Today Pandora Officially Crushes Terrestrial Radio

NEW YORK ( TheStreet) -- Unless you're doing something truly unique and compelling on terrestrial radio, Pandora ( P) just served you the proverbial papers.

Here I explain why investors should pay attention to ratings-related news Pandora released this morning. While the impact might not be immediate, we will look back on May 16, 2012, as the day Pandora -- and Internet radio in general -- rendered terrestrial radio, on a grand scale, obsolete.

I add "by and large" because a place will always exist for traditional radio. What I envision, however, is a product that delivers, almost solely, spoken-word formats -- sports, talk, all-news, etc. -- on the FM band. Examples include top all-sports stations such as WFAN in New York and "The Ticket" in Dallas, which ultimately belong on FM and online, where key demos reside.

Great personalities and tightly packaged presentations of information will always find sizable audiences, particularly if the terrestrial companies continue to embrace multi-platform delivery and scale back on physical properties. Expect to see terrestrial radio broadcasters shed physical stations and broadcast towers like big box retail now races to decrease square footage in feeble attempts to counter's ( AMZN) dominance.

So what's the big deal for investors?

On Wednesday, Pandora announced that Triton Digital released a product that will -- and consider this an understatement rather than an overstatement -- change the game in terms of how advertisers decide to allocate their radio dollar. As the company's press release explains:

Triton Digital will measure Pandora's audience size and reach nationally and in local markets with the new Triton Webcast Metrics Local solution, a market-specific version of Triton's national Webcast Metrics audience measurement platform. The new Triton data makes it easier for radio buyers to quantify the size and scale of internet radio at the national and local level.

Here's the nutshell version of why this is a game changer: While Pandora already experiences success pitching local and national radio buyers advertising, it can now walk into a room with local ratings data compiled and crunched by a third party. Pandora can compare itself, from a ratings standpoint, with radio stations in local markets.

It took forever for somebody to do this. If Arbitron ( ARB) did not rely on Clear Channel ( CCO) and other terrestrial radio companies for a vast majority of its revenue, it probably would have stepped into the century years ago. In fact, if Arbitron was a real, living, breathing and truly independent and entrepreneurial company, it would have bought Triton or a similar firm years ago.

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