Pandora is a $6.5B company, and nobody is talking about iTunes Radio, including Apple

pandora stock spike jan7 with logoPandora is more than holding on to its 14% stock ascension yesterday; it has added another five percent as of this writing. That price of about $33.50 capitalizes Pandora at about $6.5-billion. No company could hope for a more perfect storm of news, venue, and competitive positioning.

Meanwhile, Apple — which does not attend CES — released news about its mobile app-store revenues. The silence around iTunes Radio resembles, well, dead air.

When iTunes Radio launched on September 18, it was widely labeled the “Pandora killer.” All the more when Apple quickly announced 11-million users in the first month. Pandora had about 70-million active users, but fuzzy-math adherents projected a continuation of Apple’s first-month tire-kicking, and predicted Pandora’s quick demise.

The competition can still play out in any number of ways. Apple does enjoy important advantages in iTunes Radio. The service is built into a mobile OS that has been installed in hundreds of millions of devices carried by users who love Apple products and services. Apple has billing relationships with many of them. Just as important, Apple owns pre-existing label relationships forged during 10 years of operating the iTunes Music store. Those directly-negotiated licensing agreements could allow iTunes Radio to expand more quickly into non-U.S. national markets than Pandora has been able to. Also, the linkage between iTunes Radio and the iTunes Store encourages music stars to release their album streams exclusively with Apple, which can drive traffic to higher-margin album downloads.

But for now, Pandora’s stock surge has spiked straight through the “Pandora killer” premise. Audience metrics are part of the story — Pandora reported yesterday that its December listenership grew across all its monthly measurements, and the company now serves 76.2-million active users. That number might regress a bit in January without the predictable surge of holiday listening — and it might not.

Whichever way January turns, Pandora’s simultaneous monetization news is what really excited investors. To recap: Pandora has signed four national brands as anchor advertisers in a new program to monetize car listening. This new ad stream will happen in car models where Pandora is embedded in the dashboard — so-called native installation. Pandora already streams ads through its smartphone interface. Opening up a new revenue stream for the native players has huge potential given Pandora’s five-year aggressive distribution effort into digital dashboards. Pandora was definitely the early bird in connected cars, and to some people, “car radio” means Pandora. Pandora’s investors are counting on that fundamental brand clout becoming profit … sometime.

This is the drumbbeat Pandora is marching to:

Boom: disrupt radio via the Internet. Boom: invade terrestrial territory (the car). Boom: take ad-dollar share by building a national sales network. Boom: serve ads in every listening scenario.

In other words (and these are VP Dominic Paschel’s words): Replace radio. Where does iTunes Radio fit in? Nobody knows, and Apple is not offering guidance today.

Brad Hill