Pandora exec discloses ad revenues, and needs a new car

Pandora VP of Investor Relations Dominic Paschel is a frequent guest speaker at investor conferences. We last eavesdropped on his remarks in December, at a JP Morgan event. Paschel recently held forth at the Sanford C. Bernstein Future of Media Summit, which provided an update of his competitive thinking, Pandora’s ad-sales metrics, and a problem with Paschel’s car.

“I listen to terrestrial radio because my car doesn’t have Pandora in it.” –Dominic Paschel, Pandora VP

Unsurprisingly, Paschel focused on the Pandora-enabled connected car as a clear growth path, not for the first time. In this case, he hooked it into market share of the advertising business. Paschel noted that Pandora does not receive a share of the radio advertising business corresponding to Pandora’s claimed 9% of radio listening share. (The 9% number is internally calculated, somewhat controversial, and sometimes disputed by broadcast radio stakeholders.)

“We have less than 1.5% of total ad dollars being spend just on radio. We have less than 1.5% of $15 billion market when we should have 9% today. And that [9%] will continue to grow as we are now in a 135 different models of cars. The more Pandora gets embedded in your everyday life, the more hours we will get, the more we will drive monetization.”

“We didn’t create internet radio. We created personalized internet radio.”

Pandora executives are never shy about the company’s goal to disrupt and displace terrestrial radio. At the Future of Media Summit, Paschel sharpened his  knives.

“You look at Clear Channel, whose business ultimately stands to lose the most from our success, and you look at Cumulus as well and CBS. Pandora is there to disrupt their businesses, because we fundamentally deliver a better value proposition for the consumer and for the advertiser.”

Connectivity (access to the Internet) and ubiquity (devices everywhere) seem to be touchstones for Paschel’s view of Pandora’s competitive success.

“We are essentially redefining radio for a connected world. Only today has internet connectivity become as pervasive as radio waves. I had the opportunity to go out and visit our local sales team in Denver and Kansas City and the driver in Kansas City was telling us that Google Fiber is there now. So even the concept of ‘free’ around radio is extending now to ‘free’ around connectivity. That’s a gaining factor for Pandora’s growth and Pandora’s usage — just sheer connectivity and device pervasiveness.”

“We are a data company.”

Interestingly, Paschel quoted audience metrics that have not been included in Pandora’s monthly public report. We know that Pandora has 77-million active monthly users, but how much do those people listen to Pandora?

“If you look at average number of hours per active [user], three years ago that would have been around 15 hours per month per active. Our engagements have reached an all-time high. In the May metrics release, we’re up to about 22 hours per active per month. We think that can ultimately go to 56 hours because if you look at Arbitron data, NAB data, it suggests that the average U.S. consumer listens to about 56 hours of radio a month.”

Paschel broke out revenue numbers, splitting ad earnings from subscription payments, and also carving out the share of local advertising, which Pandora has invested in aggressively.

“Revenue in the first quarter was about $181 million; it grew 54% year-over-year. When you look at the ad revenue, I believe that was about $150 million, it’s about 81% of our revenue. We have now grown local ad revenue to be 20% of ad revenue up from 10% the year prior, so it grew about 230% on a year-over-year basis in Q1, which means that we’re having tremendous success on the local market today.”

Dominic Paschel took another swipe at broadcast radio, aimed at radio’s claim of superior local content, noting that when he listens to AM/FM when traveling, “every time I hear it, it’s Ryan Seacrest. So it’s like, how local is that content?”