Could Pinterest Really Get Rich from Affiliate Links?

It's hard to pass judgment on a site that that's still in private beta and hasn't hit the stock market, but that hasn't stopped analysts from trying to cut through the hype surrounding Pinterest. After reading in The Atlantic that Pinterest could be earning up to $45 million a year through affiliate links from SkimLinks, GigaOm contributor Rags Srinivasan, set out to prove the unlikelihood of a company making that much revenue from referral traffic alone.

It’s hard to pass judgment on a site that that’s still in private beta and hasn’t hit the stock market, but that hasn’t stopped analysts from trying to cut through the hype surrounding Pinterest. After reading in The Atlantic that Pinterest could be earning up to $45 million a year through affiliate links from SkimLinks, GigaOm contributor Rags Srinivasan set out to prove the unlikelihood of a company making that much revenue from referral traffic alone.

Without any real numbers to crunch, Srinivasan, a management consultant in San Francisco, used statistical modeling to estimate how much revenue Pinterest’s 10 million registered users could potentially generate.  “I generously estimated that they have one million to five million active users who click on product links and make at least one to 18 purchases a year,” he wrote. Even if the average purchase made was between $2 and $18 and the affiliate fees were only between 2 and 4 percent, Srinivasan couldn’t realistically see the company making more than $9 million per year.

By his calculation, there was only a .25 percent chance that Pinterest was making $45 million a year, with a one percent chance they were making more than $36 million and a 33 percent chance that they were making more than $10 million.  (Note: statistical modeling is not my thing, so if you’d like to know he calculated this, read his explanation here.)

The question that remains is how Pinterest will ultimately decide to make money.  Like most tech startups, the company is working on perfecting the user experience before it starts charging admission. The affiliate links were just an experiment.

In a discussion on Quora about the subject, contributor Josh Yang outlined the possible business models that Pinterest could choose. This one seemed especially interesting:

12. Data. As others have alluded to, there may be an opportunity to package and sell data to advertisers, retailers, publishers, TV studios, etc, that care about what  consumers are interested in by geography and over time.  Traditionally, Nielsen has been the gold standard for aggregating data from retailers by geography, as well as what people are watching on TV, re-packaging and selling.  Perhaps there’s an opportunity to sell Pinterest data to Nielsen or directly to brands.

Pinterest might not be as deeply personal as Facebook, but it’s a place where people can make wish lists without feeling like they are being rude and where tastemakers are born every time a pin goes viral.  You can learn a lot about consumers just by casually observing their top pins, even without a spreadsheet that details their ages, genders, and geographical locations.

It’s hard to deny the possibilities of an image-sharing site that has the openness of Twitter, the DIY spirit of Etsy, the freedom of Reddit, and that connects to Facebook. It’s got all three “C’s” of content, commerce, and community built right in. The company has also hired the former Facebook employee behind the “sponsored stories” to work on a business model for the site. If Facebook can bring in $3.7 billion in revenue in one year, Pinterest can figure out how to top $9 million.

Image by Forewer via Shutterstock.