Despite new competition, Pandora grows its users

To paraphrase Mark Twain, the rumors of Pandora‘s (s P) death have been greatly exaggerated. The Oakland-based music discovery service might have lost its mojo on the stock market, but it is still managing to grow and win on one (and probably the most important) metric: total listener hours. When more people listen to Pandora, the more opportunities the site has to embed ads and make money.

Here are Pandora’s July 2012 audience metrics.

  • Total listener hours for the month of July 2012 were 1.12 billion, up from 1.08 billion in June 2012. In July 2011, Pandora clocked 637 million listener hours.
  • During the second quarter of 2012, Pandora’s total listener hours were about 3.30 billion.
  • Pandora had 54.9 million active users at the end of July 2012, up from 54.5 million in June 2012. The company has more than 150 million registered users.
  • Goldman Sachs estimates that Pandora’s share of total radio listening grew to 6.13%, up from 5.98% in June 2012 and 3.51% in July 2011.

The real measure of Pandora’s (or, in fact, any similar product’s) engagement is total minutes (or hours) spent listening to the site per month per active user. That would be a clearer sign of how it stacks up against competition, though none of its rivals share this number. On this crucial metric, Pandora seems to be trending down.

Pandora Listening Trends: Average hours per month per active user

Pandora’s growth comes despite perceived competition from the likes of Songza and Spotify, two of the recent entrants into the music discovery business, especially on mobile. At the end of March 2012, 70 percent of Pandora usage was on the web and rest on various mobile platforms. Pandora’s main competition is not new mobile upstarts but terrestrial radio, a $17 billion market. As more and more of our attention moves online, companies like Pandora, Spotify and Songza are going to eat into the traditional radio business.

It is just a matter of time before the attention transformation shifts entirely to the Internet. However, in order for the company to grab a bigger share of the ad dollars, it needs to come up with new advertising formats, ones that befit its business.

The current banner-based advertising model is short term at best. It is one that threatens company’s business especially on the mobile platforms.¬†Over the years (well at least since it launched on the iPhone), Pandora’s mobile experience has degraded quite a bit. The mobile ads on the iPhone app are garish and seem tasteless. But I guess, they bring in the dollars!