Additional Update (2/15): Pinterest adds disclosure about how they (might) make money, my error about Skimlinks and a conversation with the Pinterest CEO.

If you post a pin to Pinterest, and it links to an ecommerce site that happens to have an affiliate program, Pinterest modifies the link to add their own affiliate tracking code. If someone clicks through the picture from Pinterest and makes a purchase, Pinterest gets paid. They don’t have any disclosure of this link modification on their site, and so far, while it has been written about, no major news outlet has picked up on the practice or its implications.

Pinterest doing this is big news in my opinion for two reasons:

Pinterest is monetizing their site while in the early beta stage, which is almost unheard of for a newish social network.

Pinterest has taken this action in a quiet, non-disclosing way.

How long this has been going on isn’t clear, but it has been at least a month as Lindsey Mark wrote a blog post that mentioned it on January 5th. In my case, I saw a tweet from from fellow Lawrence social media user Debbi Johanning that linked to an article Why I Don’t Mind Pinterest Hijacking My Links. That blog post was based on a post by Joel Garcia on an affiliate marketing blog which pointed out the practice, but also explained that if an affiliate link was in the original pin, Pinterest wouldn’t modify it.

How Pinterest modifies its users’ links.

Pinterest is able to do this across their site by using the service skimlinks. This service is rather innovative in that they automatically go through a site and add affiliate links wherever there is a link to a product that has an affiliate program associated with it. While many forums, smaller web sites and even Metafilter have taken advantage of the service, I have to think that the volume of links skimlinks is modifying for Pinterest, has to make Pinterest their biggest client and perhaps the majority of their business. skimlinks makes money by taking 25% of any affiliate revenue generated.

Pinterest is taking the unique path of generating revenue early.

Historically large social networks have focused on user growth with little regard to making money. Twitter and Facebook went years before doing any advertising, and more recently, popular services like Instagram and to a lesser extend Path are almost dismissive of how they are going to make money. The idea of growing big and figuring out the business later is dangerous for small businesses, but in the world of venture capital, it is absolutely the norm for rapidly growing web sites and services aimed at consumers.

That Pinterest is breaking from this mold, and getting revenue while it is still technically in beta is news on its own. I wrote previously on how Pinterest could be the most valuable social network for retails sales, and in Pinterest’s case, they have found a relatively easy solution to start capturing the value of the network before they even leave their beta phase.

How they are doing it with no disclosure to users feels weird.

As most bloggers are aware, when you use an affiliate link in your post, you need to provide some type of disclosure either by it clearly being an ad, mentioning it is an affiliate link or at a minimum providing some type of prominent disclosure that your site features affiliate links. This is done, because you have a financial interest is promoting the product.

In Pinterest’s case, since they are not creating the content and are inserting the links automatically, they might feel that they are not promoting affiliate linked pins any more than other pins, and thus they don’t need to disclose as the placement is not affected based on the financial gain.

skimlinks own site has a FAQ section about disclosure, and it would seem their own recommendation would be that Pinterest make a disclosure.

We encourage our publishers to disclose to their users and comply with the FTC regulations which state… “When there exists a connection between the endorser and the seller of the advertised product which might materially affect the weight or credibility of the endorsement, such connection must be fully disclosed”.

When using our URL Shortener to include product recommendations on Twitter, we have provided some disclosure guidelines here.

You could also add disclosure to your site by joining our Referral Program and using one of our disclosure badges.

One specific, problematic issue is that when individual online stores pin their own content, it is unlikely they would insert an affiliate code. But if the store has an affiliate program, it is highly likely that those links now will have an affiliate code in them that gives Pinterest a percentage of any sales. Not disclosing this modification is putting individual stores at a disadvantage when they and their customers are putting in the work of adding pins.

I, like many people, don’t have a problem with Pinterest making money off of user content. The links are modified seamlessly so it doesn’t affect the experience. Pinterest likely should disclose this practice to users even if they aren’t required to do so by law, if only to maintain trust with their users.

Do you care that Pinterest is modifying your pins? Do you think they should disclose it to users? I would love to hear your thoughts.