Social networking site Pinterest was founded in 2009, and has been growing at a rapid rate.
Now, though, the company is finally thinking of making some money.
Pinterest is a fairly simple site — basically a virtual scrapbook that makes it easy to collect (“pin”) content like photos of clothing, food, gadgets and so on.
While the company could probably make a bundle by flashing annoying banner ads, Pinterest is taking a much more subtle approach: promoted pins. This means that certain content from businesses will show-up on users’ searches and category feeds. It’s actually something that has worked for other social networks like Twitter and Facebook (FB).
According to a blog post from Pinterest’s CEO Ben Silbermann, the promoted pins will be “tasteful” and also be clearly identified. They will also be based on user interests and also allow for feedback, which should further improve the relevancy.
To get things started, though, Pinterest doesn’t plan to charge businesses anything. The company instead wants to experiment with various campaigns to get a sense of the results and impact on the user experience.
This certainly makes a lot of sense. The transition from a free service to a paid one is never easy. As seen with MySpace, a too-aggressive money grab can mean disaster.
But Pinterest at least has a clear tie-in with e-commerce. After all, many people use it as a wishlist. Perhaps this is why top brands, such as Lowe’s (LOW), Nordstrom (JWN), Michael Kors (KORS) and Whole Foods (WFM), are already heavy users of the site — and why e-commerce king Amazon (AMZN) recently debuted a Pinterest rip-off called Collections.
With that in mind, it’s surprising the company hasn’t made a monetization push sooner. The social site has raised about $338 million, so investors probably want to see some money-making efforts … especially as the IPO market begins to bubble up again. Besides, Twitter — which is only two years younger — is on pace for $1 billion in revenues for 2014.
The bottom line: Pinterest needs to play some catch-up.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.