Pinterest's Second Act

in the room. Think about all the things written about the late Apple founder of Steve Jobs, or Amazon founder Jeff Bezos, or Uber CEO Travis Clanic, who at least until recently, seemed to revel in his public persona as a controversial, cutthroat leader. And in this industry that celebrates men like this, there's a pair of co founders who have faded into the background. They're quiet and polite and understated. They don't seek the limelight in the eyes of his

journalists who graved drama. You could even say that they're a little bit boring. Meet Pinterest co founders Evan Sharp and Ben Silberman. Ben and I better low tolerance for for ego, a little tolerance for people who are assles, and um, you know, we prefer to build a great, ambitious business for people through each other at dignity by default, so that's something that's a little bit unique. Surprisingly, maybe that's what what has been perceived as, like, Oh, you know,

the pinterest founder is a very slow and study. Maybe it's just that you guys aren't assholes. There was a time when pinterest was one of the buzziest startups in Silicon Valley. Investors valued the company at eleven billion dollars, But recently people don't really talk much about Pinterest. I've been asking venture capitalists what they think of the company. Their answer most of the time is that they don't

think about pinterests much at all. But in the background, away from the spotlight, pinterest says it's been quietly insteadily building out its business all along. Its founders Ben and Evan, as well as president Tim Kendall, spoke to us in a very rare interview. Hi, I'm Akiito and I'm Fara Fryar, and this weekend Decrypted, we'll be taking you inside a

company that you might have forgotten about. Despite the company's low profile these days, it's actually still the most valuable startup in the world, according to a list kept by the research company CB Insights. While we were busy analyzing this and that melodrama erupting at our favorite startups. Pinterest has been at work preparing for its second act. Can

thinterest capture our attention again? Or like so many other startups in this business that burst onto the scene only to be overshadowed by the next new thing, will they just fade out of you? So we shared tips on going to the flower Mark which is just across the street, which is wonderful. Nice animal welfare aspects of keeping a chicken in your backyard? Is that most of the chickens okay? So Sarah tell us what we're listening to here. A couple of weeks ago, I was invited into an internal

company in conference at pinterest called nit Con. It was the most pinteresting thing ever. What were they doing like all the cool d I y stuff you can view on the app. Their own employees were doing demos for each other and ads engineering exact demo beer brewing. Another engineer was demoing latte art i ate some carbonated grapes. Did that taste good? Oh my god, it was. They were very strange and it sounds like a lot of fun. Everyone was so nice. I've had a great time and

this was a company wide thing. Yeah, even in the international offices. It sounds like kind of a silly thing for an entire company to commit to. But I guess if they invited you to attend this thing in the first place, they must have cared about it too. Yeah, I mean it is. It is very important. Business is

basically about inspiration. You go there to find images of things you want to do, places you want to see, food you want to make, you collect them, and if you show an interest in certain things interests, well, you know, the algorithm will show you more things like that. Like

the employee who was making carbonated grapes. He was actually really all into the crazy things you could do with whipping cancers, like instantly infused tequila or make nice fluffy, microwavable cake batter in addition to the public rape and Sarah, I can't say I've ever really used pinterest myself. I don't think I really get it. But you said you

use it pretty regularly. Yeah. I basically only use it on the private secret setting to plan a wet and it's really the only place you can easily compare image inspiration of things like dresses, Bouquet's color combinations, at least for now. Today's Pinterest has one hundred seventy five million monthly active users. That's decent, but not tons. Snapchat, which is a much younger company, has about that many daily active users. Twitter has over three hundred million monthly, Instagram

six hundred million, Facebook almost two billion. Yeah, at seven years old, it's not growing quite as fast as some of the others, and the company is relying on word of mouth to win more users. The way Exact tell it, pinterest biggest problem is that people like you can't think of a reason you'd want to use it because they think, why do I need another social network? But here's Pinterest. Co founder Evan I would say emphatically, Pinterest is not

a social network. And I and when I say that, because here you don't come to Pinterest to share pints. Is not about expressing yourself to others. It's out about sharing with friends. Pinterest is much more like a search engine than it is a social network. People who come to Pinterest thinking it's like Facebook or Instagram, they don't have a great experience because they upload a photo and then they're expecting to get feedback. But that's not what

Pinterest is for. And so that misconception can also make it more difficult for some people to understand what pinterest is and how it can be useful for them. And in this environment where people don't quite get Pinterest, here's the biggest threat to the company that an app that you already use will start offering you the same features as Pinterest, so you'll never end up having to use

it at all. Here's CEO and co founder Ben I mean, as a smaller company relative to the tech giants at Google, Facebook, Amazon, Apple, Um, it's not negotiable that we have to move really really quickly. Otherwise what happens, well, otherwise, like you get you get eliminated, right, I mean, that's just the story of technology. Are are

companies just like eliminating other companies. There's one search engine, there's one dominant social network, there's one dominant e commerce player, And so if you're going to carve out of space, you have to be you have to move really quickly to own that space. How confident are you that you own it? I think we're off to a good start, but we have a lot of work to do. It seems like every day there's another Pinterest like thing that

gets built into Instagram or Google or Amazon. For Pinterest, this threat of these larger companies taking over their features is very real. Just last week, Google announced that you'll be able to shop via image search for example. Instagram this week announced that you can start to collect inspirational photos. But given how competitive this space is, it doesn't seem like Ben and Evan have been really aggressive in the field. They appeared on the cover of Forbes with the caption

move over Zuck. Pinterest has a revenue model that puts Facebook and Twitter to shame. That might have been too optimistic in hindsight. Well, talking with Tim Kendall, the company's president, it's clear that there's still a big gap between Pinterest and the tech companies that it's sometimes compared with accelerating. Um, it's quite very fast. Is it great faster than they

did last year? Um, it's hard from It depends on what you depends on what you measure, like how you measure it, Like, I don't want to say something it's like factually inaccurate. We're really pleased with the trajectory UM and my standards for trajectory a very high because I've seen big trajectories up up close and it's a it's a really good trajectory. So it sounds like not the kind of explicit growth that we've become so accustomed to

in the valley. Well, more slow and study testing new ad features with small groups of advertisers and then broadening to larger groups. So how how big could pinterest be in in five years? Oh? I I think it could be um in terms of revenue, you know, billions and billions, you know, I think it could be a huge company.

I mean, if you think about again, if we are the place that you go on your phone to figure out what you're going to do with your life, from the small to the big, from the near term to the long term, like we become this this planning capability that just be almost essential to people in the same way that that Google became essential to people when they

knew what they were looking for. Sources tell me pinterest is aiming to make more than five million dollars in revenue this year, so that's still a long way to go before billions. It's seen it's been hard for them to grow internationally, in part because it's a product that's so varied and culturally specific to users around the world. Not everyone is interested in Easter egg decorating ideas for example. Right, But finally, pinterest has more users outside the US than inside.

In Kendall, the company's president told me they're only just getting started when it comes to making money from those guys and building out that revenue stream could could be slow. And is pinterest doing okay financially well? The company sets some very aggressive targets for itself and then didn't reach them, according to report in tech Crunch. But they're doing just fine. The last rays of three sixty seven million was in and then there's actual revenue coming in funding this expansion

around the world. Still, like a lot of Silicon Valley startups, pinterest isn't making a profit an you have plenty of money from the last SEMy rays. Still you are you? You guys are profitable. We're not profitable, right, But if you were profitable, that would mean you weren't spending on growth. The revenue that comes in gets put into I mean,

we re invested in the business. Maybe that explains why I've been hearing about this company's eventual I p O since Yeah, it feels like Snapchat, on the other hand, went from rumors to i p O fairly quickly. For a company to make its case convincingly to Wall Street and other investors, it needs to be able to show that it can make money reliably, and that if it's not already profitable, there's a clear strategy for getting there. Wall Street investors want explosive growth when they invest into

slok On Valley Company. This is what Tim told me when I asked him about it. So you said, you're you're not really thinking about or you're not discussing I p O internally currently plants any plants we're discussing it? Um? Are we discussing it internally? I don't know how to comment. Um, But what do you think is the time frame that makes sense for today? I mean, we don't. We really don't have plans. Yeah, yeah, so there's not we don't have plan, so there isn't a timeframe. But you don't

want to be acquired by like Google or something. I think Ben has been really clear that we want to be a standalone, independent company, and and that's definitely that's

why I'm here. You don't need the money right now, No, I mean the businesses the business is on a great trajectory um and and I think that we're I think we've grown in a really smart way that's put the position to put the company position where we have lots of degrees of freedom, um, such that we're not going to be in a position where we'll be forced to do something that isn't in the best interest of building

sustainable kind of independent company. Okay, So reading between the lines here, it does sound like they're inching a little bit closer, but that they have a lot more that they have to prove first. Yeah, especially if they're hoping for their company to be valued highly. When they last raised money, the company is worth eleven billion on paper, but people told me that pinterest would be unlikely to fetch those kinds of numbers. Right now, pinterest still has

a bit to prove. Talking to the founders, it sounds like they think the path to new users and eventually revenue growth is improving the product. And the interesting thing about pinterest is somehow they've ended up in a lot of Silicon valleys buzziest investment areas, artificial intelligence, computer vision. It's something that pinterest board member Jeremy Levine is really

excited about. Jeremy is a partner at the venture capital for Embesssamer Venture Partners, which is one of interest biggest investors. The company continues to innovate in a really compelling way, and so in its early days, um it was sort of a leader in visual discovery and sort of the great format that has not been copied many times over by other services on the internet. But even you know, very recently they launched this unbelievably cool search feature UM.

I used it all the time on my phone and it allows you to take a picture of a physical object and use that as a launching pad for search UM. And it's sort of an amazing integration of machine vision technology. Well, Pinterest has these a hundred seventy five million monthly active users actually labeling images as part of the way they use the platform, and so it opens up some great technical opportunities that other companies might not have access to.

Here's Evan, the co founder, talking about how it works. You know what I would say about computer vision is you need two things. You need more rellion, two things you need the computer vision algorithms themselves. Right, So what enables your your phone to say taking and take an image and say here are the five things in that image? And then you need the catalog, right, the data to match results back to that image. And that's what we have that's distinctive. You know, five ten years from now,

the algorithms for computer vision will be relatively commodified. But won't won't be is that is the catalog itself and the data we have. And so by really focusing on enriching that catalog and making it really actionable and leveraging all of our curation data, right, people are saving hundreds of millions of things all the time. Actually, here's a

way of saying it, right. You could you could say that we have a computer vision team of four or five people if you look at the engineers, or you could say that we have a computer vision team of hundred and seventy five million plus people because all the people on Pinterests are out there saving things supports there's definitely a chicken and egg with the catalog. We call

it the catalog and the user base. But the good thing is that a lot of Pinterests is people saving ideas from around the up to their boards, to their collections. And so as we start to grow internationally or catalog grows along with it. So what do you make of Pinterest envisioning itself as basically the Google for images is do you think this is an achievable target? Well, I guess they would say more the Google for ideas Pinterest.

Whole argument seems to be that you search for facts on Google like what temperature do you need the oven to be at? Hooked chicken? You search for ideas on Pinterest like how should I season or prepare the chicken? And now with the AI, it's like I took a picture of this chicken dish? What is it? And is there a recipe? And Pinterest will show you dishes that look like it and other things you may not even have thought of. That sounds pretty amazing. Do they actually

have the technology to do it? I tried it with kale. It's actually pretty impressive, But you need to get people to use it, and that's a different challenge. You know. That's especially making to me given how small pinterest engineering team is. We just heard Evans say that there's only four or five engineers in his computer vision team. Facebook, Amazon, Google, They must have hundreds of engineers working on these problems

and they're going all in on AI two. Well, those companies, though larger, aren't used the way Pinterest is, So they don't have this database of people's aspirations. What do you mean? Like these guys are saying you go to Pinterest to decide what you want to do or buy, or see or experience. So it's tied to activities like travel, remodeling, cooking babies, whereas on Facebook you might talk about what you've done already. So really it's an advertiser's dream. Here's

Tim again. We're the first company that's taken that commercial discovery experience and put it on the phone in a way where people get lots of utility because they actually are able to plan their lives in a way. It's great for them and completely aligned with what businesses and advertisers want to do, which is that they want to connect with the right people who are interested in their

products or services. So you know, I joined because I think it's the most interesting business to be built since gool Will built AdWords sixteen years ago. So this brings us to the secret sauce that pinterest is hoping will

turn the dynamics of the digital advertising market in their favor. Yeah, until now, tech companies have scrambled to take their credit for something the industry calls attribution, and that basically means that if you end up buying a handbag on Amazon, Facebook wants to be able to say that you made the purchase because of an ad that they showed you. But pinterest says they're playing for a whole new part

of the online advertising market. They want brands to know that without pinterras, you wouldn't even know their brand exists. You wouldn't even know you had an opinion on it. So I think what we've proven to advertisers is that people see an idea that could be their product as an advertisement, and that first impression right of seeing that handbag that you've you've never seen in your life, and that experience of going from I don't know what I want to wow, I want the handbag that it never

occurred to me that I wanted that moment. We have begun to prove to advertisers that that's probably the most valuable and important moment in generating demand. Okay, So pinterest has these big challenges and I p O isn't really imminent, and on top of all that, it's not this buzzy company that it once was. So I'm wondering is it getting harder for pinterest hire good engineers. It's actually super competitive to be hired there. And that might go back

to the being nice thing. When I asked Evan about it, he said, anyone with a sort of rash personality gets quote organ rejected from the organization. I mean, I would say, we're not very extroverted, all right, We're not out there talking all the time, and I think we don't want to be famous or anything like that, and so it's a different kind of leader. How does that benefit even how's that hurt you? I'm probably not the best person to ask, you know. Um, I mean, there's definitely a

superpower make yourself into a name. It's easier to get covered, it's easier to people have an attraction to celebrity there there. I mean, I think sometimes you have stories we want to tell. But other than that, it's just not something this top of mind. It's not that it's bad or good. And the fact that pinterest has kept this low profile in the press hasn't bothered Jeremy, the board member and investor we heard from earlier. He thinks it's actually been

an asset. It's run by a humble team that's kept its heads collective heads down, UM and focus on just building a great service and not getting wrapped up in what may be hot or exciting and in the headlines within the general tech press or the Silicon Valley. UM. That's allow of them to just keep plugging away. Startups reflect their founders, right. Whoever works there would need to be really excited about working with a guy like Ben. He's a bit soft spoken, but here he is describing

his ambition for the company. I don't know. I mean, I really love, ah, the promise of our product. I really love the idea that there's a place that you can go that is constantly kind of inspiring you to try new things, and it's giving you all the knowledge and information to actually make those real. So I really love that idea. There's nothing like that right now. I just really want us to make that reel in the world.

And a very easy way to motivate yourself is that we don't come copletely fulfill that promise UM for so many people in the gap between filling that promise and where we are today, Like that's the work we have to do, UM. But I think it would be great, you know, I think that, you know, we all grow up with these online services that really resonate with them.

Mean I mentioned, you know, I can't really imagine I can't really imagine my life without Google actually specifically without Google Maps, or you know, I can't really imagine our life without like a self like a smartphone. And I hope that interest with somebody be so useful to people. They could so reliably get inspiring ideas that they wouldn't be able to imagine how they just used to kind

of go through life and like find inspiration for things. Normally, hearing an executive say something like that, you know, a goal to conquer the world with an idea, it can get pretty annoying because we've heard it so many times before. When Ben says this, it sounds interesting because really he's so rarely talks with the public. And you know, another part of being a quiet company, I also cover Twitter, the public isn't as laser focus on critiquing what you're

doing all the time. You can work in peace at Twitter. Every time they change a design there's a used ruvolt. So those are benefits like employees getting along and they can work in peace. And we've heard the drawbacks, that growth can be slower than expected, that people can start to doubt the promise of pinterest, or even worse, that

they can stop caring. But ben in Evan, it sounds like they at least feel like they're moving pretty fast, and they're excited about the future, and they're making some really big bets. In the meantime, the rest of Silicon Valley is going to continue to be impatient. And that's it for this week's episode of Decrypted. Thanks for listening. Do you use Pinterests, do you think it has a future or do you see Instagram or Google winning this battle? Email us at decrypted at Bloomberg dot net, or you

can write to me on Twitter. I'm at Sarah Fryer and I met Akio seven. You can subscribe to decrypt It on iTunes or wherever you get your podcasts and leave us a rating and review. This helps us make our show better and it also gets our podcasts in

front of more listeners. And one last thing before we let you go today, Starting now, you can use Bloomberg's Io s app or our new Google Chrome extension to scan any news story on any website and instantly show your relevant news and market data related to the companies and the people you're reading about. It's a pretty cool feature. Check it out by downloading our io s app or search for the Bloomberg extension on the Chrome Store. Learn

more at bloomberg dot com slash lens. This episode was produced by p A Gig Cary Magnus Hendrickson, Endless Smith. Alec McCabe is head of Bloomberg Podcasts. We'll see you next week, yeah h