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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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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.


"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA

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