After abruptly taking over as CEO for Brian McAndrews in late March, Pandora founder Tim Westergren laid out his vision for the company he created 16 years ago. Westergren said he’s returning to the helm at a very exciting time and admitted the company has had a rough couple of years. He noted there were many people who doubt Pandora will survive but they are not inside his four walls. “I’ve spent the first weeks of my tenure out with the teams across the country, and can say unequivocally that we have never been more clear about our mission, nor more confident in our ability to achieve it. The team is focused and hard at work on building the next era for Pandora.” He also mentioned over-the-air radio in his presentation.
Westergren told investors he knew the company, and its business environment, like the back of his hand. “Pandora’s strategic position is not obvious to the outside world. You have to look under the hood. The precision of our personalization in which we have invested immeasurably for close to two decades is not obvious. How hard is it to deliver a consistently satisfying personalized radio experience over months and years? Just ask any of the dozens of so-called “Pandora Killers” that have come and gone – it is a fantastically hard problem. That’s why in the face of intense competition, our hours listened per user is steadily rising. And this despite a glut of free on demand services with little or no ad load that are creating a dangerous “gray market” for music. Our recommendation engine is a formidable combination of painstakingly generated ground truth data, tens of billions of precise listener signals and a large and growing corpus of original algorithms and data science research.”
He also pointed out that the future of the company is all about sales. “And just like the personalization engine, the depth and complexity of our monetization engine is also mostly unseen. Its only symptom is a growing core business that makes almost as much revenue per hour as broadcast radio, on one-fifth of the ad load. How did we hit a nearly $50 RPM in our seasonally weakest quarter? It takes massive and highly efficient national and local sales teams dovetailing with a sophisticated inside and programmatic selling arm, a highly 80 developed ad ops and client services layer, an intricate pricing and yield engine, and our end to end design and production expertise. It is an immense and very mature infrastructure that makes that experience possible. These two dimensions – personalization and monetization – are just two major strategic advantages for Pandora that manifest themselves over time. In the coming year their significance will become increasingly apparent.”
Westergren said approximately 100 million unique listeners come to Pandora every quarter and they listen to an all-time high average of over 23 hours per month. He said Pandora’s foundation is the ad-supported radio product, which will do north of $1.0B of revenue this year, and generate north of $500M in margin after content costs. He describes Pandora as a pyramid, not funnel, with a large sustainable base, upselling listeners, not trying to catch them as they fall.