With concerns about profitability and iTunes Radio about to launch, there's a lot of uncertainty around Pandora's future. But one recent report from IBISWorld claims that Pandora will continue to dominate web radio. Given that its stock recently hit new highs and mobile advertising is showing strong growth, Pandora actually has a lot going for it at the moment.
"The number of mobile internet connections grew at an annualized rate of 53.0% during the five-year period. 'As such, internet radio's audience increased an annualized 16.5% during the same period, far outpacing traditional radios,' according to IBISWorld industry analyst David Yang. Consequently, internet radio broadcasters have taken a larger slice of advertising revenue from the $17.3-billion Radio Broadcasting industry."
Though citing positive usage and ad growth stats for web radio, the report also pointed to challenges with profitability due, in part, to the much higher royalty rates web radio broadcasters pay than do terrestrial radio broadcasters.
The IBISWorld analysts expect leaders such as Pandora, iHeart Radio and, most likely, the soon-to-launch iTunes Radio to maintain their lead with Pandora continuing to "dominate the marketplace as new entrants will have a difficult time attracting listeners away from well-established services."
They also expect future competition to be limited, in part, "as new entrants will hesitate to enter the industry due to the inability of major players to operate profitably."
So Pandora's leading in a race with many challenges.
Pandora's Mobile Ads A Bright Spot
Pandora recently removed the 40-hour limit on free mobile listening with the expectation that this move might undermine subscriber growth. They maintain that such a move is positive because they've found ways to curtail those who go over 40 hours.
In addition, this move "reinforces the success we are having with monetizing and selling ads on mobile platforms," according to chief revenue officer John Trimble.
Pandora's mobile advertising is said to account for "70% of Pandora's total ad revenue." It turns out that some of that growth is in local advertising, an area in which Pandora is investing additional resources.
As Trimble revealed:
"We've grown the sales force by 73% year-over-year, and a lot of that is to compete directly for that $15 billion of broadcast radio advertising. More specifically, while we did it on a national level, we pushed extremely hard into the local markets. Last year at this time we were in approximately 8 to 10 markets; we're now in the top 28 radio markets."
It's hard to predict the future but the market has recently given an overall thumbs up when one looks at Pandora's historical stock prices which have returned this summer to Pandora's earliest highs.
Hypebot Senior Contributor Clyde Smith (@fluxresearch/@crowdfundingm) also blogs at Flux Research and Crowdfunding For Musicians. To suggest topics for Hypebot, contact: clyde(at)fluxresearch(dot)com.