The Financial Times reported Wednesday that Microsoft has held talks in recent months to acquire Pinterest. The talks, which are “currently not active,” could have led to Microsoft’s largest acquisition to date, given Pinterest is valued upwards of $51 billion.
There’s good reason why Microsoft would consider a social network like Pinterest for its biggest purchase yet.
Some have suggested that Microsoft has looked at purchasing high-profile online communities such as Pinterest and TikTok to attract clients to its Azure cloud platform. Pinterest uses Amazon Web Services, the market leader, as its cloud provider. Microsoft Azure trails AWS and Google Cloud is in third.
I don’t buy that this is the main reason Microsoft is Pinterested. Having Pinterest switch from AWS to Azure would be icing on the cake — it’s not reason alone to spend more than a quarter’s worth of Microsoft’s revenue on an acquisition. Nor is the reason to shore up Microsoft’s standing in the digital advertising market, though that can’t hurt.
Just like in the case of TikTok, the cake here is data.
Microsoft is a software company transforming into a cloud company ultimately hoping to become an AI company. To pull that off, it needs even more data.
Pinterest is a social network whose users upload plenty of data in the form of images adorned with descriptive hashtags. In other words, not only is Pinterest teeming with user-uploaded data, it is labeled data.
Microsoft would feed all that labeled data to train machine learning models that help its AI systems improve. Sure, Microsoft already owns LinkedIn, but that social network is more for “professionals” than it is for consumers, and it’s largely text rather than images. Pinterest offers a completely different dataset.
And it’s growing. In its Q4 2020 earnings report, Pinterest last week reported $706 million in revenue (up 76%) and 459 million monthly active users (up 37%). In its Q4 shareholder letter, Pinterest said product improvements led to product-only searches growing “by 20x since the beginning of 2020.”
Microsoft could use Pinterest’s data in a variety of ways, especially to better understand consumers — a weakness for the software giant. It could then use those insights to build superior products and services beyond Pinterest. Learnings from Pinterest’s data could inform everything from its Edge browser to its Surface products.
But more importantly, Microsoft would likely use Pinterest as a testing ground for consumer AI services. Already, Pinterest considers itself “at its core, a data and AI company,” according to CTO Vanja Josifovski. It leverages deep learning for personalization features that suggest recipes based on diet or home decor for a user’s specific taste. Microsoft would gain all those understandings to use beyond Pinterest.
In the near future, however, a deal is unlikely. Pinterest’s stock is hitting all-time highs, largely thanks to its stellar earnings and now the report of acquisition talks. If Microsoft decides to have another go, it won’t be anytime soon.
Originally published at https://www.geekwire.com/2021/why-microsoft-is-pinterested/ on .