Tag Archives: Initial public offering

Putting My Money Where My Mouth Is

It’s a big week for Internet radio. The space has been buzzing about Pandora going public since the news was announced back in May. This week their stock will be sold on the New York Stock Exchange for the first time.

I have a lot of admiration for the folks at Pandora and their product. I think they have thought hard and fought hard to create a product that works for listeners and musicians. Through perseverance and innovation they’ve created a product that has arguably become the generic term for Internet radio.

Latest reports peg their registered listener list at more than 90 million. 24% of the 12+ population in the US use it. That’s more than use satellite radio, Linkedin or Twitter. Their audience is growing exponentially. Right now 60% of their listeners are mobile, and Internet radio isn’t even in cars yet. But it’s coming.

Expenses are high for Internet radio, that’s definitely the challenge for Pandora. The naysayers are out in force this week proclaiming streaming dead, or at least deadly for investors. So here’s the deal: in the last one year period, Pandora grew its user base by close to 100%. During the same period they grew revenue by about 250%. Expenses surged 195%.

I believe that Pandora will continue to grow its audience. I think they will also continue to develop new and innovative ways to sell advertising and offer value to ad partners. I also believe there are ways other than advertising to make money with a user base as large as Pandora’s. I think a registered user base of passionate listeners is rare and golden, and I’m betting that Pandora will be able to wisely leverage it to more and more profitability.

So I’m in. I’ve placed my order. Stay tuned..

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Pandora’s Growing Audience and Revenue

Pandora updated its SEC filing last week to give us a glimpse of what’s been going on in 2011. Impressive growth continues to be the story. In the 3 month period ended April 30th they added 1.6 billion listener hours and another 14 million registered users. Of those 94 million registered users, 34 million are active users who have “requested audio from our servers within the trailing 30 days to the end of the final calendar month of the period.”

Last year Pandora streamed 3.2 billion listener hours of programming, in the first quarter of this year they streamed 1.6 billion. Their listener hours are up 129% over a year ago. Those additional hours are not just coming from new listeners. Registered users and Active users are up (77% and 89%), but not by as great a margin, meaning that listeners are listening to the service longer than they were a year ago.

Pandora seems to be having no trouble finding demand for their inventory, which they are growing at an extraordinary pace. Pandora made $137,764 million in their fiscal year that ended at the end of January. They added more than $47 million of that in their final quarter (November – January). In the first quarter of this year, which for them is February – April, they added $51 million. Revenue from subscriptions was 15.4% last year, and is 16.9% for first quarter.

More and more listeners are accessing Pandora on mobile devices – in the recent quarter 60.3% of their audience came over mobile devices. Check out this trajectory – listener hours on mobile devices constituted approximately 4.6%, 23.5%, 50.5% and 60.3% of their total listener hours for fiscal years 2009, 2010 and 2011 and the three months ended April 30, 2011, respectively.

On the expense side the pace is stiff as well – Pandora’s licensing obligations tore more than $29 million out of the $51 million the company brought in in the new quarter. Billboard notes that the challenge for them will be to increase their ability to monetize every listener hour, which is a challenge given the rapid rate at which they are growing listener hours at this point.

There’s no doubt about it, Pandora’s growth is impressive. I’m delighted to watch it..

Pandora’s Pushing The Privacy Envelope

The Securities and Exchange Commission has subpoenaed Pandora as part of an investigation into the way that certain popular applications that run on Apple and Android platforms share information about users. According to the Wall Street Journal, the investigation is centered on the question of whether certain popular smartphone applications used information about their applications’ users, without disclosing the uses properly.

This information follows a report by WSJ in December that Pandora and other popular applications were transmitting information obtained about user locations and preferences to third parties such as advertising platforms without permission. Pandora’s app reportedly fed info about the user’s age, gender, and location.

The news of the subpeona came to light when Pandora filed an amendment to its plans for an IPO. Supposedly other popular applications are included in the investigation – Pandora has said it is not the specific or sole target of the investigation.

Sometimes it’s not all roses when it comes to being the leader of the pack – in this case Pandora’s highly popular mobile apps are causing some higher profile scrutiny. And again, the industry will have Pandora to thank for pushing the envelope and finding the line in the sand. While advertisers demand more targetability, these functions can only be delivered with this kind of user data.

You can hear more about this topic at RAIN Summit West in Las Vegas on April 11th, especially on the Legal Issues panel hosted by David Oxenford and joined by experts from Rhapsody, Live365, SESAC, and EMF Broadcasting. You can register for that event here.

Westergren’s Savage Beast

I have a business card from Jessica Stoner Steel, EVP of Biz Dev at Pandora, that she gave me when we first met, sometime in the early 2000s. The card doesn’t say Pandora, it says Savage Beast Technologies, powered by the Music Genome Project. That was before the site was live, and before any of us had ever heard of Pandora. As far as I know, Jessica was one of Pandora’s very earliest employees. 

Now Pandora has 275 employees, and has taken the lead position in Internet radio in the US. Of the top measured sites and stations in the US, they can claim a 50% share of listening.

The SEC filing says that they changed their name to Pandora in May 2005. It’s taken less than six years for Westergren and his team to build a brand and execute a vision, and they have done it very very well.

I remember that early conversation with Jessica Stoner (Steel). She was firm in her belief that what they were doing – it wasn’t live and she wasn’t revealing much – was revolutionary. Good for artists and listeners. Better than what anyone else was offering. In fact, her confidence seemed to me at the time to be a little cocky. But I never forgot the conversation.

I think the one thing that Westergren and his team have had from the very beginning was a vision. A dream. A conviction. That their Music Genome Project would revolutionize listening and satisfy artists and listeners. Really, the biggest thing that Pandora has had going for it from the beginning was Tim Westergren and his passion. He started traveling around the country holding town hall meetings to connect with listeners. Preach his vision. Build his brand. And he did it with genuine passion and dedication to both sides, the artists and the audience.

Pandora is an epidemic, in the very best, Tipping Point kind of way. And if the past five or six years is any indication, Pandora’s IPO will be a success.

Pandora’s Public Offering

By now you’ve probably heard that Pandora has moved to go public. On friday afternoon they filed a registration statement with the Securities and Exchange Commission of their intention to sell shares via an IPO as soon as possible after the filing. They seek to raise $100,000,000.

The document they filed is full of great info about their business and their strategy.

Pandora says they are redefining radio from a one to many to a one to one radio listening experience by enabling personalization and discovery. Their Music Genome Project, which assigns attributes to songs and then is able to define and deliver an individual’s preferences for music, is their key weapon. Listeners choose to listen to Pandora because of this service, because it is free and because it is everywhere. Advertisers choose the service because it offers a one to one delivery, multi platform options, and an “enhanced messaging environment.”

Pandora has 80 million registered users. Listening on mobile devices is higher than on computers. According to AndoMedia’s ranking of the top 20 stations or networks in the US they have more than a 50% share. Perhaps they should have added the caveat that not all stations or networks are measured by Ando’s service, however they do list their reliance on third party measurement services as one of their risks.

In the first nine months or 3 quarters of last year their revenue was slightly more than $90 million, $78 million of that was ad sales and the remainder was subscription. The ad revenue number includes more than $6.6 million in ads they run as part of the Google ad network.

A daunting 60% of those dollars are paid out in royalties which they call “content acquisition”. Pandora was not profitable last year based on income and expenses for the first 3 quarters. In the fiscal year ending January 2010 they lost $16.8 million.

Westergren owns 2.4% of the company he founded by maxxing out credit card after credit card back in the early 2000s. CEO Joe Kennedy has 2.7%.

Pandora’s going public is big news for Internet radio. They are by far the most widely known Internet radio service in the US, and their success or failure will impact the ability of other services to do the same. May they thrive…

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