Pinterest expected to hit $1 billion ad revenue by 2020

Pinterest’s ad revenues are on target to reach $553.3 billion this year and to top $1 billion in 2020, according to new data from digital research firm eMarketer.

Ramping up ahead of expected IPO. Bucking the approach of most other social networks, Pinterest has taken a deliberate path to monetizing it audience through advertising. However, the company has been is expected to IPO some time next year, and has been releasing out ad products that offer more scale and visibility. The privately company has held ad revenue numbers close to the vest. Sources told CNBC earlier this year that the company already hit the $500 million mark last year, and is closing in on $1 billion in ad revenue this year.

What’s driving growth? Pinterest has aimed to increase advertising revenue from both SMBs and large brands. The company said its Pinterest Propel advertising program helped increase the number of SMB advertisers on the platform by 50 percent year-over-year in early 2018. The roll out of Shopping Ads this year, allows retail advertisers to quickly advertise their product catalogs. Pinterest’s video advertising offerings are attracting brands. It rolled out wide-format video advertising generally in August.

Product development should spur revenue potential. According to eMarketer’s estimates, the platform will generate $7.15 in average ad revenues per user (AARPU) — a 34.4 percent increase over 2017. Pinterest claims a growing audience of 250 million users, but its AARPU remains lower than more mature platforms such as Facebook and Instagram, and is closer to that of Snapchat, which will generate $7.81 per user this year. Analysts expect Pinterest to catch up.

“Pinterest has a significant and engaged user base that it is starting to monetize,” said Monica Peart, senior forecasting director at eMarketer. “As it leverages its rich user data and develops its ad offerings and measurements, it has the potential to increase the amount of revenue per user to the levels of Instagram or Snapchat.”

Why you should care. While Pinterest isn’t a threat to the duopoly of Google or Facebook, at this point, it is becoming a viable advertising channel.  A growing audience, shift from a primarily female demographic, and better measurement tools could increase its appeal among more advertisers.

“The audience expansion will help Pinterest reach regular monthly use in a quarter of the US population by 2020, a level reached by Snapchat and Instagram back in 2018 and 2017, respectively,” Peart said.