Pinterest S-1 Thoughts

Pinterest has recently filed their S-1 and I was stoked to comb through the numbers. Social media businesses are fascinating and Pinterest’s approach to the market resonates with me because they are essentially helping consumers plan their purchases — whether via planning a wedding, Christmas list, home renovation, buying a new home, mapping out video games they like. This is a clear opportunity for advertisers. This simple fact gives them a leg up on their counterparts like facebook, line, and snapchat but lets see how the numbers are panning out.

Fast Growth and Improving Economics

Pinterest appears to be in a market expansion phase with its revenue growth almost doubling year over year. This is extremely exciting when you look at the business’s economics:

Pinterest is reducing their cost of revenue from 54% to 32% which gives me a sense that they are gaining some pricing power with the effectiveness of their platform. Sales and marketing efforts are remaining a level ratio with revenue which points to that the business should be growing at a 2x rate for some time. If business growth slows down, I’d be concerned without seeing a reduction in the team’s sales and marketing efforts. But…