. A core use case is discovery of ideas, and not passively collecting. Recommendations are surfaced through personalized recommendations -- we serve 10 billion every day. Every month, people conduct 2 billion searches on the platform."

It is possible that Pinterest simply doesn't have the massively broad appeal of its dominant competitors. Currently, outside of niches where it commands significant market share, like crafters and people planning weddings, the company is going up against competitors that offer superior products to both consumers and advertisers. Why spend your ad dollars on Pinterest when you could tap into Facebook's richer data and bigger network?

Pinterest tries to combat this by emphasizing its shopping-friendly design, but it's hard to tell whether this has translated to superior ROI for advertisers. In 2015, ecommerce platform Shopify told users, "Facebook dominates as a source of social traffic and sales. Nearly two thirds of all social media visits to Shopify stores come from Facebook. Plus, an average of 85% of all orders from social media come from Facebook."

That said, a joint report with Pinterest found, "The average order value of sales coming from Pinterest is $50 -- higher than any other major social platform," further noting that the service places second in terms of driving social media traffic to Shopify. It's not clear whether Pinterest constitutes a larger portion of conversions than the portion of traffic it drives, as Facebook does.

Anecdotally, consumers aren't pleased with the product's development. A commenter on the tech industry forum Hacker News wrote:

There's very little ROI for cultivating a public image on Pinterest, so few people put much effort into doing it. At the same time, people who have taste similar to mine are a much better way to find things than any algorithm Pinterest has ever released. And yet, they keep emphasizing algorithmic recommendations while disincentivizing people from publicly expressing their taste and making it harder for me to follow people I like.

And then there are the ads, which, as a bunch of other commenters have pointed out, tend to be really far out of line from anything I've ever expressed interest in. It's just off-putting to see a bunch of low-quality ads for tacky crap in the middle of my feed of minimalist interiors.

Google employee Ryan Moulton, who works on search, responded, "This seems likely to be an inventory issue more than anything else. Fine-grained targeting requires fine-grained ads which requires a sub-linearly scaling sales team."

Back in 2015, blogger Liz Gumbinner diagnosed Pinterest's problem as a shift away from human curation:

I think that a lot of Pinterest's changes are made to decentralize influence (so to speak) away from their "power pinners" -- those curators with hundreds of thousands or even millions of followers.

I think that Pinterest wants Pinterest to tell you what is relevant to you, and not any of the people you follow. It will give them way more control when it comes to feeding users more branded, paid-for content.

She went on to say how frustrating she found it that posts from the individual bloggers she followed would get pushed out of her feed by algorithmic picks. "I'm wondering how it makes good business sense to feed users content that they have no interest in at all," she wrote. "Not just the sponsored pins, which I understand completely, but the not-at-all sponsored ones. The pins and the recommendations 'picked for me' that make me second guess whether Pinterest will continue to be a valuable visual search tool for all of us."

Pinterest's strategy in face of its sundry struggles is a push toward innovating the actual nature of visual search. According to Bloomberg:

Pinterest has said its growth potential depends on improving its product to match people with images that reflect their interests and inspire them. The company said it will use the funds to improve its computer vision and visual search technologies like its Lens camera search, which lets users take pictures on their phone and search for similar items or images on Pinterest. The company will also use the new capital to improve its offering for international users.

If Pinterest can make an augmented-reality visual search product better than Google can, there may be a way to expand and profit. It's not clear how fervently or how often consumers will want to search the objects they encounter in "meatspace," as internet denizens like to call it, but there's certainly a possibility that the activity will be popular.

Popular enough to support Pinterest's current valuation? That's the $12.3 billion question.

Update: The original version of this story cited data from a 2013 report by Shopify while failing to note more recent Shopify figures that supported Pinterest's value to retailers. The article has been updated to include that information as well as comment from Pinterest.