Pinterest Narrows Ad Focus to Match Users’ Interest

Image bookmarking service Pinterest Inc. is scaling back the breadth of its advertising ambitions, focusing more on attracting dollars from retailers and consumer packaged-goods companies while de-emphasizing other marketing categories.

In a September letter to ad buyers reviewed by The Wall Street Journal, the company said it would no longer offer hands-on support, such as consultation from sales executives, to marketers outside the core areas of retail and consumer goods.

Such marketers can still buy ads on the site, but only through either a self-serve, Web-based interface, or a group of ad tech firms that plug into Pinterest’s platform, according to the company.

Some ad buyers said Pinterest’s move follows the reality of how consumers are using the service, which counts more than 100 million monthly users who post everything from photos of winter boots they might buy to chic living-room curtains. Pinterest is ideal for marketers looking to sell such products online, these executives say.

“People have specific kinds of things they search for on Pinterest -- food, fashion, decorating ideas,” said Adam Kleinberg, chief executive at the ad agency Traction. “For brands that can deliver in those categories, it makes great sense.”

But the platform isn’t ideal for hawking cellphone subscriptions, banking services and some consumer products. “If you’re selling cars or consumer electronics or toilet bowl cleaner, it becomes a less important media channel,” Mr. Kleinberg said.

Tim Kendall, Pinterest’s head of monetization, acknowledged that Pinterest is limiting its service to two ad categories for now, but said it is still targeting a big chunk of ad dollars. “We’re a small team. We think this is the best approach to create the best ad business long term,” he said.

Through the first six months of the year, retail and consumer packaged-goods brands spent nearly $7.7 billion on digital ads, accounting for 28% of the $27 billion in total digital ad spending in that period, according to the trade group Interactive Advertising Bureau. Still, Pinterest may be leaving money on the table by not targeting other industries more aggressively. The noncore areas of financial services and autos each accounted for 13% of first-half digital ad spending, for example, according to the IAB.

Some big marketers that aren’t in Pinterest’s core focus areas were irked by the firm’s letter. “I was really surprised to receive a note [from Pinterest saying] that we’d no longer receive such support,” said Lou Paskalis, senior vice president and enterprise media executive at Bank of America.

Pinterest has been pushing into e-commerce, hoping to capitalize on a site that houses more than 50 billion images as it tries to support an $11 billion valuation. This summer, the company added a “buy” button that lets users purchase items without leaving the site. Pinterest currently doesn’t earn any revenue from buy buttons. The company told potential investors earlier this year it made less than $25 million in revenue in 2014 and projects revenue of $3 billion in 2018, according to an offering document the Journal reviewed.

Adam Shlachter, chief investment officer at DigitasLBi, said that he understood why Pinterest is catering to e-commerce brands, but “it is a bold statement when you position yourself as an ally to one group and not another, with some getting white-glove service,” he said.

Some ad buyers, however, appear to be shifting their budgets away from the service. In the third quarter of last year, 30% of ad agencies said they planned to spend ad budgets on Pinterest, according to a survey conducted by Strata Marketing Inc., which licenses media buying and selling software to ad agencies. During this year’s third quarter, that number slipped to 21.1%, compared with 96.1% for Facebook and 39.5% for Instagram. 

Pinterest said it doesn’t agree with Strata’s findings. The company says in the third quarter of this year, 85% of its total revenue was largely driven by campaigns coming from the five largest advertising holding companies. Pinterest’s overall revenue expanded more than fivefold during that period compared with last year, a spokesperson said.

Plenty of marketers are keen on the Pinterest platform. Premium pasta brand Buitoni was drawn to the highly visual nature of the site and the fact that people use it for planning meals. “We are very pleased with the results and plan to continue,” said Erica Starrfield, Buitoni’s marketing manager.

Mr. Kendall of Pinterest said the company is still getting business from advertisers outside the two core categories. Marketers such as Subaru, Twentieth Century Fox, Allstate and Samsung Home have purchased ads through Pinterest’s self-serve tools, people familiar with the matter said.

Pinterest has said it is targeting search-advertising budgets over those apportioned for social media. Some industry experts compare the data Pinterest has on its users’ product interests to Google’s ability to discern what users want to buy based on what they search for.

But Pinterest doesn’t offer the same scale as Google does when advertisers purchase ads through a Web-based auction, and it doesn’t offer the same types of ad targeting that search ads offer, according to Sarah Hofstetter, chief executive officer of 360i, a digital ad firm own by Dentsu Inc.

“Pinterest does have a ton of potential,” said Ms. Hofstetter. But when it comes to being a viable contender for search advertising budgets, “they can’t really play that game.”

By Mike Shields