Buy Facebook, Pandora on Mobile Dominance

NEW YORK ( TheStreet) -- I recently wrote about why there isn't a bubble in social networking and new media stocks.

In this article, I follow up with more color on the broad space, focusing on two companies and one major catalyst that will send both higher over the long-term.

Going Mobile

It's clear that when Steve jobs introduced the the first iPod, he set up Apple ( AAPL) to dominate technology.

One look on the streets, subway cars, buses and gymnasiums of America (and the world) told the story. White wires hanging from ear buds became commonplace.

It only made sense that all of these iPod adopters needed more than a pinwheel and a two-inch screen to keep their fingers, eyes and steel traps busy.

Jobs had plenty of answers.

As I argued yesterday, if you follow the uncritical crowd and say there's a "Bubble 2.0" or you lament more "irrational exuberance," you'll miss out on the next big thing: the explosion in targeted and interactive, cross-platform and multiplatform advertising, particularly via mobile devices.

I often cite a report from eMarketer. It details what to expect in terms of mobile ad revenue growth over the next several years.

Bookmark that report.

The first stock to buy on the basis of that report is Pandora ( P).

Pandora used that eMarketer report to make an interesting case during its last quarterly report:
"We made tremendous progress in mobile monetization during FY 2012. Total mobile revenue more than quadrupled vs. FY 2011, growing from approximately $25 million in FY11 to over $100 million in FY12. In fact, based on recent data we've seen in an eMarketer analysis, we believe that Pandora achieved more mobile ad revenue last year than any entity other than Google."

Dominic Paschel, Pandora's vice president of corporate finance and investor relations, provided more details after the report in an email:
"Look at the chart in the eMarketer report where you see GOOG at 35.7% and with our disclosure of $100M, that puts us at 6.9% ahead of Apple (even discounting the fact that some of AAPL and GOOG's numbers likely include some of our remnant)."

Although Paschel might have painted an overly optimistic picture (though not by much), he gets the overarching theme correct. Pandora is perfectly positioned to be a leader in the mobile ad space going forward. Here's what I wrote at Seeking Alpha about how I see it playing out:
"eMarketer data show that Pandora captured roughly 6.9% of total mobile ad spending in 2011, which is the company's FY2012, minus one month. If Pandora owns just 7% of all mobile ad revenue in the U.S. in 2016, it will bring in $758.1 million four years from now. I expect that 7% number to actually be much higher."

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