When Pandora was launched about 15 years ago, it was seen as a revolutionary invention that could change how people listen and interact through radio. The company has had its share of success over the last one and a half decade but 2017 has not been smooth sailing.
On Friday, Pandora’s stocks plunged 25% after low revenue forecasts for Q4. But that’s just the tip of the iceberg. A recent survey by Piper Jaffray indicates that Pandora is losing its teen user base very fast. This could potentially prove problematic for the internet radio service.
The last few months have not been business as usual for Pandora. The company has made a number of key changes both in its strategy and its management. One of the key changes was the exit of Tim Westergren, Pandora’s co-founder. Westergren was replaced by Roger Lynch in August. Lynch was Sling’s former CEO.
The new CEO admitted that there were “tangible challenges” ahead for the company. The first observation by Lynch was the decline of Pandora’s user base in the last four quarters. The CEO is planning to stabilize the company by keeping its user base before looking into new strategies to enhance growth moving forward. The declining user base has been very rapid. In 2016, Pandora had 81 million users. This number has since dropped to 73.7 million in under 12 months. It’s a massive slump.
Turning things around will not be easy. Although Lynch looks ready for the challenge, the company must take a few strategic steps. Lynch has suggested expanding the content offering to include podcasts and spoken word. Pandora may also lean towards voice-activated devices as part of its new strategy. But despite how good these steps may be, it’s very difficult to see how they will change the situation for the internet radio service.
The rate in which Pandora is losing teen users is quite alarming. The Piper Jaffray survey has clearly captured the extent of this downturn. In the survey, teens in the US were asked whether they listen to radio through Pandora. Only 35% said yes.
What makes this worrying is the fact that in 2014, a similar survey was done on American teens. When they were asked whether they listened to radio through Pandora, 74% said yes. This was only three years ago.
Pandora seems to be failing in competing with other on-demand music services. The Jaffray survey showed that Spotify, Apple Music, and YouTube were among the top companies that are currently gaining a significant market share among teens in the US.
Lynch has also spoken about revamping Pandora’s advertising technology in a bid to attract advertisers to its platform. This is, however, a long shot and may not provide results in the near future. However, if the company can somehow stop the decline and focus on regaining its market share among teens, things might just start to look up.