Pandora Predicts a Profit Next Year

pandora1Speaking to Bloomberg.com this week, Pandora Founder Tim Westergren said he hopes 2010 will be his music service’s first profitable year. He projected that revenue will double this year to $40 million based on audience growth and increased demand for ad units. Based on an assumption that current music royalty negotiations will be finalized, Westergren says he’s optimistic that Pandora can make money next year.

Pandora has 27 million registered users and adds 50,000 to 60,000 a day. Mobile devices such as the IPhone and Blackberry have played a huge part in Pandora’s success – last year Pandora’s iPhone app was the most popular app in the iPhone app store. Westergren says 18000 to 20000 new users a day are coming from iPhone alone.

Add to this news that Westergren didn’t mention during this interview: Ford says the next version of Sync, their innovative connected car radio developed by Microsoft, will have Internet radio capabilities. Ford says they are working with Pandora on development for debut in 9 to 12 months.

Pandora’s ad revenue strategy focuses on selling targeted ads, delivered to users based on gender, age, or geographic attributes. This is valuable to the advertiser, says Westergren. “We’re not delivering an ad for a women’s clothing store to men, or a bar or alcohol-related event to minors,…everything is delivered based on the information of the listener.”westergren

They’ve beefed up their ad sales staff and added audio sales specialists. Pandora plans to air 2 or 3 :15 second audio commercials per hour as the audience and demand increases. Currently, they air only one per hour. I suspect with the exponential audience growth, targetability, and positive buzz about the service, the challenge won’t be finding advertisers, but optimizing units and cpms.

Pandora is the premier brand in the Internet radio industry now – a great site with enormous popularity, functionality and cache. The positive buzz that Pandora generates benefits all of Internet radio. They led the way with Iphone, and now they’re leading the way by working with Ford. I’m looking forward to watching them march toward profitability  as well.

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