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Pandora's Absolutely Not Screwed; It's In the Driver's Seat

Tickers in this article: AAPL P
NEW YORK ( TheStreet) -- I read two articles about Pandora over the weekend that stuck with me. One for how mind-numbingly horrible it is. Another because it provided a rare occasion where a writer actually presents a real understanding of not only what Pandora does, but the direction Internet radio heads.

A couple blokes put together a piece for Motley Fool centered around two completely asinine -- and plainly false -- ideas:

  • Pandora "has no intellectual property, leaving its business ripe for disruption"; and
  • Music listeners love Pandora, but it "has few supporters on Wall Street."

Second absurdity first. "Music fans" and "millions of devotees" have not run the price of Pandora stock up 97% since it hit mid-November lows. That would be Wall Street, thanks in large part to the emergence of a better understanding of exactly why the company, despite senseless noise, runs near the front of the mobile advertising revolution and will continue to not only lead Internet radio and disrupt terrestrial.

First absurdity second. Pandora's business has been "ripe for disruption" for years. Competitor after competitor has come in and done absolutely nothing to slow Pandora's growth. In fact, the growth has never stalled. In terms of listener hours and revenue, particularly on mobile, the company is as healthy as it has ever been. Don't expect that trend to reverse, even if Apple hits the market with an iRadio product.


Pandora's most important piece of intellectual property -- the Music Genome Project -- sets it apart. In this video conversation, Pandora Co-Founder and Chief Strategy Office Tim Westergren traces the history of how the MGP spawned Pandora and gives it its massive edge today:

I feel like I have to hold people down, rough them up and threaten the safety of their families to get them to sit still long enough to comprehend the impact of the MGP. You don't just walk in and, overnight, disrupt the advantage the MGP gives Pandora in the areas of personalization and discovery or the head start it has building out sales infrastructure to gobble up an ever-increasing chunk of traditional radio's $14 billion to $16 billion advertising market. Not if you're Apple, not if you're Spotify. Pandora's continued growth and the growing number of entrants attempting to snag a piece of it only validates the company's model.