NEW YORK (AdAge.com) -- If it seemed like Pandora was everywhere at the Consumer Electronics Show in Las Vegas earlier this month, it's because, well, it was.
The streaming radio company was in connected TV devices from Samsung, Sony, Roku and others; tablets from BlackBerry and Barnes & Noble; in-car apps from BMW/Mini, Toyota, Ford and Hyundai, and even a Wi-Fi enabled refrigerator from Samsung. More than 50% of Pandora listening is now done on devices other than the PC, and not only is Pandora the leading streaming audio app on the iPhone and iPad, it has also become the first (and in multiple cases the only) radio partner for many devices.
So how did a 10-year-old company -- on the brink of bankruptcy as recently as four years ago -- become the de facto radio app for virtually every new app-enabled device? By being device-agnostic and, more importantly, by being free. Although Pandora offers a $3 monthly (or $36 annual) fee to stream its music-recommendation stations without commercials, the overwhelming majority of the site's listeners have opted for its free, ad-supported model.
"Smartphones really turned Pandora into an anytime, anywhere service without us doing anything," Pandora founder Tim Westergren said, noting that half of smartphone listening is done in users' cars.
As a result, registered users on the site skyrocketed in 2010, growing from 40 million to 75 million within the span of the past 12 months. On a monthly basis, Pandora has seen unique streams grow from 251,000 in November 2009 to more than 585,000 in November 2010, the most recent month measured by online radio metrics firm Ando Media. That's enough to give Pandora a major edge over terrestrial competitors like CBS Radio, which reached a monthly average of 165,833 listeners during November 2010, and Clear Channel's streaming network, which reached 125,498 average monthly listeners during the time period.
And yet, streaming radio -- let alone Pandora -- is still very much in its early stages. According to research by the Radio Advertising Bureau, streaming radio only represents about 4% of all radio listening. But with an arms race among HD and satellite radio providers to get a larger share of car installations, Pandora was the surprise victor at this month's CES and again at the Detroit Auto Show, among the most-cited broadcast partners in the year's forthcoming Wi-Fi enabled navigation systems.
Yvonne Malmgren, a spokeswoman for the BMW Group, said Mini drivers overwhelmingly asked for the service when the automaker started researching potential partners for its new Mini Connected App player.
"We had two very crystal-clear requests. No. 1 was, 'When is Pandora coming? When can I control Pandora without having to touch my phone?' And two was, 'When are you making this available to other phone partners?' This was more about meeting customer demands than anything else," she said.
Pandora also bears the distinction of being the first radio company to make it to your fridge. Kurt Jovais, director of Samsung's home appliances, said, "The apps on our LCD refrigerator are all kitchen-specific for the new kitchen center, and Pandora was the easy choice as a music service people know and love."
With more than 40 strategic content partners and availability on more than 400 different devices, Pandora's biggest challenge will be to monetize all its listener growth in the coming years. But streaming radio is a small percentage of radio revenue -- of the $17 billion the radio industry is expected to have generated in 2010, only $500 to $550 million of it will come from online or streaming properties, according to SNL Kagan.
Pandora's percentage? Since the private company publicly disclosed revenues of $50 million in 2009, reports have suggested that number doubled to $100 million in 2010. Les Hollander, the company's director of Eastern region sales, indicated as much at a recent SNL Kagan event, and the company's recent growth in headcount would certainly suggest that things are improving. It ended the year with 250 staffers, led by a major staffing up in advertising sales, development, strategy and operations.
Mr. Westergren said paid subscribers make up a "small, single-digit percentage" of the company's bottom line, which is why the Pandora sales team has been amping up its efforts with Madison Avenue to keep its streams free. Earlier this year, the company began positioning itself as a radio company to advertising partners for the first time, having previously categorized itself as a more generic "audio" buy in an attempt to attract digital buyers who might otherwise be scared off by the old-school terminology.
The approach seems to have paid off thus far. Last year, Pandora wrote business with first-time clients such as Walgreen's, Disneyland, Farmer's Insurance, Allstate, Ford Trucks, Marie Callender's and Verizon for national audio, display and video buys. And on a local basis, Pandora's dynamic targeting capabilities have caught the interest of marketers like Whole Foods, which recently tapped it to reach 30-something females within a five-mile radius of the Bay Area.
This is where Pandora's promise of personalization really kicks in, Mr. Westergren said. Because Pandora knows all of its listeners' ages, demographics and ZIP codes when they register, the site was able to broadcast those ads only to the direct target .
"No man heard those ads, or if you were a 40-year-old woman, you wouldn't have heard it either, because you were outside the demo,"
Mr. Westergren said. "We hear from 74-year-olds who say, 'I haven't heard an ad yet when I listen to you.' That's because we haven't targeted you yet."
Natalie Swed Stone, who leads radio buying for clients like McDonald's and Visa at Omnicom Group's OMD, said Pandora has created the "gold standard" for online radio in terms of commercial loads and ad models.
"They're really into the listener experience, and that's good for our clients because listeners like it, they tune in and stay there. They seem to have the longest time spent listening," she said.
John Trimble, Pandora's chief revenue officer, said the company's next priority is to build more relationships with clients on a more local level. In recent months, he's been working to create "insights" sales teams in major markets and regions to get a larger chunk of the local radio dollars that still make up the bulk of the traditional radio industry's ad revenue.
"Digital can be a challenge to local advertisers, so having that audio is very intuitive, and [we] can help with custom creative so they can talk to individual users in their market," he said.
Jeff Haley, CEO of the Radio Advertising Bureau, praised Pandora for its ability to stay on top and often ahead of new distribution platforms, but cautioned that its ability to supplant traditional radio is still unproven.
"I'm not sure if it's replacing radio, if it's replacing the stored music experience that we have already. It's a strong complement to live audio, and some of this listening is incremental, which is great. The more audio consumption there is, the better," he said.