So­cial me­dia sites evolve to rake in cash

Pin­ter­est in­tro­duces Buyable Pins and Instagram says it will in­crease ad ef­forts.

Los Angeles Times - - BUSINESS - By Tracey Lien and An­drea Chang

SAN FRAN­CISCO — Be­hind the bil­lions of images posted on Pin­ter­est and Instagram, there’s money to be made.

The com­pa­nies, two of the most popular on­line com­mu­ni­ties, an­nounced big moves Tues­day to com­mer­cial­ize their brands.

Pin­ter­est, the 5-year-old dig­i­tal pin­board start-up, is get­ting into the e-com­merce game by pro­vid­ing a way for users to di­rectly buy items pinned on the site.

Mean­while, Face­book-owned Instagram said it was in­creas­ing its ad­ver­tis­ing ef­forts by al­low­ing a wider va­ri­ety of com­pa­nies to place ads, im­prov­ing its tar­geted ad­ver­tis­ing tools and testing ads that users can click on to buy prod­ucts.

Nei­ther an­nounce­ment was that sur­pris­ing given the stiff pres­sure on tech com­pa­nies — par­tic­u­larly those whose core prod­ucts are free to users — to build a sus­tain­able busi­ness on the backs of tweets, pins, videos, posts and snaps.

“You have to make money,” said Rob En­derle, prin­ci­pal an­a­lyst of the En­derle Group. “It shows you have stay­ing power.”

With 70 mil­lion monthly ac­tive users and 50 bil­lion pins across 1 bil­lion boards, Pin­ter­est has quickly built enor­mous clout in the so­cial me­dia world, mak­ing the roll­out of Buyable Pins a log­i­cal next step.

“What’s next for Pin­ter­est?” co-founder and Chief Ex­ec­u­tive Ben Sil­ber­mann said dur­ing the an­nounce­ment at Pin­ter­est’s head­quar­ters in San Fran­cisco. “When­ever we have to face that ques­tion, we talk to pin­ners. Peo­ple want to buy things on Pin­ter­est.”

Buyable Pins, he said, are a “sim­ple and se­cure way to buy the prod­ucts you love from within Pin­ter­est.”

By the end of the month, users will begin to see small blue price tags on cer­tain pins as they scroll through their Pin­ter­est feeds.

Tap­ping on the pin will bring up the price, color and size op­tions and a prod­uct de­scrip­tion, as well as the abil­ity to swipe through more images. Tap­ping on a but­ton in the top right will en­able the user to buy the prod­uct, which can be done with a credit card or Ap­ple Pay.

The or­der and pay­ment are se­curely for­warded to the

re­tailer, which will send the cus­tomer a con­fir­ma­tion and de­liver the prod­uct. There’s no fee for the pinner or for the mer­chant.

Pre­vi­ously, users were only able to view the images and would have to leave Pin­ter­est to search for those items if they wanted to buy them.

The new fea­ture could “def­i­nitely be a game changer” for Pin­ter­est and re­tail­ers, said Bob Gil­breath, co­founder of mar­ket­ing firm Ahal­ogy, which spe­cial­izes in dig­i­tal mar­ket­ing on the dis­cov­ery plat­form.

“What Pin­ter­est has had for­ever that hasn’t been no­ticed is peo­ple are al­ready us­ing it to buy things,” he said. “It’s ac­tu­ally more of a search me­dia than a so­cial me­dia.”

Com­peti­tor-wise, Pin­ter­est is closer to Google than Face­book or Twit­ter, he said, so adding a buy but­ton is a “great way to close the sale” on mil­lions of pins that are posted ev­ery day. It cre­ates an all-in-one ecosys­tem where peo­ple can dis­cover things they like and buy them with­out hav­ing to nav­i­gate away from Pin­ter­est.

E-com­merce an­a­lysts stopped short of de­scrib­ing Pin­ter­est’s new fea­ture as a threat to the likes of Ama­zon and Google, but Linda Bus­tos, direc­tor of e-com­merce re­search at re­search firm Elas­tic Path, said Pin­ter­est could help make the dis­cov­ery play­ing field more even.

Prod­uct mer­chants cur­rently rely heav­ily on Google’s search pri­or­i­ti­za­tion to get no­ticed, and get­ting good place­ment on a search re­sults page can of­ten make or break a busi­ness. With the launch of Buyable Pins, mer­chants will be able to di­ver­sify their mar­ket­ing, mak­ing it “less risky for the re­tailer” and giv­ing smaller brands a shot, she said.

“On Pin­ter­est, be­cause things are so vis­ual, it could help smaller re­tail­ers,” Bus­tos said. “A cus­tomer may have never heard of your brand, and they don’t re­ally care, be­cause they see the im­age and they like it.”

There will be 2 mil­lion buyable prod­ucts at launch. Macy’s, Nord­strom, Neiman Mar­cus, Cole Haan and Kate Spade are among the launch part­ners.

Pin­ter­est is not tak­ing a cut from any sales made, which will serve to lower the bar­rier to en­try for mer­chants. With more re­tail­ers on the plat­form, Pin­ter­est can then use it as lever­age to get them to pay for Pro­moted Pins, which are pins that re­ceive bet­ter place­ment.

The com­merce fea­ture has the po­ten­tial to be a big hit given how many pins there are on Pin­ter­est and how de­voted many users are to the fast-grow­ing site. Pin­ter­est said the num­ber of pins on the site is grow­ing 75% year over year.

An­other ad­van­tage is that most Pin­ter­est boards are as­pi­ra­tional, so many boards al­ready dou­ble as wish lists. With Buyable Pins, Pin­ter­est is re­mov­ing some of the fric­tion be­tween cov­et­ing some­thing and buy­ing it.

Cit­ing data from re­search firm Mill­ward Brown, the com­pany said 93% of ac­tive pin­ners said they use Pin­ter­est to plan for pur­chases, and 87% said they bought some­thing be­cause of Pin­ter­est.

For now, the fea­ture will be avail­able on mo­bile only and will launch on the iPhone and iPad. Other op­er­at­ing sys­tems and plat­forms will come later. Pin­ter­est said 80% of its users ac­cess the site through a mo­bile de­vice.

Whereas many peo­ple have long hoped for a buy but­ton on Pin­ter­est, the ad­di­tion of more ads on Instagram may ran­kle some users.

In a blog post, Instagram, which launched ads a year and a half ago, said it would make Instagram ads avail­able “to busi­nesses of all types and sizes.”

“We’re ex­cited to bring In- sta­gram ads to more ad­ver­tis­ers,” the com­pany said. “Busi­nesses are im­por­tant mem­bers of our com­mu­nity and we look for­ward to learn­ing what works to­gether.”

Instagram said the new ads would serve more than just busi­nesses. It will ex­per­i­ment with ways for users to take ac­tion di­rectly from an ad, such as by en­abling them to sign up on a web­site, buy a prod­uct or down­load an app.

The com­pany said it would begin testing some of those “di­rect-re­sponse for­mats” in the com­ing days.

Some users might not like buy but­tons and more ads, but that’s the na­ture of run­ning a suc­cess­ful tech com­pany, said Nate El­liott, prin­ci­pal an­a­lyst at For­rester.

“This is what busi­nesses do,” he said. “For all the blus­ter about how we’re here to connect and serve the world, it’s busi­ness.”

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