Pandora Media Inc. continues to make progress with its initiatives meant to drive listeners back to its platform, and announced several new ad technologies that will keep the top line growing at a healthy clip, executives said as the company reported second-quarter earnings late Tuesday.
Shares were up 13% in after-hours trading, after the music-streaming pioneer released results that beat top- and bottom-line estimates, and the company issued better-than-expected guidance for the third quarter. “With the number of companies that have reported in the last week you’ve seen a mixed bag, especially for advertising-supported internet businesses,” said Pandora P, -2.46% Chief Executive Roger Lynch. “We didn’t see that. We had a very good quarter. We had very strong revenue, which was up 12%.”
Pandora also announced Tuesday that it was making programmatic ads widely available on its platform, after initially offering them in a limited manner. The programmatic capabilities leverage technology from AdsWizz, a company Pandora recently acquired.
Lynch said that the programmatic space is getting more attention lately, including from Alphabet Inc.’s GOOGL, -0.23% GOOG, -0.20% Google, which said it would start accepting audio ads. “With our supply coming into AdsWizz programmatic, we now represent, through AdsWizz, the vast majority of all audio inventory that’s available programmatically not just in the U.S., but globally,” Lynch said on the conference call with analysts.
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But after single-digit stock gains immediately after the report was released, shares rallied following the remarks on the earnings call from Chief Financial Officer Naveen Chopra. He said the company expects revenue of $390 million to $405 million in the third quarter, compared with analyst expectations of $395 million.
“Our revenue guidance reflects the fact that we project continued momentum in our subscription business, albeit at a moderated growth rate as we are no longer growing off a small revenue base,” Chopra said.
The company once again saw a decline in listener hours on a year-over-year basis, but it was less pronounced than in the past. Users spent 5.1 billion hours listening to Pandora in the June quarter, compared with 5.2 billion hours in the year-earlier period. Analysts were expecting listener hours of 4.9 billion.
Lynch told MarketWatch that the company is making strides when it comes to its listener-hour metric, thanks partly to new data-driven marketing efforts that draw users back to the platform. He said such initiatives are having a positive impact on monthly active users, subscriber growth and overall engagement.
See also: Partnerships and programmatic ads will drive growth
Pandora continued to benefit from Premium Access, a feature that gives listeners to the company’s free radio tier the ability to play some songs on demand in exchange for watching a video ad. Prior to the introduction of Premium Access, on-demand listening was only available to those who subscribed to Pandora’s Premium tier. On the earnings call, Lynch said that 22 million people have used Premium Access, compared with the first quarter, when the company had 13 million.
Lynch also discussed the early results of some new initiatives geared toward listeners, including family plans as well as partnerships with both AT&T Inc. T, -0.09% and Snap Inc.’s SNAP, +1.87% Snapchat. He said that Pandora’s three listener tiers “really open up a lot of possibilities on partnerships” because it can make arrangements geared toward free and paid offerings.
“This is part of our broader strategy to shift the mix of how we acquire customers from all direct to relying more on partners,” he said. Lynch’s prior experience at Sling taught him that partnerships can help attract “the best customers at the lowest cost of acquisition.”
Shares of Pandora have rebounded this year and were up 43% so far in 2018 as of Tuesday’s close. That compares with a 5.5% rise for the S&P 500 SPX, +0.49% However, the stock is still in negative territory over the past 12 months and it is trading significantly below its 2011 IPO price of $16.
