Radio is going through major changes. Despite being around for years, internet radio has recently grown in popularity and usability. Leading the rapidly growing internet radio movement is Pandora Media Inc (NYSE:P). This popular internet radio option supplies listeners with music based on band requests and song preferences. It’s a music explorer that can help you find things that you would have never encountered otherwise. Offering free radio with ads and a premium service without ads allows the listener to decide whether they want to pay for the radio with money or time.
Music on the go
One of the things that makes Pandora Media Inc (NYSE:P) valuable is its mobile capability. Being on mobile devices allows Pandora to connect advertisers with specifically-targeted customers anywhere. This presents an opportunity for both national and local advertisers to reach consumers. This is especially attractive for local advertisers because Pandora is the #1 radio station in almost all local markets. It also offers them new options to improve marketing including targeting, interactivity, and measurability.
Mobile listening represents 77% of Pandora’s total listener hours and has increased 70% year over year. In the 4th quarter of the company’s 2013 fiscal year, mobile revenue increased 111% to $80.3 million from $38 million last year. The continued growth and innovation of mobile listening and advertising is paramount as Pandora moves ahead.
5 point stance
Looking towards the future, Pandora Media Inc (NYSE:P) is focused on five primary growth objectives. First, the company is growing its sales force. Pandora increased the number of employees to 740 in 2013 from 530 in 2012. Second, the company is focusing on increasing utilization of its ad inventory. This move led total mobile RPM to reach a high of $23.83 in fiscal 2013. Third, Pandora continues to focus on developing innovative products. Pandora 4.0 was released with features that include a detailed personal music profile, diverse social sharing capabilities, and increased functionality. Fourth, the company has begun international expansion. While this is a long term plan, Pandora recently expanded in Australia and New Zealand where growth has already outpaced the user growth that the U.S. had during the same stage of development. The final objective is to expand distribution through mobile and automotive devices. This five point strategy shows that Pandora has a solid plan for the future so it can continue its high growth.
Two speed bumps
Both Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) now have internet radio services of their own.
Apple’s radio is unsurprisingly called iRadio, and will offer free internet radio with commercials. Apple Inc. (NASDAQ:AAPL)recently had a win by signing a deal to play music from holdout music label Sony Music. This followed deals with Warner Brothers and Universal. iRadio is primed for launch and will pose an immediate threat to Pandora. One of the main competitive advantages that iRadio has will be its link to iTunes. Listeners will be able to easily purchase songs they like on the radio to have in their library. In addition, Apple iPhones could come with the program preloaded. This would make it easier for Apple Inc. (NASDAQ:AAPL) users to switch from Pandora to iRadio. This new radio service is due to launch any day now.
Google Inc (NASDAQ:GOOG) launched Google Play Music All Access in May. This internet radio is a subscription based service that allows customers to listen to radio, playlists, and stream their favorite songs commercial free for $7.99 a month. Like iRadio, Play Music will allow users to purchase songs through Google Music for offline use. This service is currently available for Android users, but will soon be available on Apple products sometime this summer.
With music stores, hardware and cash to invest, both Google Inc (NASDAQ:GOOG) and Apple have significant advantages over Pandora Media Inc (NYSE:P). If Pandora hopes to compete with the tech giants, they need to focus on providing the best personalized music service on the web. The company’s mission is to help every talented artist reach an audience that will appreciate their music regardless of their sound or genre. Discovering great music for consumers is where Pandora could outshine Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG).
Conclusion
Pandora Media Inc (NYSE:P) is a fast-growing company that has to compete with two of the world’s largest tech powerhouses. The company has had impressive revenue growth of 54% in 2013 and plans for further expansion down the road. Even though I like Pandora, competing against Google and Apple is bad for its health. Wait to see how the launch of iRadio and Google Play Music All Access affects Pandora Media Inc (NYSE:P)’s growth in the coming months. If the company is still growing at the same, impressive rate then I’d call it a buy. But for now, hold off on this investment.
Ben Popkin has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.
The article Can Pandora Keep Up with these New Competitors? originally appeared on Fool.com.
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