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Sell Pandora: It's About to Become a Thing of the Past

Stocks in this article: PAMZN

Pandora Does Not Have a Growth Problem

The fact that growth is slowing/moderating at Pandora doesn't concern me at all. Not one bit. The way the company decided to handle this reality baffles me, but the reality itself -- it's truly immaterial.

Because, as I detailed late last year, Pandora has been telling us for years that growth would moderate. In fact the company's former CFO Steve Cakebread discussed this with me in 2011. But that's back when Pandora was a straightforward company, not one that employs thin PR spin.

Pandora can't possibly command every household in the U.S. as a listener. It's already a wild leap to say it is has 250 million users. Back out pets, duplicate accounts, dormant accounts and such and the number would be much lower. And that's OK.

That said, Pandora still has massive scale. And it has the tools necessary to more than convince advertisers that they should send considerable portions of their budgets Pandora's way. If Pandora stopped growing -- and simply maintained its present core audience (but got it to listen longer) -- I still wouldn't worry. Nobody can come to advertisers with a stronger pitch than Pandora.

However, as we connect the dots throughout this article, I'll argue that broadcast radio (that's traditional radio) appears to finally be getting its act together. It, unlike Pandora, believes in and is beginning to use the power of the data it collects in innovative ways. Being the Internet radio leader going forward will mean more than getting the listener experience right and having an effective sales department. Interestingly, Pandora will likely maintain the largest market share of all the Web radio players for some time, but that won't matter much unless it gets serious about expanding and specializing its now non-existent data business. 

Pandora's Not Fully Embracing the Amazon Way

McAndrews foolish comment -- We don't see (the deal) as a significant development for us ... -- should win him a permanent spot on Jim Cramer's CEO Wall of Shame.

When I first heard Pandora CFO Mike Herring not-so-indirectly refer to doing things the Amazon way, I bought it:

... Setting aside my very appropriate obsession with data, Pandora absolutely still has enormous opportunity to seize in the advertising space, particularly mobile.
Next time I see Herring I will kiss him. It's about time somebody borrowed the pair Jeff Bezos walks around with and used them for some good in the broad tech space.
The fact that Herring was allowed to make that comment gives me great confidence that the entrepreneural culture remains intact at Pandora (which makes me think the company is probably on the same page with me on the data obsession !). Not that there was ever reason to doubt it.

But I then I checked myself, particularly the Setting aside my very appropriate obsession with data part. And I said NO! I can't set my obsession with data aside. I would be as negligent as Pandora is.

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