Launched in March of 2010, Pinterest is a website and mobile app that gives its users the tools to discover, share, collect, and store items, pages, websites, etc. on boards they create. And the board possibilities, it seems, are endless.

Want to eat and live healthier in the New Year? Make a board filled with tips and recipes for doing just that. Love fashion? Create a board that demonstrates your personal style choices. Wishing for a complete home redecoration? Make a board that compiles all of your design hopes and dreams.

A look at Pinterest. Image: Pinterest

This approach has really caught on with users in the social media sphere, propelling Pinterest to incredible growth. In fact, the company reportedly only took nine months to go from 50,000 unique monthly visitors to 17 million monthly unique visitors, compared to 16 for Facebook Inc (FB - Analyst Report) and 22 for Twitter Inc (TWTR - Analyst Report).

High IPO Potential

Back in 2013, Pinterest CEO Ben Silbermann, speaking at Fast Company's Innovation Uncensored conference, said Pinterest was not angling to go public, and while he did not rule out the possibility of a future IPO, he emphasized that it was not a priority.

Silbermann elaborated that the company wants to "stand on its own two feet," and he was not sure if going public would help Pinterest retain and grow its user base.

Fast forward to 2015, and Pinterest is one of the most talked about IPO candidates. It’s the last of the popular social media companies to go public or to be swallowed up in a merger. Despite Silbermann’s past comments, the company seems to be following in the footsteps of fellow social media giants Facebook and Twitter.

Currently, its valuation is at a praiseworthy $11 billion after its latest round of funding from new and existing investors in March. With financial backing from venture capital firms Andreessen Horowitz and Bessemer Venture Partners, hedge fund Valiant Capital Partners, and Japanese e-commerce company Rakuten, Pinterest raised $367 million. Combined with Pinterest’s previously raised $764 million, the company has raised over $1 billion in equity funding and is now one of the world’s most highly-valued start-ups, ranking No. 9 on The Wall Street Journal’s list of billion dollar startups.

Pinterest Inc.'s Investors by Type (Cumulative) | FindTheCompany

And their valuation just keeps on increasing. Thanks to a SkimLinks deal that monetizes links on Pinterest to other sites, the company is expected to generate $50 million annually.

New Products

Pinterest just recently unveiled a new product called “Action Buttons,” allowing users to instantly add all the items from a cooking recipe straight to a shopping cart, or add a gadget straight to their wish list on Amazon. The company also offers users tools called “buyable pins,” which lets consumers purchase directly from partners Pinterest works with. Users will see prices, be able to select color or quantity, and then they can tap the button to buy the product.

Pinterest's convienent buyable pins. Image: Pinterest

After a successful first phase with selected advertisers—and using a tool called “Promoted Pins”—Pinterest is opening its ad sales platform to all merchants. Wedbush Securities estimates ads could generate $500 million in revenues in 2016.

User Base

In addition to monetization, Pinterest possesses a unique balance of consumer and product. It uses advertisements to their advantage; users—or, really, consumers—pin products they like, want, or have onto boards to share with others. Whereas ads on Facebook and Twitter stick out like a sore thumb, Pinterest works ads into the experience as a whole. They are (almost) invisible.

Pinterest has also curated a rare audience as women account for 80% of its user base. This not only presents new possibilities in terms of marketability and loyalty, but it also drives online sales since women are more likely to shop and buy online.

Obstacles Ahead

Despite commendable numbers and distinctive users, Pinterest must take on some daunting hurdles.

First, there is the problem of user growth. Since its user base is 80% women, and 1/5 of all Internet-using women are registered users, one has to wonder how Pinterest will keep up its blistering pace of growth over the next few years.

It is also highly vulnerable to copycats, with similar applications like Wanderfly and Gentlemint popping up left and right. Internet users are constantly moving on to the latest and greatest, so Pinterest must prove that it is not just some fad or craze.

Not only is monetizing Pinterest a risky bet—“Promoted Pins” could very easily have been a financial failure—but there is also a clear risk of the company devolving into a mess of advertisements.

Final Thoughts

Pinterest has become an important new way of driving traffic to web properties as well as spurring high mobile usage (80% of its traffic originates from mobile devices). With over 176 million registered users, and over 100 million active users, the company has the potential to be great; however, Pinterest must prove its staying power, and convince advertisers that vast pin collections can somehow be monetized. 

Its best feature, though, is not the $11 billion valuation or female-centered user base. Since its launch, Pinterest has been dedicated to discovering its identity within the immense social network, and this desire to find itself may be what sets the company and its potential IPO apart from the crowd.

Investors will have to watch this ‘promoted pins’ plan and to follow Pinterest user growth in the months leading up to any IPO, as revenue generation will increasingly come in focus for this company. However, Pinterest has grown unlike very few internet companies in history, suggesting that if they can figure out the monetization of its huge user base, it could become the next darling of the social media IPO world before long.