Pandora is great. You can go on its website and listen to any genre of music. You can go as far as categorizing your favorite music. Best of all, it’s free. Well, you can pay or upgrade your free account to paid version if you want to eliminate the ads, have unlimited listening, and have better quality audio.
Now, onto the business at hand. Pandora is going public. It’s yet another one of those IT companies that isbursting at the seams with revenues, but cannot turn a profit. Well, it turned a profit in the fourth quarter so that’s a start. But, this tech company is similar to many in that it can satisfy customers, but cannot control its bottom line. To Pandora’s defense, their fees to record companies have gone up over the years and they’re dealing with a Facebook-like free access paradigm. Like Facebook, it relies on advertisers to annoy users. You know what I’m talking about, you’re searching for an artist or song, and then a Weight Watchers ad whisks itself right in front of your screen.
So, Pandora will need a lot more advertisers or more paid users to upgrade their accounts. Oh wait, they now have their public offering so that should quash any profit concerns, right? Wrong. If their fundamental business model cannot control its expenses versus advertising revenues, then over time, their value will still be weak. However, if this IPO can drum up enough investors and more advertisers, then Pandora may have enough breathing room to build its brand further.
I’d like to see Pandora branch out into more IT services. Internet radio is not a novel idea. Every day, I listen to iTunes radio stations for free. I’d like to see Pandora branch out to cloud services. For instance, how about saving favorite songs to a cloud account? That way, you can play the songs from any of your devices, i.e. iPhone, iPad, Android, and iPod Touch. Yes, you can already listen to streaming radio on your phone which is great, but this service will allow you to save your favorite songs online. Other than that, the only stand-out-quality is that Pandora will use special algorithms to play songs that it thinks you will like according to your music preferences. Yes, this is what the iTunes Genius service does as well, but Pandora will do it with streaming music whereas you can only play the iTunes Genius for songs you’ve purchased.
At the end of the day, Pandora has a great concept with streaming music, but it better act fast before the latecomer IT companies copy and better its concept. As for making more profit, that will come in with more advertisers and making more favorable deals with record companies. Please keep in mind that I am just a techie, and do not take any of my comments as formal investment recommendations. That is my very official disclaimer.