• Triton

Here's one way to think about PINS vs. SNAP

Pinterest and Snap run the same kind of mousetrap.  

They aggregate large groups of online users, whose attention they sell to big brand advertisers. Usage for consumers is free, but running ad campaigns on these platforms costs money. So the advertisers are the customers – they are the ones getting steak dinners and free iPads.

Snap and Pinterest go on and on and on about the cheese in their traps:

Mice like this cheese because "it empowers them to express themselves, live in the moment, learn about the world, and have fun together.” 

Mice prefer our cheese because "it helps them imagine what their future could look like, which helps them go from inspiration to reality.”  

But they don’t talk very much about the end-users of the mouse attention they sell as their actual business. Pinterest at least admitted to having an advertising sales force in its S-1, while the words didn’t even appear in Snap’s. Pricing trends, customer counts, campaign sizes – forget it.

This is part of an overall trend we see of a unicorn calling attention to one side of its marketplace while downplaying or ignoring the importance of the other. For example, neither Uber nor Lyft told us their driver counts over time while going on about passengers.

Anyway, advertisers care a little how young/old or rich/poor or female/male the mice are – but mostly they want to put their ads in front of A LOT of mice at the same time. Scale is what brand advertisers want to buy.  So audience size and growth are pretty important.

Why investors care at all about the cheese in the traps is somewhat of a mystery – except that the companies themselves and their underwriters have gone to a gigantic amount of trouble to focus attention on that to the exclusion of other, more relevant, factors.

One thing that is really weird, though. Social publishers like Snap (and obviously Facebook) are supposed to be better businesses than regular publishers because their content costs should be lower. The neat trick of “user-generated content” is convincing the mice to make their own cheese. However, that doesn’t explain why Snap was losing a colossal amount of money when it went public (losses that are up in dollar terms since), while Pinterest appears to be approaching breakeven.

All of this is spelled out in the comparative metrics below.

Particularly stunning in the comparison:Snap had about half as much revenue at its IPO as Pinterest has today, but went public at roughly double the valuation Pinterest is seeking, and raised about twice as much money.If investors are into this kind of proposition, and aren’t particular about this or that kind of cheese, it’s pretty clear who has a better mousetrap.