Chris Lau, Kapitall: News that Apple (APPL) will release iRadio services caused shares in Pandora (P) to decline. Apple reportedly has a licensing agreement with Warner Music, and is working to get one signed with Sony (SNE) and Universal Music. Pandora has an amazingly large user base of 200 million. 140 million accessed Pandora on a mobile device. 200 million songs are streamed before 10 a.m. (More articles from Chris Lau: 4 Things To Look For Before Iron Ore Bottoms) What is the real risk in the business model of Pandora? Is Apple a real risk to the ad revenue model for Pandora? Pandora outperforms Apple Apple is no threat Apple’s iRadio is not a threat for Pandora, since the service will only work in Apple products. Pandora has an established customer base who already invested time in building music lists. Customers enjoy limited commercials and would need to acquire an Apple product to use the iRadio service. The high usage of Pandora is like a gold mine for advertisers. Pandora applies information supplied by its users to effectively target advertising based on gender, age, and location. iRadio strengthens App store moat An iRadio service is likely to gain a substantial number of users within the first few days of a release. If the interface is as good as other Apple products, which is very likely, then Pandora will lose many users after the iRadio launch. More importantly, if the monthly cost of service is negligible for Apple users, it would ensure product loyalty for Apple. This would be another reason for Pandora users to switch to iRadio.