Pinterest to open up promoted pins to all U.S. businesses

SAN FRANCISCO — Pinterest will let any U.S. business buy its "promoted pins" advertising product starting in January, the latest step by one of the technology world's so-called unicorns to build an advertising business worthy of its $11 billion valuation.

Earlier this year, Pinterest began testing a self-serve system, mostly for small and medium-sized businesses, to create their own promoted pins just as big consumer brands do. Now that system will be open to all businesses, Pinterest's monetization chief Tim Kendall said in an interview.

"The business is scaling very rapidly," he said.

Pinterest is one of the world's most valuable venture-backed start-ups. Like many in Silicon Valley, the 5-year-old company put off making money to focus on creating new features and growing its popularity.

Over the last year, Pinterest has gotten serious about scaling an advertising business to compete with the likes of Facebook, Twitter, Instagram and Snapchat, especially when it comes to reaching consumers on their mobile devices. That's where they increasingly scroll through glossy pins, mostly photos, posted by other Pinterest users tagged to certain categories.

Pinterest last January officially launched its first advertising product — the promoted pin that targets users based on their interests, location and other data, Pinterest's equivalent of a sponsored Facebook post. Kendall says thousands of businesses are now paying for promoted pins, including  "cinematic" pins, Pinterest's first foray into video advertising.

Over the summer, Pinterest introduced a buy button to allow users to purchase items without leaving the Pinterest app. Some 10,000 retailers are trying out the buyable pins, Kendall says.

Pinterest is also seeing more activity from businesses in general, Kendall says, with 1 million businesses around the world accessing business accounts on the service at least once a month.

With 2016 shaping up to be the year that tests Pinterest's potential in digital advertising, observers say it's too soon to tell if Pinterest is ready for prime time.

According to a document reviewed by the Wall Street Journal, Pinterest had revenue of less than $25 million in 2014 but is projecting revenue of $3 billion in 2018. Pinterest declined to comment.

"A year in and I think the jury is still out on whether it's a niche marketing vehicle or something bigger than that," Gartner marketing and media analyst Andrew Frank said.

Pinterest is essentially a catalog of 50 billion images which its users, mostly women, pin to online boards to collect and organize their interests — so-called aspirational content that signals an intent to buy or take some kind of action, Kendall says. "Native" ads such as promoted pins are designed to look like and mix in with that content.

"It's a unique kind of behavior on the user side which creates a very unique place to be for businesses," Kendall said.

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Two categories of marketers have found success on Pinterest: retailers and consumer packaged goods which combined represent billions in digital ad spending.

Ian Schafer, founder and chairman of digital ad agency Deep Focus, says he expects his clients, many of them in consumer packaged goods, to spend more of their 2016 digital ad dollars on Pinterest as the service continues to grow, ad products improve and new formats roll out.

"It's not easy to find a platform with Pinterest's reach or influence," he said.

Jake Kassan, co-founder and CEO of Movement Watches, says his retail site gets 50,000 visits a month from Pinterest, 47,000 of those from new users.

Aimee Lapic, senior vice president and general manager of Banana Republic Customer Experience, has been using promoted pins since 2014. "Pinterest is becoming more and more important in our media mix," Lapic says.

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To capture as much of digital marketing budgets as it can, Pinterest is employing a new tactic: It's going after a slice of search advertising budgets. Kendall says Pinterest has the potential to do for discovery what Google did for search.

Search advertising fetches the biggest share of digital marketing dollars. Advertisers will shell out roughly $26.5 billion on U.S. search ads this year while ad spending on social media is expected to reach $10.4 billion, projects research firm eMarketer. Google controls 72.4% of search ad spending in the U.S.

It's a reach, say analysts. Pinterest does not offer the scale or conversion rate of Google search ads.

Pinterest is still a third the size of Instagram and a fraction of Facebook. Pinterest said in September it has 100 million monthly active users, 80% of them using Pinterest on their mobile devices. According to research firm ComScore, Pinterest had 84 million unique U.S. visitors in November, slightly lower than its all-time high of nearly 84.5 million in October.

Schafer, the Deep Focus digital ad executive, says the smaller user base matters less because of the "proximity to a purchase."

Therein lies one of Pinterest's main challenges: Creating ads that people want to see and that make them want to buy.

Some Pinterest users say the company has work to do on that front.

Jen Martin, a costume researcher for television shows and films in Los Angeles, says she frequently searched Pinterest to flesh out what a character might wear, say a 1940s bus driver or a modern-day "casual guy," but now refrains from using the service because she got weary of being "bombarded" by ads.

Cameron Stanford, a Los Angeles graphic and textile designer in the fashion industry, says he still uses Pinterest daily to collect and organize images but says he became frustrated by a torrent of irrelevant ads for women's clothing, such as leggings and lace dresses. He says he has seen some improvement in the types of ads he sees in recent weeks.

"I have not yet clicked on a promoted pin," he said. "I am not opposed to it. I use this great service for free, I understand it needs to make revenue."

Kirsten Flynn, a Palo Alto, Calif., interior designer who runs her own firm Sustainable Home, says she loves curating on Pinterest for "visual interest, creative stimulation and inspiration." But as a professional she chafed at being shown ads for do-it-yourself content ("I am not so interested in making glitter pine-cone ornaments") so she started to "teach" Pinterest by hiding unhelpful ads. She says she now sees more ads geared to an interior designer such as vintage tiles.

And that may be an early sign that Pinterest's advertising business holds promise.

"Many social properties still struggle with how the advertising can drive an action or ultimately a sale," said eMarketer analyst Debra Aho Williamson. "Pinterest has a lot of potential because, of any of the social properties, it's got the strongest connection to what people are actually doing and buying which advertisers really appreciate."

Follow USA TODAY senior technology writer Jessica Guynn @jguynn