Pandora Sounds Off on iPhones

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rockingout2.jpgADOTAS – Did you hear? The new iPhone is on sale! Today! And yesterday morning, Apple’s app store opened its virtual doors – some industry observers are predicting that the bevy of games, programs and tools could be one of the iPhone’s biggest selling points.

“The emphasis on software shifts the debate from how cool a device it is to what it can do for you,” Tim Bajarin, an analyst with industry research firm Creative Strategies of San Jose, California, and a veteran Apple-watcher, told Reuters.com.

About one-quarter of the programs are free and the ones that are charging are pretty cheap, with most of them coming in at under $10 a pop. There are 25 music apps – most notably, personalized online radio service Pandora, which enjoyed several thousand downloads in the first hour alone.

Pandora has been around since 2000 and has been through its share of ups and downs. Short story: it was started as part of the Music Genome Project, ran out of money, raised a ton in March of 2004 and then became a radio service.

“We repurposed all the technology we were already working on with the genome project,” Tim Westergren, the CEO and founder told ADOTAS. “It took us a year to build and test and then it just took off through word of mouth. Right now we have 14 million registered listeners.”

Their listeners, incidentally, are the stuff of marketers’ dreams: between the ages of 18 and 34 (though Westergren said that the age is spreading out, with some octogenarians logging on), tuned-in, savvy and with money to burn. Their advertisers include Procter & Gamble, Microsoft and Anheuser Busch. But though the company has raised about $20 million in venture capital so far, its ad revenue can’t keep up with its growth rate.

“We’re adding between 600,000 and 700,000 registered users a month,” Westergren said. “The irony is in the nature of a business like ours, the more users we get, the harder it is to become profitable fast because it costs us every times someone listens to Pandora. But even though it makes the time horizon a bit longer for profitability, you don’t want to slow down growth.”

Westergren better steel himself for an even longer wait – Pandora is one of the top-10 downloaded apps right now from the iPhone store. There are about 6 million iPhone users (bound to rocket up with the cheaper 3G version) and one-third of the users are between the ages of 25 and 34 – Pandora’s strongest audience subset.

ADOTAS took Pandora’s service on the iPhone for a quick test drive. It’s simple, straight forward, and mirrors iPod’s interface, making using it automatically instinctual. Scrolling through stations or building your own is easy, the text is easy to read and album art always appears along with the music, a nice touch. The service is ad-supported – but the small subset of Pandora users who despise ads (they number in the low thousands) can pay a modest subscription fee to opt out.

The audio quality is superior to that of Sirius or XM – and since it’s uses a cellular, not a satellite connection, if users want to listen to Pandora in the car, they don’t have to worry about losing the signal under a bridge or in a tunnel (heaven forefend!).

This isn’t Pandora’s first foray into the mobile world: It currently has deals with Sprint and AT&T.

“There are panoramic limitations with other phones,” Tom Conrad, Pandora’s CTO, said. “The iPhone is basically a hero device for us. People who use the iPhone are thinking about it as more than a phone – they’re thinking about it as a music device, which makes it the perfect fit for us.”

Their ad model is basic. “We’re going to insert audio ads,” Conrad said. “About six segments an hour that’ll run for seven seconds a piece, NPR-style. It’s actually kind of old-school especially when it comes to the delivery model, but we like it because it’s not intrusive like some of the tiny banner ad campaigns you see on mobile phones.”

The ads represent about one-third of the load that regular broadcast radio cranks out.

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