Why Apple Wants To Kill The 2nd Biggest Mobile Ad Business On The Planet

Pandora Joe KennedyPandora CEO Joe Kennedy

Photo: Michael Seto

Apple appears to have woken up to the Pandora threat: Every minute that users spend listening to the music streaming service is a minute not spent listening or buying stuff in iTunes. So Apple is now looking at building its own Pandora-killing music-streaming clone.The fastest-moving dynamic in this play is mobile: Apple has an iPhone 5 coming out imminently and the iPad is growing like wildfire.

Likewise, Pandora’s business has already shifted to a majority mobile-content/mobile revenue model. Listening from your phone or tablet is, basically, where music-streaming is at, and a majority of Pandora’s revenues now come from mobile ads served against those songs. According to eMarketer, Pandora’s mobile ad business is second in size only to Google’s.

But it’s not at all clear that Apple would want the potentially massive mobile ad business that comes with a Pandora clone. Apple’s iAd business is increasingly regarded as an also-ran in the business—netting only an estimated $75 million this year, per eMarketer. And, as Peter Kafka of All Things D points out, the mobile ad business really isn’t the kind of beautiful standalone device business that Apple likes: It requires a lot of salespeople calling a lot of people on the phone every week.

Music-streaming is also notoriously unprofitable. For all its elegance and beauty, Pandora can’t make a red cent on the bottom line doing what it is doing. Apple probably won’t be able to either, absent miraculously low song royalty payments or miraculously high mobile ad prices.

So it looks likely that Apple wants a music streaming service purely as a loss-leader to keep people within the iTunes environment, where they may buy songs, and nix their need to listen to Pandora. Currently, Pandora may generate as much as $225 million in mobile ad revenue this year. Apple’s version could simply wipe that off the map.

In reaction, Pandora’s investors are already bailing out of the stock.

This is the worst-case scenario for Pandora: That Apple will build a successful streaming version of iTunes, steal Pandora’s audience, and crush its mobile ad business in the process.


  • Pandora Just Told The SEC It’s Taking A Huge Hit On Mobile Ads
  • Pandora’s Mobile Ad Business Has Almost Doubled In Size

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.