Rakuten Strategy In Pinterest Coup

social media traffic referrals

Photo: Capstone Investments

The announcement that Pinterest raised a lot of money at a billion-plus valuation was expected; less expected was the name of the lead investor: Rakuten, the Japanese e-commerce giant. This is a brilliant move for everybody involved. Here’s why:

  • Pinterest is building a monetization strategy based on driving ecommerce referrals: if you pin something you or someone else who follows you can buy it, and Pinterest gets a referral fee. From what we’ve been told, however, this still drives minimal revenue as Pinterest gets that referral income from a third party company, and because a lot of Pinterest activity is “aspirational” (you might “pin” a $20,000 wedding dress because it’s fabulous, but you’re not going to buy it). Turning Pinterest into a monetization engine would therefore require product optimizations, such as e.g. allowing brands to build stores inside Pinterest. That being said, Pinterest clearly has a lot of potential. As you can see from the chart above, from Capstone Investments’ Rory Maher, Pinterest already drives as much traffic as Twitter despite being years younger.
  • This is where Rakuten comes in. Rakuten not only has great e-commerce experience, being the biggest e-commerce company in Japan, it has experience at a very specific kind of e-commerce; what’s known as “B2B2C.” Rakuten’s website is like a “shopping mall” where thousands of small businesses set up storefronts that Rakuten manages and drives traffic to. Rakuten is not like Amazon, in that it’s not a store, but it’s also not like eBay, in that it’s not a pure marketplace. It’s something inbetween, that’s known as B2B2C, that allows businesses to sell to consumers via an intermediary. What’s more Rakuten, starved for growth in its home country, has been on an international warpath, buying leading European and American commerce startups for hundreds of millions of dollars and investing heavily in China.

In other words, Rakuten could teach Pinterest how to become this B2B2C powerhouse; how to become a fee-collecting intermediary for social commerce by figuring out how to connect shoppers and businesses and brands. This would be extremely profitable for everyone involved.

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