The company recently started ramping up its advertising
business, which accounts for 86% of its total revenue. Ad revenues
grew from just over $3 million in 2007 to $50 million in 2009. The
company says it booked $77 million in ad revenue in the first nine
months of 2010. Overall the company lost $328,000 on $90 million in
total revenue, down from an $18.6 million loss during the same 10
months in 2009.
Pandora has managed to narrow its losses significantly over the
past year, while significantly expanding the number of devices. It
has flirted with profitability before; claiming one profitable
quarter in 2009. The 295-employee company's biggest expense is
royalties paid to the record labels, which accounted for $45
million in expenses over nine months ended Oct. 31.
Pandora is hoping to grow its revenue both by serving more ads
to more listeners, while allowing users to pay $36 a year for
higher quality audio and an ad-free experience.
Built on music recommendation technology developed by the Music
Genome Project, the 10-year-old company has 80 million registered
in the U.S. The Pandora music service was launched in 2005, and
four years ago flirted with bankruptcy. But it has flourished as
the numbers of internet-connected devices have exploded, where it
has become the de-facto music service on hundreds of mobile phones,
TVs, set-top boxes, tablets, cars, and, well, a Samsung
In all, Pandora is available on 400
different devices, including Apple's iPhone and iPad, which
accelerated new registrations.