Trefis Valuation of Pandora at $1.8 Billion
Pandora (NYSE:P) is the leader in Internet radio. The company offers music that allows for personalized experience for each listener based on their preferences and feedback. Apart from being available online, Pandora has also launched apps for Apple’s (NASDAQ:AAPL) iPhone, Research in Motion’s (NASDAQ:RIMM) BlackBerry and other smartphones operating on Google’s (NASDAQ:GOOG) Android OS. The company has also developed relationships with auto manufacturers like Ford (NYSE:F) and BMW (GR:BMW).
As of April 2011, Pandora had over 90 million registered users and is adding a new registered user almost every second. Pandora has over 50% market share in Internet radio listening time among the top 20 stations and networks in the United States.
Trefis Valuation of Pandora – $1.8 Billion Valuation
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We have broken down our analysis of Pandora into three main business segments:
3. Subscription
Growth in Listeners
Pandora’s number of registered users has grown considerably in the past few years. The firm’s unique ability to develop programs that cater to the tastes of individual listeners as well as its online access has driven user growth. In May 2011, Pandora also started offering comedy stations to cater to individual tastes and increased smartphone penetration has helped grow Pandora’s mobile platform as well.
In 2008 mobile access accounted for 4.6% of total listener hours; however, by first quarter of 2011 this figure had increased to around 60%. In 2010 there were 103 million consumer mobile devices using the Internet in the United States and IDC expects this to grow to 168 million by 2014.
The firm is actively strengthening its partnerships with consumer electronics manufacturers and looking to grow its presence in the automobile market for integration of Pandora’s music services in automobiles.
Attractive Advertisement Base
Pandora has positioned itself to become a useful advertising platform for various institutions and caters to three large advertising markets:
- Online advertising: $9.8 billion in 2010 and we expect this to grow by around 15% annually through 2014 [1]
- Mobile advertising: $877 million in 2010, which we expect to grow by almost 70% annually through 2014 [1]
- Broadcast radio advertising: $13.4 billion in 2010 and this should reach $13.7 billion by 2014 [1]
The strong user base, growth in streaming hours and diversity in user base has attracted many advertisers. The firm enables both local and national advertisers to reach listeners based on their demographics and music type and offers advertisers the ability to choose from a variety of advertisement products which include display, audio and video advertising. Pandora’s mobile app is currently one of the most widely used, adding to the attractiveness of the platform to advertisers.
See our full analysis for Pandora here.
**Editorial Note: We have updated our valuation for Pandora based on additional IPO proceeds and higher cash balance. Our new valuation is $1.9 billion and equates to a near $10 price estimate.
- According to IDC, as reported in Pandora’s S-1, filed with SEC on May 26 2011 [↩] [↩] [↩]