Pinterest deal hints at major e-commerce push

Pinterest (PINS -2.75%) announced that it has agreed to acquire The Yes, a fashion shopping platform that creates a personalized feed based on user input. This is the company’s most significant acquisition in a while and marks the first signs of a serious turning point in its growth strategy. Here’s what we know so far and why it could be such a significant move.

Why is Pinterest acquiring a shopping platform?

An interesting point is that Pinterest doesn’t actually want to own and operate The Yes. In fact, the press release announcing the deal makes it pretty clear that Pinterest plans to shut down both the app and website soon after the deal closes.

Image source: Getty Images.

The real reason Pinterest is acquiring The Yes is for its technology and people. The Yes features proprietary algorithmic technology that personalizes the shopping experience. And perhaps more importantly, The Yes was co-founded by Julie Bornstein, who currently serves as CEO.

If that name sounds familiar to you, Bornstein was previously the COO of stitch fix and previously held e-commerce roles at several major retailers. And once the transaction is complete, Bornstein will take over Pinterest’s shopping strategy. The rest of her team will also be included in Pinterest.

Finally, it is important to mention that we Not know how much Pinterest pays for The Yes. It’s not uncommon for contract terms to be withheld when a privately held company is acquired, but Pinterest has over $3 billion in cash and investments on its balance sheet, and it’s fair to assume it’s only using a small fraction of that for the company issues acquisition.

Why it could be a big deal

This is by far Pinterest’s biggest move in leveraging its platform’s e-commerce potential. The company began testing a personalized shopping feature called “Your Shop” earlier this year, but it’s still in the very early stages.

To date, virtually all of Pinterest’s revenue has come from advertising, and it’s sure to make up the bulk of its revenue for the foreseeable future. However, using Pinterest as a shopping tool opens up countless interesting possibilities.

Pinterest even went so far as to call itself a “shopping platform.” Perhaps the most important line from the press release was:

Pinterest is a shopping platform that combines the unique commercial intent of its audience with the ability to visually explore products like you would in a magazine or catalogue. In a world of impulse buying, Pinterest aims to enable inspired shopping. It’s like a catalog tailored to your unique taste.

This is in stark contrast to how the company has described itself in the past, even in its 2021 annual report, which stated:

Pinterest is where over 400 million people around the world get inspired to live their best life. They come to discover and implement ideas for their daily activities like cooking dinner or deciding what to wear; for bigger commitments like remodeling a house or training for a marathon; for enduring passions like gardening or fashion; and for milestone events like planning a wedding or dream vacation.

In other words, this move could signal a big shift in Pinterest’s focus, away from the typical social media model of relying on advertisers and getting people to buy what they see on the platform.

How Much Ecommerce Potential Does Pinterest Have?

It’s hard to say what the long-term impact of expanding shopping on Pinterest might be. E-commerce is a huge market, accounting for approximately $870 billion in transaction volume last year in the US alone.

Pinterest user growth has slowed in recent quarters as pandemic-era restrictions eased. But the company has done a great job of increasing monetization for its users. However, there is still a large gap between the earnings per user of Pinterest and other social media platforms like Facebook (meta platforms) and Twitterand if it can successfully monetize its purchasing vision, it could be a big driver of revenue growth (and user growth) for the company.

About Rachael Garcia

Check Also

The Ligonier Home Tour gives an insight into 5 eclectic properties in the area

When Carmen Quartararo decided to move from California to western Pennsylvania in 2020, she ended …