Mobile Growth Soaring at Pandora, Which Seeks to Dominate Radio
Following its plan to be a “disruptive force” in the radio business, Pandora said in its fiscal Q4 earnings webcast Tuesday it expects to be “larger than the largest FM or AM radio station in most markets in the U.S.” by the end of the year. With significant growth in listener hours, the Internet radio company’s relevance to traditional radio advertising buyers “is skyrocketing,” said CEO Joe Kennedy.
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Audio advertising revenue on Pandora more than doubled year over year, to more than $100 million in fiscal 2012, Kennedy said, and the company is “just beginning to scratch the surface” of that market. “We have effectively transitioned from being a small- to medium-sized radio station in every market in the U.S. to one of the largest radio stations in every market in the country,” he said.
Pandora’s share of U.S. radio listening in February was 5.74 percent, up from 2.9 percent the previous year, the company said in its monthly audience metric report released Wednesday. Total listener hours jumped 101 percent to 975 million for the month, the company said, with active listeners reaching 49 million, up 57 percent from the same period last year. Based on growing audience metrics, Pandora “has just begun to realize the potential” of its $37 billion U.S. radio ad market opportunity, it said.
Desktop growth rates have leveled off, but mobile growth rates are climbing, Kennedy said. Citing “tremendous progress” in monetization from mobile device usage, Kennedy said Pandora had more mobile advertising revenue in fiscal 2012, ended Jan. 31, than “any entity other than Google.” Mobile monetization quadrupled to $100 million in fiscal 2012, Kennedy said, and revenue per thousand listener (RPM) hours grew from $13 in fiscal 2011 to more than $20 in 2012, he said.
Desktop and laptop revenue was “roughly constant” year over year in the $60-$70 RPM range, Kennedy said, adding that desktop RPM was under $20 in 2009. But while the desktop usage growth rate has slowed, desktop RPMs more than tripled, he said. The difference in RPMs between mobile and desktop is due to the nascent state of the mobile ad market and the “stratospheric growth rate” of mobile usage, he said. Citing analysts’ estimates, Kennedy said total U.S. mobile advertising was in the $1-$2 billion range in 2011 and forecast to grow to $13-$20 billion by 2015. Current growth rate in mobile listening hours “may make it difficult” to improve mobile RPM in the near term, but the company is “very well positioned” to take a significant share of this market in the future, which will lead to “higher and higher” mobile RPM levels, he said.
Regarding future direction, Pandora expects to capitalize from its “enormous scale and listener engagement,” Kennedy said. The company receives “massive amounts of data each day from tens of millions of user interactions,” he said, including Pandora’s feedback database that includes more than 15 billion thumbs-up and thumbs-down tallies. On a typical weekday, Pandora streams more than half a billion songs, Kennedy said. Pandora’s scale and multi-platform approach allows the company to “redefine radio for consumers and create new forms of Internet advertising for Web, mobile and radio ad buyers,” he said. A primary objective in fiscal 2013 is to drive share of U.S. radio listening and it will do that by investing heavily in products, technology and sales staff to reach its goal, Kennedy said. The company is also focused on expanding the reach of its service across “the full range of connected devices,” including the automotive industry, he said.
For Q4 2012, Pandora’s total revenue was $81.3 million, up 71 percent from Q4 2011, it said. Net loss per share was minus 5 cents. Advertising revenue grew 74 percent to $72.1 million, and subscription and other revenue climbed 51 percent to $9.2 million, the company said. For fiscal 2012, total revenue was up 99 percent to $274.3 million, including a 101 percent increase in advertising to $240 million and subscription and other revenue of $34.3 million, it said. Net loss per share for the year was minus 19 cents, it said.