Microsoft bought the maker of Minecraft for more than $2 billion in 2014, LinkedIn for $26 billion in 2016, and GitHub for $7.5 billion in 2018. There’s not much in common between young gamers, career strivers and programmers, but they have all been fast-growing sites that users are somewhat fanatical about. Pinterest is another.
Some of it is working, too. LinkedIn had $2.6 billion of revenue last quarter, a 23% year-on-year increase. Suppose its top line reaches $11 billion over the next year. Comparable businesses such as Angie’s List, Yelp, Tripadvisor and Pinterest are valued at about six times estimated revenue, according to Refinitiv. On that metric, LinkedIn is worth more than twice the purchase price.
Pinterest, run by Ben Silbermann, is often overlooked. Competently attracting attention, shopping leads and predominantly female users doesn’t resonate in the male-dominated worlds of finance, hacking and politics in the same way as all the drama at, say, Twitter. The media is guilty, too: Twitter has about the same market value as Pinterest, but Reuters Breakingviews has mentioned the former in more than 20 times as many stories as the latter over the years.
Even after more than a 230% run-up in its stock price over the past year, Pinterest could still be a relative bargain. The company said last week that it had 459 million monthly active users, up 37% year-on-year, and revenue of $706 million, up 76%, in the fourth quarter of 2020. Twitter had 192 million monetisable daily active users, up 27%, and $1.3 billion of revenue in the period. Pinterest’s top line is smaller but grew almost three times as fast, while user growth looks at least as attractive.
Significantly, Pinterest’s lower profile than other social-networking sites may extend to Washington as well. Lawmakers are increasingly concerned about the dominance and social impacts of businesses like Facebook and Twitter. Pinterest’s users are more interested in shopping than storming the Capitol. Microsoft’s idea is craftier than it looks.