Brief:

• Pinterest is set to double its ad revenue this year to nearly $1 billion as the social media company reportedly prepares for its initial public offering (IPO) in mid-2019, unnamed sources told CNBC.
• The platform is seeing particular success with mobile ads among its more than 200 million active monthly users, 80% of whom use Pinterest's mobile app, the company reports. CNBC said that advertisers are also attracted to Pinterest's mobile search capabilities.
• The social media company's value has risen to between $13 billion and $15 billion from $12.3 billion a year ago, according to secondary market data cited by CNBC. Pinterest's IPO may align with other startups like ride-hailing pioneer Uber and Airbnb that could also go public next year.

Insight:

Pinterest's mobile ad sales strength may bode well for a company that built a large following early on but has seen its user growth slow with time. The company has struggled to build its digital ad business, particularly against older and bigger rivals like Google and Facebook. That "duopoly" commands about 57% of the U.S. digital ad market, per estimates by eMarketer, leaving many brands to yearn for a viable alternative for targeted ad placements. While Pinterest is a smaller ad platform overall than Facebook or Google, its unique positioning as a social media network for inspirational ideas makes it an attractive investment for some mobile marketers.

The company continues to add features that make its app and website stickier to users. Pinterest in February combined Lens photo searches with text searches in its iOS app in a move to differentiate its service from those of its rivals. The number of visual searches in the past year has jumped 140% to 600 million queries every month, signaling that its effort to boost Lens over the past year and a half have paid off. Pinterest has also worked to make its platform more compelling for advertisers. Last fall, the company released self-service tools to let marketers place search ads on its platform without intervention from a live salesperson or help desk and began testing an autotargeting feature to extend keyword campaigns into more searches.

Pinterest in 2015 had projected sales to hit $2.8 billion by this year, according to TechCrunch, but currently is on pace to reach a third of that estimate. Pinterest needs to grow its audience and add more video content to lure big-budget advertisers, while also emphasizing its strength in capturing the purchase intentions of its users. While Facebook has detailed personal information about its users and Google gathers insights from people's internet searches, Pinterest users directly indicate their aspirations with their pins. More than half of Pinterest's audience (55%) use the site to find and shop for products, compared with 12% for Facebook and 9% for Twitter, according to Mary Meeker's Internet Trends Report.

Now, Pinterest needs to manage investor expectations as it goes public to avoid repeated disappointments and negative headlines, like Snapchat parent Snap has seen since its IPO in March 2017. At that time, Snap was valued at $33 billion, or twice its current market capitalization. In the private market, Uber is currently valued at $60 billion, while Airbnb has a price tag of $30 billion, per Investor's Business Daily.