Pandora Rolling Stones
Pandora sold out of Rolling Stones presale tickets earlier this year. Source: Pandora.

"Rolling Stones have been doing presales of their tours forever and usually about 20% of presale allotments gets sold," Pandora (NYSE:P) CFO Mike Herring told the audience at a Wedbush technology conference earlier this month. "Pandora sold 100% of the allotment, 55,000 tickets in 24 hours, not because of any other reason other than we knew exactly who wanted to buy those tickets."

Herring was pointing out the value Pandora adds to Ticketfly, the ticketing platform Pandora acquired in October for $450 million. What Herring revealed is that the real value of Pandora is in the data it's collected on the 78 million people who actively use Pandora every month. "We knew that you lived in Westchester and that you have a Rolling Stone station or you sound up a Rolling Stone song in the context of listening to Brown Sugar, you got an offer for a ticket and you bought it. 24 hours. I mean you don’t have to be a genius," he said. Ticketfly, a technology company that connects fans, artists, and events promoters, may help extract some of the value from Pandora's wealth of data, but Pandora may be able to supplement its advertising revenue by licensing its data a la Twitter (NYSE:TWTR).

What does Pandora do with its data now?
Pandora uses its data to help it target advertisements. In particular, Pandora has found success targeting political campaign ads based on a user's taste in music. While this certainly isn't as strong of a signal as a Twitter user who follows several Republican candidates and Fox News anchors, Pandora has made it work. And when it comes to targeted radio ads specifically, Pandora is probably the better option compared with terrestrial radio for political candidates.

Last year, Pandora also opened up its data to musicians. The 125,000 or so musicians on Pandora's platform are able to see detailed information about their fanbases. The data can be used to better plan tours and setlists and help target fans when promoting albums.

Pandora also feeds back its listener data into its algorithms to play more songs its users like. Most recently, Pandora unveiled "Thumbprint Radio," a service that takes all of the songs you've given a thumbs-up to and creates a playlist based off those data.

The licensing opportunity
Pandora doesn't sell its data directly, like Twitter does. Twitter continues to make deals to license its firehose of data to companies such as Google and IBM. Over the past 12 months, Twitter has generated over $200 million from its data licensing business (which includes its MoPub mobile ad platform), accounting for more than 10% of its total revenue.

Although Pandora doesn't have a similar amount of data as Twitter, it does have very actionable and telling data that's easier to analyze. Users either like a song or they don't. Pandora also acquired Next Big Sound, a company that specializes in tracking the popularity of songs online and on social networks, earlier this year. That gives it even more data at its disposal.

If Pandora opted to license its data, which it's shown the value of with things such as TicketFly, it could probably gross a similar percentage of revenue as Twitter -- 10%. Pandora could license data to all sorts of different companies from record labels to a company that are looking for data sets to advance AI algorithms.

Why Pandora won't license its data
The only data Pandora shares with the general outside world is that which it provides to musicians. And that was only done as a show of goodwill after complaints that it doesn't pay enough in royalties.

And Pandora doesn't seem interested in licensing its data to anyone else. Instead, it's been snapping up companies that would otherwise benefit from licensing its data. Ticketfly is the first example. Rdio, the on-demand streaming platform, is another. With Pandora's listener data, it can take both of those services and make them more effective, engaging, and cost-efficient. So while Rdio went bankrupt on its own, Pandora may be able to make it work. And while Ticketfly could sell 20% of Rolling Stones presale tickets on its own, it sold 100% of tickets with Pandora's data.

Indeed, this strategy produces more long-term value for shareholders than simply licensing data to other businesses. And that option is still on the table should a business approach Pandora and it doesn't compete with the streaming radio service. While Pandora's approach won't provide the short-term revenue the company appears to need -- especially in light of the recent royalty rate increase -- it does set the company up to perform better in the long term.

Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Pandora Media and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.