At a conference recently, an industry guru made an impassioned argument that Google should immediately buy Pinterest, the photo-pinning social site that has taken the world by storm.
The argument was persuasive.
Here, in a nutshell, are the guru’s key points:
- Google sucks at social and will always suck at social. Despite its humongous user numbers, the guru says, Google + is a bomb. It’s a bomb because, once again, Google is playing catch-up and because Google just doesn’t know how to build good social products.
- Wayne Gretsky’s famous secret to success in hockey was to skate to where the puck is going, not where it is, and Google is skating to where the puck is. Facebook has the puck, the guru says, and there’s no way Google will catch up if it keeps chasing Facebook. Google needs to skate to where the puck is going.
- Pinterest is where the puck is going, because web navigation is shifting from search to social and from “streams” towards “grids.” As Pinterest’s success demonstrates, the guru argues, the web is becoming more and more of a visual medium. In this new web, users prefer to browse content and follow each other in visually-appealing “grids,” rather than chronological streams. Google + is following the tired “streams” convention, the guru says. Meanwhile, the puck is headed toward “grids.” [I don’t agree with the guru that “grids” will entirely displace “streams”–sometimes chronology is helpful–but I think I certainly think you’ll see a lot more grids.]
- One of the few home-run acquisitions Google has ever made is YouTube–and that’s because Google acted aggressively and boldly to buy it early and then didn’t screw it up. Google, you will recall, bought YouTube for $1.7 billion back in 2006. This acquisition was ridiculed at the time–by smug pundits who didn’t realise that $1.7 billion was chump-change to Google and that a site with an opportunity as big as YouTube’s was worth making a big bet on. The YouTube acquisition is not ridiculed anymore.
- Google will be able to marry its amazing algorithmic revenue engine–one of Google’s core strengths–to Pinterest’s new social distribution engine. For some forms of content and commerce, “social” is becoming a critical distribution channel. Sites that once optimised for search are now optimising for social. This trend hurts Google, which is still completely dependent on search. Google hopes to forestall this trend by making search more social, but it’s still playing defence, not offence. To play offence, the guru argues, Google needs to embrace the next form of social–and then combine it with its existing revenue engine. (Pinterest is already making money using links, which are close to Google’s AdWords product).
- Google can afford to write a check for whatever it takes. No, Pinterest is not “for sale.” But everything’s for sale at the right price. And Google has the resources to pay that price.
The guru added that Google would have to go out of its way to make sure that it doesn’t wreck Pinterest the moment it buys it, the way it has so many other acquisitions.
The secret to Google’s not wrecking Pinterest, the guru said, is for Google to leave it alone.
Larry Page would personally have to commit to Ben Silbermann and the rest of Pinterest’s leadership that Pinterest would be free to do its own thing without being assimilated into the Google Borg. Page’s pitch could be that Google could handle monetization while Pinterest focused on the product and audience.
But would Pinterest ever sell to Google?Pinterest is not for sale and probably has no intention of selling. But just about everything is for sale at the right price.
And, in recent weeks, a threat to Pinterest’s future has appeared that might well make Pinterest more likely to sell than it otherwise would have been:
Pinterest allows users to “pin” photos from other sites to personal pinboards.
Another way of saying this is that Pinterest allows users to easily steal and display photos.
(Some observers argue that Pinterest’s pin boards constitute “fair use” of photos, but if Pinterest were really confident about that, it probably wouldn’t have made posting copyrighted photos against its terms of service. And lawyers wouldn’t be fleeing Pinterest in fear of being sued.)
In other words, Pinterest may have a huge, looming legal problem, one that will only grow bigger as the company gets more successful.
The story behind YouTube’s decision to sell to Google at such an early stage of development is that three factors played a role:
- The looming legal threat to YouTube
- The rapidly increasing costs of storage and streaming as the site’s growth exploded
- The vast check that Google was willing to write
By selling to Google, YouTube’s founders and investors neutralized these risks and cashed in. They might have made less than they otherwise would have gotten if they had developed YouTube into a huge, successful standalone site, but they also removed the risk that they would be sued into oblivion–the way, say, Napster was.
Pinterest’s situation is not directly analogous to YouTube’s, but it has some elements in common.Specifically, Pinterest has potential large and looming legal risks. And Google has the ability to write an absolutely humongous check to induce the founders and investors to take these risks off the table.
How much would Google have to pay to get Pinterest to sell?
Right now, it would probably take $2 billion.
$2 billion is chump change to Google, which has $45 billion in the bank. If Pinterest implodes and the $2 billion goes “poof,” Google and its shareholders will barely notice. Google’s vast wealth would make the Pinterest gamble a much smaller risk for Google than it might seem. Google earns $2 billion every couple of months.
To Pinterest and its investors, meanwhile, $2 billion is a lot of money.
Pinterest, after all, is less than two years old.
And $2 billion for a year and a half of work is pretty fair compensation.
Yes, if they sold to Google, Pinterest’s founders and investors would have to give up a dream of building a company worth tens or hundreds of billions of dollars.
But they would also eliminate the risk that Pinterest might end up being worth nothing.
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