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  • Pandora's Business Model Doesn't - And Can't - Work [View article]
    @ Andrei Volgin....

    Can't agree more with that. The idea of selling behavioral data won't cut it. But they need something to boost the top line, something that it not music but would be relevant to their audience. Hard to see what that would be without competing with Amazon or eBay. If they could sell $100 worth of TBC non-music merchandise (goods or services) per year to just 2% of their user base, then that would bring in about $400m in incremental revenue - an increase of about 100% on 2012 revenues.

    I feel this is the right way for Pandora's management to be developing the company, but there's no sign of it yet.
    Dec 12 05:55 AM | Likes Like |Link to Comment
  • Pandora's Business Model Doesn't - And Can't - Work [View article]
    Another perspective on this is that Pandora could develop a self-serve ad platform for at least some of it's inventory. That could help to reduce the cost of selling the inventory it is creating. Another idea would be to think about other ways to monetize its user base, by for example, collecting and selling detailed behavioral data on what users are listening to, and what they are doing online. This is exactly the sort of data that Google, for example, are collecting and using to better target ads across the Google Display Network. Pandora will have a lot of highly relevant data that it could in theory sell to other ad platforms, ad networks, ad exchanges and advertisers. It's not directly ad revenue per se, but would serve to boost the top line which is what they need to do.
    Dec 11 11:45 PM | Likes Like |Link to Comment
  • Pandora's Business Model Doesn't - And Can't - Work [View article]
    Interesting perspective, but one that is I think flawed...
    It is a mistake to think that the value of the mobile advertising market, when viewed on a per user basis is somehow going to reach that of online.

    All the media formats have their own strengths and weaknesses and they all have their own long-ruin saturation levels for rev per user. Online and mobile are still growing, but mobile is fundamentally incapable or matching online - see our chart for a comparison:

    Or if you want a more detailed view then try this:

    So Pandora will expect some uplift but it will not be enough to fix the problem.

    If you want to compare the sizes and rates of growth for online and mobile ad markets then this might be useful:

    Mobile advertising is clearly growing strongly, but compared to online it's still a niche market.

    Finally, it is incorrect to compare mobile-based subscritpion music services like Pandora with radio. Two reasons (there are more..): try calling an advertiser and trying to persuade them that they are the same. Good luck! And don't forget that radio is not just music: think about games shows, phone-ins, talk radio and news and features. Music subscription services are a very different media.

    So although your points look good on the surface they are I think based on incorrect assumptions.
    Dec 11 02:15 PM | 5 Likes Like |Link to Comment
  • Pandora's Business Model Doesn't - And Can't - Work [View article]
    Those are all great points, and I'm sure that Pandora's management will be doing all they can to boost ad revenue per hour. But the fact remains that the whole music subscription sector has an issue - and you see that whether the service is ad-funded (like Pandora), funded from subscriptions or both.

    That says a lot I think.

    On valuation, I'm sure you would find that an analysis based on FCF, would make no difference to the thesis of this article.
    Dec 11 11:27 AM | 1 Like Like |Link to Comment