Has Pandora Media Inc (P)’s Advertising Destroyed its User Experience?

Page 1 of 2

Pandora Media Inc (NYSE:P)I’ve been a loyal Pandora Media Inc (NYSE:P) listener for many years. Until now.

Despite its position as the leading Internet radio service, Pandora’s history as a public company has been a turbulent ride for investors. Shares came public in June 2011 at $16 per share, before losing more than 50% of their value to $7.08 in November 2012. Concerns over the launch of iTunes Radio by Apple Inc. (NASDAQ:AAPL) pushed the stock to all-time lows.

Headline risk has been the dominant theme for Pandora shareholders. The stock has ebbed and flowed like the ocean tide, depending on the latest news flow.

Fast-forward to the present, and Pandora Media Inc (NYSE:P) reached an all-time high of $20.54 in early July. Investors are choosing to ignore the obvious issue that competitors Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) are launching their own music services, giving full confidence to Pandora’s monthly listener figures, which indicate a burgeoning subscriber base.

I’ve written negatively on Pandora time and time again, citing the company’s inability to turn a profit and monetize its listening hours. Royalty costs have been rising at a faster rate than advertising revenue. New listeners will only exacerbate the problem, not resolve it.

A new concern

My current article is dedicated to a new and overlooked element: the Pandora Radio user experience. Few on Wall Street have commented on Pandora’s decision to roll out numerous “software improvements” to its radio service. These updates have made little actual improvement; instead, the overall user experience has declined dramatically.

The recent actions of Pandora Media Inc (NYSE:P) are a huge game changer for investors, and a negative one at that. Hidden within the bug fixes and performance enhancements is a dramatic increase in advertising and a decrease in listening options. The company appears to have reached an ultimatum with its free listener base, which is unwilling to pay $4 per month for a premium radio service.

Faced with rising royalty costs, Pandora made the decision to abandon its traditional model and deliver a massive advertising increase to its customers. Listeners are faced with a 15-second or 30-second radio advertisement as frequently as every 2-3 songs, compared with 5-6 songs in recent past. Free radio listeners can no longer skip through multiple songs; instead, you are required to listen to the current song or switch to a different radio channel altogether.

All in all, the originality and flexibility which attracted millions of users to Pandora Radio appear to be waning. Listeners are now faced with more advertising on Pandora’s Internet radio than with a traditional radio broadcast.

Can Pandora attract quality advertisers?

A potential reason for the rapid increase in advertising volume is Pandora’s inability to attract quality advertisers. There are several explanations for this, including an inadequate ROI for brand-name corporations that took a stab at Internet radio. The math is simple–if Pandora cannot attract advertisers at a respectable premium, the company is forced to balance supply with demand by lowering its advertising rates.

Listeners are now faced with advertisements to download the latest game craze for their iPhone or Android devices, instead of credible advertisers that bring legitimacy to the Pandora platform. Discount carrier Southwest Airlines Co. (NYSE:LUV), the University of Phoenix (owned by Apollo Group), and Universal Pictures (owned by Comcast) are among the few respectable advertisers in a pool of ads to download the latest smartphone game.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!