September 20, 2013 12:06 am

Pinterest takes new tack with advertising launch

Pinterest, the online scrapbooking site, has launched an advertising business in the company’s first serious move to make money from its 46m users.

Borrowing an ad concept developed at Facebook and Twitter, Pinterest will charge businesses to place content that is integrated with the photos of cakes and dresses already on users’ pinboards, rather than isolated ads or pop-ups.

Pinterest has become a Silicon Valley favourite, obtaining a valuation of $2.5bn after a $200m fundraising round. The company’s product has gained fans with user numbers rising to 46m in July, according to ComScore.

“I know some of you may be thinking, ‘Oh great ... here come the banner ads.’ But we’re determined to not let that happen,” wrote Ben Silbermann, chief executive, in a blog post.

Analysts expect the company will attract its first advertising dollars from companies that sell primarily to women – fashion, food, home décor.

Pinterest’s first test will promote pins in search results, so a person who searches the site for “Halloween” ideas will see a promoted pin from a costume shop for a Darth Vader outfit.

Mr Silbermann vowed that Pinterest would be transparent about letting users know when someone paid for a pin or not. This will help the company avoid a misstep Facebook made in the early days of its “sponsored stories” ad product, which attracted a backlash when they were not clearly labelled as ads.

But Facebook also showed that ads that appeared in users’ news feeds were much more effective, as opposed to banner or display ads appearing on a side panel that people could easily ignore.

Both Twitter and now Pinterest have focused their advertising strategy in a similar way.

“Consumers have developed banner blindness,” said Rebecca Lieb, an analyst with Altimeter Group. “Banner prices have been falling precipitously and steadily year after year.”

At the same time, ads that are carefully tailored to a specific site have limited reach, and limited sales potential, because they cannot be repurposed for use on other sites. Twitter will be the first company to go public whose sole revenue stream is one of these endemic advertising platforms – promoted tweets.

This is one reason Pinterest is also likely to develop an additional monetisation strategy in the realm of e-commerce, Ms Lieb said. The company’s public relations staff has been trying to reframe its image in recent months, saying the initial “social media” label Pinterest initially attracted to define the company is more accurately replaced with “commerce”.

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