Pandora chief revenue officer John Trimble gave an interview to Ad Age in which he said hitting profitability was “doable.”The company has historically been plagued by its inability to become profitable as it scales up. It can only air an ad if it plays a song, and for every song it plays, it must pay a royalty fee. Thus its costs and revenues are closely tied. Pandora has taken to lobbying the government — and battling the music industry — to lower its royalty fee rates.
In the meantime, Pandora has built a huge mobile advertising business, about $100 million a year, Trimble told the magazine, from 67 million users a month. Mobile is now 55% of Pandora’s revenue, he said.
Trimble hinted that Pandora could become profitable if it wanted to:
I think we’ve always felt that this has been a viable business. At points in time, we’ve hit that inflection point of being profitable, so it’s doable. We’ve taken a really focused approach: Building our audience is paramount to building the business. As we catch up on the revenue side, we’ll hit that inflection point again.
That would be good news, except that he dodged writer John McDermott’s sharp question about whether it costs Pandora more to acquire a new user than it can get back in ad sales:
Ad Age: Does it cost the company more than it makes to acquire a new user?
Mr. Trimble: At this point, from the revenue standpoint, we’re still trying to catch up to user growth. Our user growth has been so accelerated that we’re trying to build our business to get over that profitability line.
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