Does Pandora Have a Fake Listening Problem?


That’s a question Westwood One’s Chief Insights Officer, Pierre Bouvard, would sure like the answer to. He’s asking because noted Wall Street analyst Anthony DiClemente brought up the subject of listener hours in a research brief on Pandora Media released this week.

As Bouvard sees it, Pandora suffers from “empty room syndrome.”

He reasons that two-thirds of Pandora’s listening occurs at home. This means, in his view, that a stream could be kept on for a great length of time, but the individual who put the stream on could be throughout the house for much of its duration.

“The ads are on, but no one is there to hear them,” Bouvard says.

Thus, he opines, “Pandora has no idea if anyone is actually listening. They can send a message: ‘Are you still listening?'”

On May 9, DiClemente, who presently works with Nomura, assigned a “Hold” rating to Pandora Media stock and set a price target of $12.

Just before Friday’s Closing Bell on Wall Street, Pandora was trading at $9.72 per share.

DiClemente asked the last question on Pandora’s Q1 2017 earnings call. In a question to Naveen Chopra, the company’s CFO, he asked about its active listeners.

“You said that the promotions and marketing of the new subscription services on the platform was what drove the decline in active listeners,” he said. “With 80% of the new trial subscription users being acquired on platform, I guess, I’m trying to figure out, do you guys think you’re sort of limited in terms of how much you can market on the platform to your existing users, given the active listener erosion here? I’m just trying to understand your tolerance for, let’s say, sacrificing your active listeners for the goal of the subscriber ramp? And then, on the subscriber ramp, I think you had a target for year-end subs of 6 million to 9 million. I’m wondering what the new revenue guidance is and if you have a new expectation for subscribers for year’s end?”

Pandora plans to continue actively controlling listener hours, which were down 5.6% year-over-year in Q1, to 5.21 billion, as it optimizes timeouts for the least profitable audience cohorts.

Chopra replied that Pandora has multiple tools, both on- and off-platform, that it can use to promote subscriptions to the ad base. “Our off-platform marketing was kind of more heavily oriented to subscription, so we didn’t get the volume of new subscribers into the free tier that we typically would,” she said. “In combination with that, we had some issues with how aggressively some of the on-platform tools were being used. So, it’s not that we hit kind of the maximum limitation of what we can do from an on-platform perspective. Frankly, we just need to be smarter about it — meaning, using different tools whether it’s direct ad inventory, or whether it’s the concept of smart conversions getting people.”

It’s also, Chopra says, “then turning the knobs and dials on each of those mechanisms, so that we’re not doing it too much in any given period of time. I don’t think we have changed our view that those on platform promotions are still going to be our most effective and obviously most cost-effective way of acquiring subscribers. We’re learning how to use them in the most optimal way, and that’s what we’ll continue to do.”

WW1’s Bouvard assails Pandora for “fake listening,” touting the abilities of Nielsen Audio to track “actual radio listening.”

He does not mention the recent issues in Tampa with Nielsen Audio including the streaming audio of WYUU-FM “Maxima 92.5” in recent surveys after a household apparently had used a smart home device to connect to the station for hours at a time.