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Print 30 comment(s) - last by bigdawg1988.. on Jun 21 at 2:42 PM

Some analysts think it will be a long time before Pandora turns a profit, if ever

Pandora is an internet radio company that has been around for more than ten years. The company has not been publicly traded until recently when Pandora had its IPO. Early on shares in the company soared as high as 48% from the IPO price.

The problem was that the stock then turned around in late trading and prices tumbled, yet it still ended up above its opening price. That means that people who bought early are still doing well enough on the stock, but those that bought later in the day are facing a loss in a single days trading. The reason for the about face on the stock has to do with concerns of whether or not Pandora will even be profitable.

The problem is that Pandora is growing its user base very quickly and the ads sold to support the network aren’t growing nearly as fast. This raises concerns of whether or not Pandora will be able to turn a profit in the future. 

Pandora listeners are also migrating more and more from listening via their computer to listening on a mobile device and mobile ads are worth even less than ads on computers. Pandora CEO Joseph Kennedy said, "We are tremendously focused on providing a great listener experience and that's what has gotten us to this point."

The stock's IPO price was $16 per share and it closed the day at $17.42 per share. Some analysts are calling for investors to avoid Pandora stock for now. Analyst Rick Summer from Morningstar has a target price on the stock at $6 per share. The WSJ reports that Pandora CFO Steve Cakebread thinks that its margins will improve as listener hours slow down. 

Cakebread said, "[We should] improve operating margins as our listener hours slow down." The WSJ also lists the value of Pandora at $3.1 billion fully diluted and notes that a limited float of 95 is driving shares up higher than the first day of trading.



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The problem with Pandora is simple...
By MrBlastman on 6/16/2011 12:41:40 PM , Rating: 2
When their CEO came out and say that he isn't focused at all at becoming profitable, but instead "We are tremendously focused on providing a great listener experience and that's what has gotten us to this point." He shot himself in the foot by saying that.

He shot their IPO in the foot also by saying that.

Lets face it. When you buy into a company, it is a business decision. Sure, there's an element of chance that you might be big, but the people with the most coin to dump into something aren't idiots.

We want results. We want numbers. We realize that Pandora hasn't made a dime yet due to tremendous pressures from royalty payments that the recording industry requires them to pay. We see that Pandora has a huge user base and appreciate the efforts the put into making it a good user experience. However, what we want to see is them figure out a way to monetize the user base into a profitable revenue stream.

When their CEO comes out and says this is not his goal right now, we make him suffer for it.




RE: The problem with Pandora is simple...
By Denigrate on 6/16/2011 1:22:34 PM , Rating: 4
That's one way of looking at it.

Another way of looking at it is that the only way for Pandora to grow and become profitable is to focus on customer satisfaction, and that's what they are doing.


RE: The problem with Pandora is simple...
By MrBlastman on 6/16/2011 2:03:34 PM , Rating: 2
You can have a million satisfied customers--but if all that satisfaction still means you owe money to creditors every single quarter, it is a great way to go out of business.

Once you IPO, you are _expected_ to earn money for your owners (now the public). You no longer have the leeway to just sit around and do what you see fit (though, Tesla is an example of them still begging for more money constantly), eventually it will catch up with you.

I can understand going public to raise money, but please, at least be focused on earning a return for that. I like Pandora, I think they have a great service and want them to stick around... I just don't want to see hundreds of tech companies think they can go public and the majority of them end up out of business and bankrupt again.


RE: The problem with Pandora is simple...
By Samus on 6/16/2011 3:25:24 PM , Rating: 2
Google has proven that you don't need to charge for a consumer product to turn a profit. As their customer base grows, they will become more attractive to advertisers...it sounds like they're just in limbo at the moment.


By omnicronx on 6/16/2011 4:23:01 PM , Rating: 2
quote:
Google has proven that you don't need to charge for a consumer product to turn a profit.
The exception hardly proves the rule..


RE: The problem with Pandora is simple...
By MrBlastman on 6/16/2011 4:29:54 PM , Rating: 3
There is one minor (okay, MAJOR) difference between Pandora and Google... plus the ads generate profits model.

Google doesn't pay royalties for every single search they perform to another company/agency. Pandora, on the other hand, does.

Pandora pays money to the music industry for every single listener that tunes in. The royalties are killing them and will continue to drag them down. They need to be more creative than just "placing ads."

Google, if you'll notice, has been extremely creative. They haven't just sit around with their search engine placing ads. Their Android phones have been selling in droves.

The Music industry is full of a bunch of blood-sucking leeches. Okay, vampires. They're worse than leeches. At least leeches share some sort of benefit. Vampires don't. They screw their artists over and pocket all the profits for themselves any way they can. Pandora has this huge roadblock to their success.


RE: The problem with Pandora is simple...
By crimson117 on 6/17/2011 9:59:00 AM , Rating: 2
quote:
Google, if you'll notice, has been extremely creative. They haven't just sit around with their search engine placing ads. Their Android phones have been selling in droves.


Good comment, except this bit - google is still an ad-sales based company. They aren't making a ton of money off Android phones themselves, other than ads they sell on android phones.


By vol7ron on 6/21/2011 12:35:38 PM , Rating: 2
quote:
Google, if you'll notice, has been extremely creative. They haven't just sit around with their search engine placing ads.


Right, they haven't, but I'm not sure I'd call it creative. They buy other companies out and apply them to their user-base. That's more smart than creative. The YouTubes and Maps are the creatives.


By bigdawg1988 on 6/21/2011 2:42:52 PM , Rating: 2
Well said, plus most people listen to Pandora, they don't sit there watching the ads. At least with Google you have the sponsored ads at the top of your search engine.
I like Pandora, although I don't like it enough to pay for it, but I don't see them making money without commercials, and who would want to listen to that?
They ought to sell the technology to someone else or combine it with a standard pay model like Rhapsody.


By RivuxGamma on 6/20/2011 12:09:45 PM , Rating: 2
Just because there's no money transferred doesn't mean that they don't take something in exchange. It's a pretty ingenious barter system.


RE: The problem with Pandora is simple...
By omnicronx on 6/16/2011 4:19:04 PM , Rating: 2
quote:
Once you IPO, you are _expected_ to earn money for your owners (now the public).
I disagree, you are very lucky if you find an IPO that gives you an immidiate or even close term return because they are usually being valued on market potential, not their current state. Many IPO's never turn profitable, and even most that do take years to do so.. Not everyone is Google..

Pandora made a whopping 138M in revenues but were actually 1.8M in the red last year. Do you really think anyone can expect instant returns when the IPO is being valued at 2.6B?

Not to mention most IPO's form when companies are seeking to expand and/or need capital in order to do so..

This is clearly a long term investment, and anyone getting involved without realizing this is a fool..


By MrBlastman on 6/16/2011 4:45:15 PM , Rating: 3
quote:
This is clearly a long term investment, and anyone getting involved without realizing this is a fool..


Long-term... Lets see. Long term implies they will survive long enough to give a return on capital. That means they have to stay in business.

Anyone who makes an "investment" on a company that cannot make any money and has stated their goal is not to focus on making money anytime soon is a fool.

Anyone who places a "bet" on a company that does this--well, they're taking a gamble then. Pulling the lever to see what they get. If they go in with this mentality, then they aren't a fool.

When you make an investment, you put your money in something that will make you a return--at a value, typically a discount to what it is worth. Pandora did not IPO at a discount. It was sold at an extreme premium. A HUGE premium. It has a market cap today of 2.8 billion, that is _still_ 20 times revenues. TWENTY TIMES. Most borderline insane individuals might buy into something that is selling at eight times. It sold on the primary at TWENTY FOUR times. On the secondary at open, it was THIRTY times.

It sold on the primary for 16/share, opened on the secondary at 20, went as high as 26 and now, as of today, closed at 13.26. There are plenty of people that are looking at it the same way I am.

If you invest, you invest in value and a discount. Pandora is extremely overpriced. I want them to make money, I really do, I just think their CEO is going to need to change his attitude if he wants to keep from being ousted by his new public that owns his company.


By RamarC on 6/16/2011 4:24:48 PM , Rating: 2
most every customer is satisfied (or has nothing to complain about) when something's free. but i stopped listening to pandora when the ads started popping up more frequently.

pandora's either going to have to severely cut the free hours per month to reduce the listening fees or increase the number of ads to increase the revenue. we'll see how many folks are still satisfied when that happens.


RE: The problem with Pandora is simple...
By Amiga500 on 6/16/2011 2:12:47 PM , Rating: 2
quote:
When their CEO comes out and says this is not his goal right now, we make him suffer for it.


Too bad so sad.

If you don't have the patience for a long term business plan, then don't invest in them.

The desperation of people for instant profits and returns are key to the stock market and financial institutions f**k ups over the past 15 years coming to a head in 2008.

"The market" seeks instant profits, regardless of the long term consequences - well f**k the market - the company doesn't see a penny beyond the initial share price or any re-issue of stock - therefore they should have no need to pander to idiots wanting to see $5 this year at the expense of $10 next year.


By MrBlastman on 6/16/2011 2:19:16 PM , Rating: 2
quote:
The desperation of people for instant returns are key to the stock market and financial institutions f**k ups over the past 15 years coming to a head in 2008.


Fixed for you. The reason it was messed up the first time around is people were pumping money into companies that couldn't earn a dime and weren't even promising a dime other than their big great name and idea.

This of course, failed miserably.

No, we now expect profits, or at least a solid plan towards it. It's okay to come out and say we aren't expecting profits for 6-12 months--we will punish them for saying so, but they can stop the bleeding by giving us some sort of logical plan to fix their income statement.

You don't just give a company money at the primary offering out of generosity like they are a charity. It also isn't logical to think you'll double your money in a day either.


RE: The problem with Pandora is simple...
By NellyFromMA on 6/16/2011 3:57:20 PM , Rating: 2
Please go away. As a user of Pandora, I constantly feel like throwing my phone out of my window when awful ads come on and ruin it for me. The application is neither avaialable consitently enough or of high enough quality (application wise) to be worth a subscription. And lately, they have bombarded users with ads. Songs cut out and don't even resume themselves but start brand new ones etc. Truth is, people are on an ad-revenue generating frenzy and investors want to see ads in everything you can possibly interact with without any regard for user experience. I came for the music, not the ads. Aren't the ones displaying WHILE I listen good enough?


By invidious on 6/16/2011 4:11:07 PM , Rating: 2
You mean the ones on your screen while your phone is in your pocket? Those ads are worthless. The only ones that generator good money are the annoying ones that get up in your face.

If you don't want ads then spend money.

There is no long term place in this world for having your cake and eatting it too. If something good is free, enjoy it while it lasts because it wont stay that way.


RE: The problem with Pandora is simple...
By MrBlastman on 6/16/2011 4:23:42 PM , Rating: 2
You came for music.

That's great.

Did you come for music for free at their expense--i.e. they act as a music charity?

Please, cry me a river. They are a business. They need to cover the costs to provide YOU, the consumer, music. The shareholders should also expect this.

If you don't like the ads, pay the 35 bucks a year subscription fee. It isn't much. If you use it as much as you act like you do, it is a small investment in their future success.


By NellyFromMA on 6/20/2011 1:42:18 PM , Rating: 2
I'll quit my crying if you quit cheerleading.

No, seriously, I'm not expeting things for free, but I'm dissatisfied with it and if their ads are so obnoxious (and they are) between there volume difference, skipping sound, and annoying visuals and basically picking from a pool of 2 different advertisers every 4 songs, I have every right to bash them. It's called word of mouth. Get over it. That's the impression they left on me.

Why would I pay for a service when they fail to impress and actually make me feel somewhat intruded on with their poor free service being a sort of 'ultimatum' if you will to sway me into a subscription. That's bad business as it rubs people the wrong way. Again, get over it.

Marketing is key. Not alieniating your base.


RE: The problem with Pandora is simple...
By borismkv on 6/16/2011 5:04:29 PM , Rating: 3
Actually, the subscription service is significantly better than the free service, especially when you consider that it only costs 3 dollars a month. It's always available for me and has fantastic sound quality. I'm more than happy to spend a little bit of money to keep from having to listen to ads. And if you can't afford 3 bucks a month, seriously, get off the couch and get a job.


RE: The problem with Pandora is simple...
By seamonkey79 on 6/17/2011 9:30:57 AM , Rating: 2
I started subscribing to them a couple of years ago because the ads were getting bad enough that I didn't like them, but the convenience of Pandora is worth a few bucks a month... it's not that hard, my experience with it has been great with a couple of relatively minor issues on the Android app, but even that has finally (after this latest update) not given me any trouble at all.

Pandora is pretty great, and really is worth the $36 a year it costs to kick the ads and still enjoy music I like.


By NellyFromMA on 6/20/2011 1:47:44 PM , Rating: 2
I exclusively have used the Android app and thats where 100% of my dissatisfaction with it lies. It's also annoying things like when losing service for maybe 2 seconds, instead of resuming the song you were just on, it starts a brand new one for 'licensing' purposes no doubt, even though you can pause the song and resume it yourself. I have actually done this when hitting known bad service gaps to not lose a song I like. It's things like this that get me to form a negative opinion.

Whereas before I could close the app and restart it if it was giving me issues, now it seems they have implemented APIs that make this substantially harder in an effort to not 'lose the listener'.

It is convenient to have, but I'm not a bait and switch type of guy. This is how I respond to that. It's an annoying tactic.


"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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