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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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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.

"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller
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