NEW YORK ( TheStreet) -- So, like yeah, Google (GOOG - Get Report) launches a new Internet music service. That's the rumor. By the time you read this, it might be fact. And, of course, in after hours trading Tuesday, Pandora (P - Get Report), after hitting a 52-week high intraday, lost a little bit of ground. By the time you read this, it might have lost even more.We have seen this story before. Even though Google's service, at least according to The New York Times, will compete most directly with Spotify, Pandora stock takes a hit.
Pandora does not compete with active on-demand services
It is important to note that Pandora does not compete with active listening streaming services. Pandora is addressing the 80% of all music listening that happens passively vs. the 20% of listening that occurs actively (ie. choosing songs individually).Put another way -- Pandora competes directly with traditional AM/FM radio. It does not compete -- directly -- with on-demand services such as Spotify. Put another way, you can use the word "complementary" to describe the relationship. You know what you want to listen to so you fire up Spotify, Rdio or your iTunes and punch in that specific song, album or artist. You want a radio experience, you punch up some FM radio and, increasingly, Pandora Internet Radio.
Even if Google or Apple or somebody else launches a direct Pandora competitor, they do not have a superior personalization and recommendation engine that took over a decade to develop (and is still developing) -- the Music Genome Project. As such, they cannot provide the same quality of experience. Moreover, these companies -- as dominant as they are -- do not have the singular focus Pandora has to take market share and advertising dollars away from one particular source: Terrestrial radio companies such as Clear Channel. I know. I have written these words before, but they warrant repeating. Follow @rocco_thestreet -- Written by Rocco Pendola in Santa Monica, Calif.