Considering an Investment in Pandora ($P) in Light of Spotify, Rdio, and Songza

I really fell in love with Pandora a year or two ago. I think the market cap was treading around 2 billion. I told myself that if the Market Cap hit 1.5 billion, I’d make an investment. Well, I haven’t logged it, but it seems like it must have bounced off 1.5 billion about 7 or 8 times in the last year and a half. Seems like it’s bounced between about $9.50-and $11.50 about the same many or more times during this period. From that perspective it seems it would make a great “Channeling” stock, as the traders call them.

But then, a couple months ago, I subscribed to Spotify, and from a consumer point of view I haven’t looked back. I love it so much. I thought I might still use Pandora occasionally for “discovery” but since then Spotify has launched their own “Radio” feature. So, for myself, I literally can find no reason to use Pandora anymore.

Still, I have Pandora (P) on my “Stock Watch” list. I still believe it’s part of the bigger paradigm of all media moving to the digital. So I still think it would probably be a good investment, just on the general paradigm itself. It’s hard for me to make an investment in a product that I don’t use, though. If, however that changes, and they launch some new features that make me want to use it again, I’m sure I’ll even be more excited.

Being in this state of wondering whether to invest or not, I was happy to come across this GigaOm article today: Despite New Competition Pandora Grows It’s Users

The take away is that Pandora is still growing fast in registered users and total minutes per month of listening, but the number of minutes per registered user is actually decreasing, which is weird, until I think about it: I’m a registered user, and my usage has dropped to Zero because Spotify finally picked me off. Back when I was in love with Pandora, I thought, I’d never pay a subscription, but I think seeing Spotify constantly in my Facebook Newsfeed finally wore me down. Like Ogilvy said about advertising: The first time you see an ad, you curse it. The tenth time you see it, you’re writing a check out for the product. Anyway, the GigaOm post inspired me to comment on his site, which I copy and paste here:

“I was a big Pandora fan last year, and I told myself I’d make an investment at a 1.5 billion market cap, which it’s close to now, and has bounced off of several times, but since I’ve become a Spotify Subscriber, or actually since Spotify launched their “Radio” feature, I don’t see any need to go back to Pandora. That’s what keeps me from making an investment, myself. I don’t use it. But I do believe it will grow with the whole digital revolution, as you mention. It definitely had a head start on mobile and has brand recognition.
Once crucial feature of Spotify and Rdio, which seems so vane and egotistical, yet very potent, is the sharing what you listen to to Facebook. I mean even if I own an album, I usually will prefer to listen to it on Spotify, to show everyone what I’m listening to, especially if the record or artist is considered “hip.” I guess Pandora has this feature, but I never see it in my feed. I constantly see Rdio and Spotify in my feed though, which obviously is also free and invaluable advertising for them too. I don’t know why Pandora doesn’t copy all of Spotify’s features (assuming they can) just as Spotify has copied one of the crucial features of Pandora: Discovery.”

Leave a Reply

Your email address will not be published. Required fields are marked *