The latest example: The
might want to buy Pandora if
enters the streaming music space with personalized radio.
I have huge respect for Bloomberg, both the company and the New York City mayor. But they presented analyst conjecture as more of a news report than what it was -- uninformed, albeit slightly worthy speculation.
I have no knowledge as to whether Pandora gets bought or not. I could see it going either way. I hope it doesn't happen. Based on my limited interaction with him, I would assume co-founder Tim Westergren feels the same way.
That said, the decision to accept or not accept an offer is bigger than Westergren. Under the right conditions, I could see him being open to one. But again, this is purely conjecture on my part.
Even as a long, I prefer a buyout doesn't happen. While it would be a nice way to make a quick buck, I want to see the Pandora story unfold organically, minus outside interference.
Google or Clear Channel would just screw things up. Reporters and analysts don't get Pandora; and I am not sure many other companies do either.
Most considerations of Pandora start from faulty premises, focusing on profitability, valuation and the stock price. At this stage of development -- in mobile, Pandora's business and the overall space -- these metrics bear scant meaning.
Folks who prematurely make it about these things show a flawed understanding of --
-- mobile, Pandora's business and the overall space. Most importantly, they fail to comprehend the dynamics of radio as well as how and why Pandora disrupted and is now reconfiguring the medium.
Unlike Apple, Google and Amazon, Pandora can position itself as a radio company. It can hit local businesses with a convincing pitch: "We are more relevant than traditional radio. And we can produce better, more targeted ads."
Pandora's sales staff does this daily. And Westergren, who tells the story better than anybody, travels the country doing the same. The company takes part in old-fashioned, boots on the ground, hand shaking, relationship building, face-to-face selling.
Nobody in the media or analyst community, present company excluded, talks about the existence, let alone the power of this approach.
At the local and regional level, Pandora often calls on clients who have only done local radio -- and maybe local television and/or print media -- for decades. Historically and automatically, that's where their ad budgets go cycle after cycle.
Think about the types of companies Pandora does or can call on. Your geographic location and experiences dictate whether or not you have heard of these iconic brands.
Nobody Beats the Wiz
. New Yorkers and San Francisco Bay Area residents best know these names (and Seinfeld fans know the Wiz), but everybody knows similar icons.
It's a slow build. Not just getting the infrastructure of sales offices off of the ground, but persuading these businesses to change what they have been doing for ages and allocate at least some of their advertising budget away from terrestrial radio, local television or print and to Pandora.
Pandora continues to experience incredible success selling local as well as at the more formal national and agency level. There are several reasons why.
Pandora provides more effective advertising solutions than terrestrial radio. When you consider Pandora's user base, dominance in mobile, multi-platform capabilities and ability to target by age, location and musical taste, it's no surprise it can lure advertisers away from less effective channels.
As Pandora Chairman and CEO Joe Kennedy explained on the company's recent conference call, when you buy a terrestrial radio ad, plenty of people who you do not want to or should not target hear your ad. With Pandora, you get much more bang for your buck.
And, again, there's the Westergren factor. When I worked in radio, sales people had closers. If a client was on the fence, they brought somebody or something with them to the crucial next meeting to seal the deal. Westergren is Pandora's closer.
Maybe most importantly, the Pandora sales staff consists of former terrestrial radio salespeople, including several very successful and high-level ones. If you're a business and the rep who has been selling you local radio in your market for years, if not decades, lets you know he or she has made the move to Pandora, you're going to listen to what this person has to say.
Relationships, like the ones solid sales reps forge with clients, matter. Sales call by sales call, presentation by presentation, Pandora continues to cultivate these connections, chipping away at what was once broadcast radio's foothold on billions in ad dollars.
It's one thing for Westergren and other Pandora executives to sit around a boardroom and explain this to a Google or Amazon. It's entirely another for the latter to listen, comprehend and respond productively after an acquisition.
While Clear Channel might get it, the company is such a mess -- saddled with $21 billion in debt, on the hook to private equity and in perpetual cost-cutting mode -- that it has no business buying a growth machine like Pandora.
If I am on the Pandora Board of Directors, I want a document signed in blood that says -- anybody who buys us leaves us alone. We operate with complete autonomy. Fund us and let us continue as we were. Treat us like a startup, separate from your corporate structure, but handed car keys and a company credit card. And don't expect us to wear protection.
Even with a suicide pact, I have no confidence that a new owner would not, at the very least, meddle and, more likely, sell Pandora down the river for the benefit of something like Google Adsense or Amazon Prime.
There's a time and place for M&A. This isn't it. Other than the prospects of having a war chest at its disposal (probably only possible with Google), there's nothing good about a Pandora minus its independence. It would end up divided against itself.
At the time of publication, the author was long P
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Rocco Pendola is a private investor with nearly 20 years experience in various forms of media, ranging from radio to print. His work has appeared in academic journals as well as dozens of online and offline publications. He uses his broad experience to help inform his coverage of the stock market, primarily in the technology, Internet and new media spaces. He has taken a long-term approach to investing, focusing on dividend-paying stocks, since he opened his first account as a teenager. Pendola, 37, is based in Santa Monica, Calif., where he lives with his wife and child.