What Is Pinterest with a Focus on Its Business Model - Coursework Example

Introduction The need to convey messages to a vast number of people led people to evolve ways to pass message in a more convenient way. One of them is through pin boards. Pin board can be described as a surface put with the intentions of posting messages for the public to view for example items for sale, announce forthcoming events among others. This can be found almost everywhere from the streets to institutions or even at home. The most prevalent place for the bulletin boards is at the university. They are used by many extracurricular groups to put up all kinds of notices both official and non-official. At home they have been used to serve several roles such as reminders or sticking a menu. The use of the pinboards has evolved over the years with the advent of the internet. The internet forms are becoming an alternative to the traditional pin board. Online pin boards are sometimes given the term message boards. The online board serves the same purpose as the physical online board. These online boards have been provided by several social websites and Pinterest is one of them. This essay looks at what is Pinterest with a focus on its business model. The implications of its business model, its upside and downside is also looked at in detail in this essay. Pinterest Pinterest is a social website. It assumes the style of a pin board and enables members to share photos online. It also allows its users to be able to create and carry off collections of theme-based images such as interests, hobbies, events and many more. The mission of Pinterest is based on the desire to make everyone connect throughout the world by sharing the things they find interesting through a global platform of idea sharing together with inspiration (Koufman, p.39). The users of Pinterest are allowed to save images and put them under categories on different boards. They can also be able follow other members’ boards if they share the same tastes. The popular categories include travel, film, home design, cars, humor, art, sports, and fashion. Its development started back in the year 2009 with Ben Silbermann being one of the co-founders. From about 5000 number of users since it started the social site has seen the number of users increase to about 11.7 million by January 2012. This has made it to become the third largest social networking site in the United States. It is indeed one of the fastest growing social networking sites in the world (Schaffer). Pinterest Business model The business model adopted by Pinterest is not clear. The biggest question is how will it get its revenue in the future? It has received a total funding of about $37.5 million but it isn’t sure of the path it’s going to use in generating its revenue. However it’s modeling a feeling of exclusivity. Despite the gathering site being currently an invite-only its growth has increased tremendously through the internet world. The nature of its exclusivity is fascinating to many people. This has created much hype as people try to get a place in this exclusive world being offered by Pinterest. This exclusivity has proved to yield very high results for stores, hotels, targeting the big spending consumers. In the long run the company can be able to generate income through many ways. One of them is through advertisements. This has to be done though in a way that the users experience is not affected. It does this by following the e-commerce route where it makes money by getting a cut from each transaction through the pinned traffic. With the potential that this company possesses, the revenue-generating ideas seem to have no end. According to the general theory of marketing the development of a company’s product is done so in an interactive manner. This interaction is between conscious and unconscious, wishes, ideas, and demands of suppliers together with the buyers. When the product is rolled out to the consumers, it reacts by its rating of the offer to the audience. This results in the division of the consumers into those who are willing to buy and can afford it and the non buyers (Linn, p. 108) Pinterest have fully adopted the concept of internet marketing. Internet marketing can be referred to as any type of marketing activities based on interactive technology for it to be put into use (Dann, p.63). The internet together with other e-technologies has to a large extent changed the nature of the transfer of information that has for a long time favored the brand managers. The internet has provided the consumers with a platform to interact with the brand together with other consumers. It has also enabled the consumers come up with their own content on the sites that enables users to generate their own content. This enables a more participatory way of coming up with a brand by incorporating the views of the consumers (Christodoulides, p. 141). Pinterest has partnered with a firm known as Skimlinks. This company scans every link that has been posted to see whether it ends up in a retail site which posses an affiliate program. If it identifies that kind of link, it adds an affiliate code secretly. This code ensures that Pinterest will make some money from the sales emanating from that link. The lack of a clear business model for this company with so much money is quite surprising. But the fact that it lacks a business model at this point actually makes sense. This is because at first the company was only interested in learning about its users. These includes the interests of the users, things that they liked to pin, what are they uploading together with sharing, and what sites they like to visit. Since its inception the site has been used by its users to plan weddings and even baby showers. Its user’s has also used to do things like decorating their households. This has been thanks to the ‘pinning’ obsession. The Implications of Lack of a Clear Business Model Every business enterprise whether established implicitly or explicitly should employ a proper business model. The importance of a business model is that it defines the manner in which the enterprise values are delivered to the customers in order to entice them to pay for value, and change over these transactions to profit. It therefore reflects the hypothesis of the management on how to address customers wants, in the way they want it. This helps the firm to organize all these activities to the customers’ satisfaction and make profit in the process. Therefore a business model is a very important tool in any business venture. In simple terms a business model encompasses the organization together with the financial ‘architecture’ of a firm. It lays bare the assumptions that the business have about their customers, how the revenues and costs behave, the dynamic nature of the users tastes and preferences, and the probable response from the competitors. It gives a basic outline of the logic necessary in a earning a profit and once it has been adopted, stipulates how the business puts its products in the market. The lack of a clear business model for Pinterest can negatively influence the profitability in the future. The Gains and Risks of Lack of A Clear Business Model The ways in which business activities used to be carried out have changed over the years. The evolution of the internet has to a very extent contributed to this change. This is because it has made companies nowadays make money in a relatively simple way. The user of the electronic computers has also changed the way in which companies market their products. The customer today is more informed hence affecting the tastes and preferences. The information about the products is shared in the social networking sites. The numbers of the users in these sites is increasing by the day offering a very good place for the companies to market their products (Teece, p.174). The business model in which Pinterest assumes is basically based on exclusivity. This means that it’s an invite-only gathering site. The reason why it is generating much hype is because of this exclusivity. The effect of exclusivity is that it captures people’s imaginations as they think of how to have access to this exclusive world. The advantage of this is that it helps to create a well nit community that is good for referral business. The referral system is the engine for e-commerce. This is because when referring a product to somebody you already know the likelihood of making a sale is quite high. More sales translate to high revenue for the company. This sharing characteristics of the social media also enables the sticking together of the users which creates a good loyal customers for a companies’ products. The pinning also acts as a good way of advertisement for the companies. A product which has been liked by the customers will get more pinning. This means that there will be more widespread knowledge of the product a company wants to sell. This creates a large market which translates to more sales. As the customers share their experiences about a product it gets a wider audience. The users also refer the products to their fellow users therefore leading to more sales. This referral system of marketing when properly utilized leads to customer loyalty and good business. The referral system relies basically on the word of mouth, which is very effective way of advertising and promotion (Barrow, p.18). Since the users of Pinterest forms a community, word goes round very fast as each user narrates his/her experience with the product through pinning. This business model still has its shortcomings. The company in order to generate revenue relies on the success of the referral system. This means that if there are no sales made through the referral system there is no revenue for the company. The application of this type of marketing saves lot of money to the business. This is very crucial for the businesses which are struggling financially. Pinterest allows this kind of affiliate marketing for the businesses by offering the platform through it ‘pinning’ tool (Hunt, p.38). The customers who are Pinterest user are able pass word of any good deals being offered by a company through the ‘pinning’ feature. The company is then able to make revenue by getting a cut of any deal that takes place through the website. The fact that Pinterest relies heavily on the success of affiliate marketing is a down side to this kind of business model. Affiliate marketing is prone to misleading information on the part of the consumer by the merchant leading to to unjust claims together with complains by people. This may in the long run hurt the sites credibility leading to low number of user’s hence low sales. Pinterest needs to come up with proper and clear business plan. This will enable it to create more avenues for collecting revenue. It will also provide it with a proper way of how to carry its business activities and address the intellectual rights row which has threatened to bring it down. In conclusion the way in which companies is marketing their products. The world is increasingly becoming a global village thanks to the continued use of the internet to communicate. This has seen the rise of social networking sites such as Pinterest which allows its users share the things that interest. The gathering of people with similar interest has led to creation of a community which has a good market for companies seeking to sell their products. In case of a successful transaction of a product through the affiliate marketing that was done through the site, Pinterest gets a cut of deal. The company lacks a clear business model making it unclear how it will generate its revenue in the future. This has to be addressed because of the dynamic nature of the industry. References Barrow, H, 2010, Benefits of Referral Marketing. Internet Marketing Journal, Vol. 2, no.3, pp. 14-18 Christodoulides, G, 2009, Marketing Theory. Branding in the post-internet era.Vol.9 no.3 pp.103-141 Dann, S, 2011, E-marketing Theory and Application. Palgrave Macmillan. New York Hunt, T. (2012). How Pinterest Really Makes Money. The Internet Marketing Journal, Vol. 2, no.3, pp.38 Koufman, J, 2010, Pinterest. A Review of Social Media’s Newest Sweetheart pp.39 Linn, E, 2010, General Theory of Marketing. The International Journal of Commerce, Vol. 2, no3, pp.108 Schaffer, N, 2012, Getting started with Pinterest, viewed 10 August 2012, < http://windmillnetworking.com/2012/02/28/getting-started-with-pinterest/> Teece, J, 2010, Business Models, Business Strategy and Innovation. Oxford University Press. London Read More