At the end of July, Pandora had almost 55 million users, an increase of 48 percent from a year ago. Listener hours were 3.30 billion, an increase of 80 percent from a year ago. Mobile or other connected device accounted for 75 percent of all listening hours. The growth rate in mobile hours was 96 percent.
Pandora's market share of radio listening in the United States was more than 6 percent, an increase of 3.5 percent from a year ago. Media Audit surveys in 2012 showed Pandora was the largest radio station reaching adults in 25 US markets, including New York and Los Angeles.
Pandora's strategy to grow mobile revenue is working. First, it is allowing interactive buyers to easily expand to multi-platform spending so they can reach the segment that is spending more time on mobile. Second, it is going beyond traditional advertising to offer advertising with superior targeting, interactivity and measurability. Because consumers interact with Pandora, they will see, rather than hear, some of the advertising. Although the mobile screen is smaller than the computer, a higher percentage of the screen on Pandora can be devoted to ads.
Pandora is also streamlining the process to make it easier to purchase local ads. It is making it easier for media buyers to access audience information and request proposals from Pandora electronically. Once this is complete, it expects to monetize and expand the number of local markets in which it does business.
Mobile advertising should continue to grow. A recent study by the Mobile Marketing Association suggested that 7 percent of ads should be sold through mobile to maximize return on investment. A year ago, mobile ads were only 1 percent of ad budgets.
Pandora is also expanding into Australia and New Zealand. Its objective there is to first grow its audience, so that it will have the numbers to attract advertisers. It is creating special mobile apps for the region and building the necessary infrastructure. Pandora's payments and processing will be through PPNZ, the New Zealand Collection Society, which will handle the entire region.
There are two pending bills in Congress regarding radio royalties, the Chaffetz bill and the Nadler bill. Pandora believes the Chaffetz bill is the preferable one. Pandora is pleased there is attention being paid to parity in radio royalties for the various digital types of radio.
Financials.
Total revenue in Q2 grew by 51 percent. Mobile revenue increased by 86 percent. If the largest advertiser from last year is excluded, the growth in mobile revenue exceeded the growth in mobile hours. Advertising revenue grew by 53 percent. Subscription and other revenues increased by 36 percent. Pandora expects revenue growth for fiscal year 2013 to increase by 56 percent.
In mobile, total revenues per 1000 listening hours (RPM) increased in Q2 to 21.5 from 19.8 a year ago. Ad revenues from mobile and other connected devices increased to 20.4 from 18.07 a year ago. RPMs from traditional computers to 54 from 61.3 a year ago. Most of the mobile revenue is advertising revenue, not subscription revenue, although Pandora is working on growing mobile subscription revenue. Advertising RPMs from traditional computers declined to 56.9 from 65.2 a year ago. Total RPMs declined to 30.3 from 34.9 a year ago. The decline is the result of the move to mobile from traditional.
The ad revenue is similar whether it is on a traditional desktop or mobile. Ad revenue differs when it is sold through a third party as opposed to Pandora selling it directly. Ad revenue sold through third parties is significantly lower.
Pandora increased the number of its employees by 38 percent in Q2. At the end of Q2, it had 589 employees. Much of its employee growth was in sales.
In Q2, Pandora had a break even quarter on a non-GAAP basis. It expects its loss for fiscal year 2013 to be between $.04 and $.08. It expects a break even quarter to a $.01 gain in Q3/2013.
The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/836761-pandora-media-s-ceo-discusses-f2q13-results-earnings-call-transcript?part=single
Copyright 2012 Jaygo's Earnings Conference Call Summaries
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