Can Pinterest Build a Business Model to Justify $1 Billion Valuation?

Interest in Pinterest has grown rapidly in recent months. The social network has received plenty of attention over the past few months as its membership numbers have soared.  In fact, Pinterest has become the 16th most visited site in the United States, according to recent data from market research firm Alexa.

After getting $100 million in investment funds from Japanese e-commerce giant Rakuten, the new kid on the social media block got a valuation 50 percent bigger than that of Instagram when Facebook brought it for $1 billion.

So what does the future hold for Pinterest that would justify a $1 billion valuation for the cloud-based vision board?  Pinterest still has a ways to go before it becomes a true platform player for social commerce, marketing and user recommendations.  Here are some areas in which Pinterest will need to develop its business:

Advertising in pictures

Pinterest is the third most popular social media site behind Facebook and Twitter, letting you organize and share all the beautiful things you find on the Web. The site also includes built-in ways to incorporate mutual respect, authenticity and properly crediting your sources.

The social sharing site shows tremendous growth in its user base. Over 80 percent of pins are actually re-pins of other people’s stuff, according to findings from RJMetrics.

“Pinterest demonstrates some of the strongest user engagement, retention and virality metrics I have ever seen in an online business,” wrote Robert Moore of RJMetrics. “The company has found tremendous success among its core demographic, and the potential reach of its appeal will be tested in the coming months as attention from broader audiences continues to increase.”

Pinterest can use the existing social platform as an advertising marketing tool for businesses selling easily photographed products and services. The company can look at developing their own tools to render itself a relevant business model with its current platform and projected growth.

To do this, Pinterest can build up an e-commerce platform overlapping e-commerce and social networks where both retailers and consumers can communicate, discover, and curate to make the experience more entertaining.

Charging Advertisers

Several brands are beginning to make Pinterest pages, pinning their own products to the site. Pinterest could potentially sponsored pins in the stream that are paid for by advertisers, similar to the model Twitter’s used to build out advertising on its microblog. Pinterest can also work with advertisers to create customized Pinterest-connected campaigns and pages.

Mobile App

Pinterest has yet to explore the mobile space, lacking a mobile app on any major platform and limited mobile-specific options for the mobile web (like pinning). Pinterest could potentially create a mobile marketplace by developing mobile apps where users/advertisers, instead of pinning products on the site, could upload product photos, price, description, and price etc. on their mobile devices itself.

The mobile marketplace could be modified further into a monetization platform where users can buy the pins and seller would be obligated to ship the product.

The biggest benefit of mobile integration is the added context of location to uploaded pins.  Pinterest is likely going to develop some recommendation tools around its site activity, and as retailers and marketers become more interested in user-generated pins, promotions for local venues can leverage Pinterest as a mobile outlet as well.

Pinterest API

Pinterest has the potential to become a notable marketing tool, but for that, the company needs an interface to interact with social and content feeds – an API could accomplish that requirement.

The API could create an environment where retailers can better integrate their offerings for two-way collaboration and sharing with their customers.

Pinterest CEO Ben Silbermann hinted in recent past that the company will acknowledge an API in the near future (although the page was listed for only a short time on Pinterest’s site).  In the post Silbermann said the Pinterest profiles will be very different to those of Facebook and other social networks, and will show a snapshot of what you’re really about. Through an API, Pintrest-related app development would further spur the rapid growth of the site, which already reached 11.7 million unique users in January.