Pandora Media (P +0.00%) seems like it just can’t catch a break.
The media's recent coverage of Pandora has mostly centered around Apple's recent move into the streaming radio space with iTunes Radio. However, Apple isn't alone in its quest to steal Pandora’s market share. Although less seriously covered, online giant Google (GOOG 3.85%) has also been attempting to carve out its own slice of this booming industry, presenting another serious threat to Pandora.
By all appearances, Apple hasn't put much of a dent in Pandora's growing business. So, just how serious a threat is Google to Pandora?
Google moves from Spotify to Pandora
Google's presence in the music space is nothing new. When it rebranded its music service as Google Play last year, the possible implications of one of tech’s most able and feared competitors sent a shiver down Pandora shareholder's spines. Even though Google's new music service was essentially only a digital media store similar to Apple's iTunes at that point, the possible threat was still enough to send Pandora's shares down 24%.
This May, Google took its music service one step further when it announced Google Play Music All Access service. The key new feature with Google Play Music All Access was on-demand streaming music, which made it a more direct challenger to privately held Spotify. Users could still create radio stations, but they were largely incomplete. At that point, Pandora still remained more or less out of Google's crosshairs
But as you should imagine by now, that didn't last for long either.
Google's rivalry with Pandora evolves
In September, Google finally got around to challenging Pandora. At that point, Google added functionality to Google Play All Access Music that enabled users to create custom radio stations around genres. This update finally allowed users to enjoy the same degree of functionality that Pandora offered.
However, the comparisons between Google's rounded-out online radio offering and Pandora still aren't apples-to-apples today. To me, there are still two key differences that separate Google and Pandora here:
For one thing, Google Play Music All Access is a subscription only service, whereas Pandora offers free and paid models. This seems to be key as Pandora’s signaled it intends to make the bulk of its (eventual) profits from advertising. This is apparent in Pandora’s decision to remove the 40 hour per-week listening cap it instituted last year. This is in line with its increasingly profitable advertising business, a fact I had overlooked at one point.
The second trump card Pandora wields, for now, are the fruits of its Music Genome Project. This is harder to clearly quantify, but something that still helps Pandora's final product beat both Apple's and Google's radio stations Pandora has spent years engaging artists and music experts in order to tag and link tracks that are relevant to radio listeners. This has left Pandora with a better sense than both Apple and Google of which songs a listener might want to hear when they create a station.
Foolish bottom line
As we saw with Pandora's October audience metrics, it appears neither Apple nor Google's online radio capabilities have yet to meaningfully erode Pandora's user base. This could change over time as each services' recommendation engines improve with more listener data.
Up until this point, Apple's iTunes Radio has been by far the more discussed potential “Pandora-killer.” However, investors also need to pay attention to Google's increased involvement in this booming space.
Pandora reports its third quarter earnings on Thursday, so we'll get another glimpse under the hood of the streaming upstart. However, for now at least, it appears that Pandora is safe from Apple and Google.
