Pandora Media (P) is showing some signs of recovery. The Internet radio purveyor reported better-than-expected first quarter results in April. Its revenue increased significantly year-over-year, while the loss narrowed. According to CEO Brian McAndrews, an increase in listener engagement and better monetization led to a solid performance in the previous quarter. However, due to Apple's ever-growing presence in radio, will Pandora continue improving? Let's find out.

Getting better
Pandora has successfully improved user engagement, which led to an increase in listening hours in the previous quarter from the year-ago period. The company has managed to achieve this by offering new features such as an alarm clock, sleep timer, and a station recommendations platform for its listeners.

People using Pandora's alarm clock functionality on Android are listening to the radio service 30% more days per week and 3% more hours each day. In addition, the company has also increased its reach, which means that people have greater access to its Internet radio than before. According to management, Pandora is available in almost every best-selling car, and has more than 5 million unique active users through its native automotive integrations.

On the back of such solid strategies, it is not surprising to see that Pandora's monetization is getting better. The company reported strong progress in mobile monetization. Its ad revenue per thousand impressions, or RPM, increased 44% year-over-year to $29.46. Encouraged by this solid jump, it made significant changes to optimize Pandora One. This includes a modest price increase for new subscribers, which will take effect from the second quarter onward. 

The company also plans to spend aggressively on marketing moves to bolster its standing in online radio. This will hurt its bottom line in the short run, though. As a result, Pandora issued a weak forecast for the ongoing quarter, which led to a huge drop in its share price.

Opportunities ahead
Pandora is striving hard to increase its user base and also provide new opportunities to advertisers. Consequently, it has hosted a series of live personalized concerts designed to connect fans with artists they love. The company is experimenting with new innovative ideas for enhancing listeners' experience.

It is partnering with Peet's Coffee & Tea. This is the first time that Pandora is partnering with a brand in a brick-and-mortar environment. Under this partnership, Peet's will have its own customized radio stations on Pandora that will be played in all of its 300 stores across the U.S. The radio stations will also be made available to all Pandora listeners. 
Pandora is aggressively increasing its advertising base. It added three new markets in April, and now has a total of 37 local markets with a sales presence. Additionally, it has also employed an inside sales team of about 40 people to cultivate local ad revenue in the remaining 239 markets where Pandora doesn't have a strong presence.

Going forward, the company is positive about its prospects, and is counting on its ability to leverage its strong brand to redefine radio in a connected world. Also, it has tweaked its top management, and hopes that this new team, which has a wide range of skills and experiences, will turn it into a more profitable business.

Apple's CarPlay is a concern
Pandora's growth will certainly be challenged by Apple in the near future. Apple introduced CarPlay in March, making it easier for users to interact with their iPhone while driving. By using the iPhone's Siri, drivers will be able to make calls, navigate, and also use apps. However, as Fool contributor Rick Munarriz wrote in March, Pandora isn't one of the apps that is supported by CarPlay. Apple is promoting its own iHeartRadio service, along with Spotify.

In the U.S., 42% of smartphone users were on an iPhone in 2013, up from 35% in 2012. This year, the share could increase further as Apple is expected to launch larger-sized iPhones. An increase in the number of iPhone users means that there is a greater probability of CarPlay usage since it is supposed to be the iOS interface for cars. As Apple has sidelined Pandora and is bolstering its own radio service, the rapid adoption of CarPlay might hurt.

Takeaway
Pandora's management is taking various initiatives to strengthen its business. Its focus on monetization and a strong user base should attract more advertisers going forward. Moreover, additional user-friendly features could strengthen its customer base. While Apple is no doubt a threat, investors shouldn't forget that Pandora's bottom line is expected to improve at an annual rate of 41% for the next five years, making it an enticing investment.