Pandora shareholders may need to change their pants

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Image from Spotify.com

Music fans have been waiting a very long time for the European streaming service to be allowed to function in the states. I have yet to meet anyone who says Pandora is better than Spotify. Music industry gadfly Bob Lefsetz addressed it when Pandora went public:

If music radio is to survive, and that’s doubtful, it’s all about curation.  Serving up music you want to hear.  Pandora fails at this.  Despite the vaunted Genome, just too many suggestions are tuneouts, some positively dumbfounding.

And don’t even get me started on the fun Turntable.FM is. -Matt

Pandora worth $1 billion?

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Chart: Trefis

An eyebrow-raising estimate of online radio company Pandora’s valuation was released Wednesday by the folks at Trefis.

For those unfamiliar with Trefis, the company uses computer models and nifty visualizations to forecast and break down a company’s stock price or market cap. That’s tricky to do for some public companies, but for private companies like Pandora, the task is even harder. (Pandora is preparing for an IPO.)

The $984 million valuation of Pandora, therefore, should be taken with a grain of salt. Yet some of Trefis’ arguments are convincing. Listener hours have been rapidly increasing for both mobile and online listeners, and the astronomical growth of smartphones should help continue to expand Pandora’s usage.

Trefis estimates that online ads generate just over a penny of revenue for Pandora for each hour a listener tunes in, and mobile ads are worth just over three cents. That works out to about $207 million in ad revenue a year. Subscriptions add just $29 million, and the company has about $35 million in cash.

Royalties are expected to climb substantially, but increased mobile listener hours and deals with automakers should help the company overcome that, Trefis said.

Still, how do you get to $1 billion with those numbers?

Oh, right, ad targeting.

It’s highly controversial — Pandora was recently subpoenaed as part of a government probe of what data smartphone applications collect about us — but it sure is effective. Trefis noted that Pandora is extremely valuable to advertisers because it “can precisely tell the audience size at any given time. It allows advertisers to reach individual listeners based on their age, gender, zip code and music preference.”

Spooky? Perhaps. Lucrative? Definitely. -David

Pandora boots its outside ad platforms

Remember when Pandora got served a subpoena as part of a federal grand-jury investigation into the data mobile apps collect and pass around to their partners?

The company is taking action: Pandora said Wednesday that it will remove all embeddable third-party advertising platforms from its application.

That means goodbye for Medialets, AdMeld and Google.

Pandora emphasizes that it has no evidence that these partners were violating users’ privacy — but it’s taking the “better safe than sorry” route. It will keep serving ads in its mobile apps, but it will handle all the infrastructure itself. 

And although many apps track your location, Pandora says it’s not one of them.

Here’s the statement Pandora released to CNNMoney:

Recently, certain third party advertising software development kits
(SDKs) from Medialets, AdMeld and Google have been the subject of scrutiny and speculation in the media. While we have no reason to believe that any of these mobile advertising companies acted outside the scope of our privacy policy, we have decided to remove the advertising SDK’s entirely to ensure that our listeners have complete confidence in our commitment to their privacy. The revised versions of the Pandora application with these SDK’s removed will be available soon in Android Market and in the Apple App Store.

Furthermore, Veracode, a third party mobile security firm that recently highlighted the presence of these SDK’s in our Android app, has publicly retracted their assertion that our app was transmitting GPS location data and has confirmed that their original report was in error. The Pandora app does not transmit GPS location data.

We take privacy very seriously at Pandora. The trust that our listeners place in us at Pandora is something we value tremendously and we want to leave no room for doubt that we honor and respect their privacy.

And here’s our own investigation into Pandora’s app. -Laurie

Pandora’s cute little error message

Last month my dear friend Sarah alerted me to a glitch in Facebook’s system to detect fake accounts. Basically, the bug was inadvertently disabling legitimate accounts like Sarah’s.

Since then, I have felt like Sarah’s own personal tech hero (or heroine, as it were). The cries for help come in the form of email messages like this one:

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Not the Christmas music! Anyway, it turned out the site was down only for Sarah, and it resolved itself quickly (Sarah’s followup email: “ITS BACK. THX. I was just kidding OBVI”).

I was glad Sarah sent the email, though, because I got a kick out of the error message it gave her:

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"Oh, man. Our servers must be down or something." GENIUS! It’s just exactly what a bored (stoned?) webmaster would say. And CNNMoney is all about "decomplicating" things like tax cuts, Treasury bonds and foreign exchange trade — so why not servers being "down or something"? I love it. And it’s a Monday, so I’ll embrace the little joys, thank you very much. -Julianne