Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



200 Million Is Just a Number

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

As far as milestones go, 200 million is a pretty big number. Pandora (NYSE: P  ) announced Tuesady morning that it has surpassed that mark in registered users -- an impressive tally, but one that needs to be put it in its proper perspective.

For starters, there's a big difference between 200 million registrations and 200 million users. Pandora puts out monthly user metrics, and we know that it had 69.5 million -- a little more than a third of its total registrations -- check in as active listeners as of the end of March. That's a big number, and it's up a healthy 36% increase over the past year. But it's not 200 million.

Investors also need to consider the value of these 200 million cumulative registrations. How many of them are duplicate accounts? How many of them no longer exist? What's a Pandora account worth?

We may never get an answer to the first two questions, but we can give the third query a shot.

Since Pandora's market cap is $2.2 billion, we can divide that figure by 200 million to arrive at a value of $11 per registered user -- or closer to $32 for each of Pandora's nearly 70 million active listeners.

The market's perceived value of Pandora's membership is low because the company just isn't good at milking revenue out of its users. Premium-radio leader Sirius XM Radio (NASDAQ: SIRI  ) has just 23.9 million subscribers, but it commands a roughly $20 billion market cap.

How can the average Sirius XM subscriber be worth $836 while the typical Pandora user can be swapped for a multiplex movie ticket? Well, Sirius XM consumers are paying good money for premium content. Pandora is still a haven for freeloaders. Sirius XM cranked out $3.4 billion in revenue last year, while Pandora rang up only $427 million on a much larger base of users, and it failed to follow Sirius XM into profitability.

That doesn't mean you can't make money as an ad-supported platform. LinkedIn (NYSE: LNKD  ) also crossed the 200 million mark earlier this year, and most users of the career-oriented social-networking website approach it as a free destination. However, it generated more than twice as much revenue as Pandora did last year, and its market cap is actually closer to Sirius XM's these days.

In other words, Pandora has a long way to go.

Instead of praising the 200 million-subscription milestone, maybe Pandora should be taken to task for how little it has been able to do with such a wide audience. Pandora generated just $51.9 million in subscription revenue last year, and that's a little more than $0.25 per account over the course of an entire year if we go by that cumulative registration figure that the company's shouting from the rooftops.

Pandora's posting impressive growth metrics, but now it's going to have to start growing where it counts.

Pump up the volume
Pandora has won millions of devotees among music fans but few supporters on Wall Street. The online jukebox seems to be redefining the way we consume music, a transformation that's only likely to grow. But high royalty rates and competition from all corners threatens to silence the company. Can Pandora translate success with its listeners into a prosperous business model that will deliver for investors? Learn about the key opportunities and potential pitfalls facing the upstart radio streamer in The Motley Fool's new premium research report. All you have to do is click here now to subscribe to this invaluable investor's resource.

Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 10, 2013, at 6:36 AM, sharptongue13 wrote:

    I was one of the early registered members, but I seldom go there. I was a paying member years ago before it went public. I came to the conclusion that the service, pay or free, was not up to par.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2354765, ~/Articles/ArticleHandler.aspx, 9/26/2016 6:30:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:02 PM
P $13.99 Down -0.10 -0.71%
Pandora Media CAPS Rating: **
LNKD $193.04 Up +0.25 +0.13%
LinkedIn CAPS Rating: ***
SIRI $4.17 Down -0.04 -0.95%
Sirius XM Radio CAPS Rating: **