An Inside Look at Pinterest's Business Model

Pinterest is a website and mobile application that serves as a photo sharing platform. Registered users can upload, save, sort and manage images, as well as other consumable media content such as videos through curated collections known as pinboards.

While Pinterest is often thought of as a social media website, the company does not approach its business or business model in that way. The company views itself as a discovery service, and it helps its users plan for their futures by allowing them to curate images or a set of images. One of the top use cases for Pinterest is women's use of the website to plan their future weddings.

Pinterest is a unique platform with an equally unique business model that differentiates it from other photo sharing websites.

The rise of social sharing has become meteoric over the past five years, highlighted by Facebook's $1 billion acquisition of Instagram and the recent success of Snapchat.

Photo sharing has been the largest reason for the increase in social sharing. With traditional photo sharing websites, such as Facebook, Instagram or Snapchat, users share their personal photos with friends and family.

Pinterest, taking a fresh approach to photo sharing, has decided to go a different route. Rather than having users share photos directly with friends, users instead curate personal pinboards of existing photos uploaded by friends, strangers and even companies. In addition, users can upload their own photos and pin to their pinboards.

This creates a more personal experience for the individual users and still allows friends of those users to see what they're up to by checking out their personal pinboards.

As of August 2015, the best way to monetize a social sharing site is through digital advertisements. Pinterest knows this, and it has created a business plan that monetizes the platform with advertisements. However, the company does it in a unique way.

While the Facebooks of the world charge advertisers based on the cost-per-click model (CPC), Pinterest has created a promoted pin ad strategy that charges advertisers on the engagement or action. This means that an advertiser only pays when an existing user engages with a promoted pin, which has the potential to increase the advertiser's return on investment. Pinterest also offers CPC and cost per thousand (CPM) options for advertisers.

In addition, with Pinterest's unique use of pinboards, advertisers can target users based on their interests, their personas or their life stages. This gives advertisers the chance to target potential customers on a more granular level than they can on other social sharing platforms, which provides an additional boost toward a positive return on investment (ROI) on advertising budgets.

Pinterest has also introduced an in-house creative studio, the Pin Factory, which allows advertisers to pay for more appealing promoted pins. The Pin Factory helps advertisers by designing attractive images and writing more engaging descriptions.

While other social sharing sites focus on the interactions between friends, Pinterest has built a business model that instead focuses on letting its users discover new and interesting things. In this way, Pinterest is highly differentiated from Facebook or Twitter in that the company wants its users to use it as a tool for planning future projects.

Pinterest should be seen as more of a search engine than a social sharing site. The company allows its users to stumble on new information rather than look for specific pieces of information, which makes its business model extremely unique. This focus on discovery is highlighted by Pinterest's partnership with Apple, which allows users to discover new apps in the Apple app store.