On Wednesday, Pandora released its latest performance metrics for the previous month, and as the percentages continued to grow tame, they're are only going to fuel debate about the future of the Internet's biggest radio service.
But Pandora's monthly metrics didn't tell us the most important element of its story.
The missing piece isn't how muchRadio could be swiping away listeners -- though next month will give a better sense of that, when Apple's competing online radio service has existed longer than just 12 days.
Pandora's story now is about how it's faring at making money, and the figures released every four weeks don't touch on that. That's OK, because the most valuable audience for the monthly listener checkups isn't journalists or even investors anymore. It's advertisers.
Pandora in September: still growing, more slowly
Overall, Pandora's September metrics paint a picture of a service that's still getting bigger but finding it harder to grow as fast as it once did.
Pandora had 72.7 million active listeners in September. That's an increase of 600,000 from the month before, and 25 percent higher than the level a year earlier. But as it has for the last year, the company's momentum eased again. In September 2012, for example, the 49 percent growth rate was nearly double what it is now.
By contrast, Pandora did better on its share of the U.S. radio market. It rose to 7.7 percent, and it picked up the pace of the gains a little. But Pandora's share peaked months ago in February, before it instituted a cap on listening hours for mobile users -- a cap it has since removed.
And its 1.36 billion listener hours, now freed of the mobile restraint, ticked up less than one percent from the prior month. In August and July, listener hours had increased 5.5 percent and 2.4 percent from the previous month, respectively, even with the mobile ceiling in place.
The slight creep up on listener hours is by design. Pandora's costs are correlated to its listening hours, because its largest outlay is to license the songs people hear. Since September, it has. That was sooner than Pandora had planned but it lifted the cap after figuring out how to rein in long, unengaged listening in other ways.
The cost benefit of lower listening growth is only helpful, though, if Pandora keeps adding more users so advertisers have more incentive to pay attention to Pandora.
"The story was user growth. Now it's shifting to monetization," said Michael Graham, an analyst for Canaccord Genuity. "The listener metrics are still quite important but less important than they were."
Show me the money
While Pandora rolls out the listener data every month, it keeps quiet on its revenue progress until its quarterly release with full financial news. In those, Pandora has only posted a couple quarters in the black since going public, when dividends it paid out to preferred shareholders are included. And those quarters of profit were relatively slim.
At its last quarterly update, Pandora's then Chairman and Chief Executive Joe Kennedy said the company would be accelerating its investment -- and thus crimping its profit going forward -- to drive growth, leading to a bottom-line outlook that dampened some investors spirits at the time.
But the trends are getting better. Average advertising revenue has increased in recent quarters. Graham also conducts a monthly survey on Pandora's ad load. While his most recent look last month suggested lighter amounts of ads per hour than in the previous couple months, he estimates average advertising revenue will continue to increase when smoothed out over the full quarter.
"We're going to be in a period of slower growth in listeners partly because Pandora has really good penetration, and partly because we have a new competitor out there," he said. "But now it really is a question of monetization."
Advertisers, Pandora's other audience
Monetization numbers aren't something Pandora is likely to disclose more frequently then it already does. More likely, it will continue to tell the world its listener figures, even though James C. Goss, an analyst with Barrington Research, noted that year-over-year changes are not as indicative as they once were, and sequential changes -- those month to month -- are becoming nominal.
"Maybe this is played out a little bit," he said. "But I think they've established the base, and they've been putting out numbers to some extent because there hasn't been the same levels of measurement [for Internet radio] that broadcast radio tends to have with its ratings."
More than half of the online U.S. population are aware of Pandora and one-quarter of them use it, according to Russ Crupnick, senior vice president of industry analysis at NPD Group. The degree that they're accounted for still trails the kind of ratings that broadcast radio has used for years to secure advertising dollars.
It's why more of the roughly $14.8 billion advertisers spent in 2012 went largely to terrestrial radio.
Since Kennedy weighed in about Pandora's plans in August, the. Brian McAndrews was a marketing and advertising executive with Microsoft and, before that, the chief of digital marketing company Aquantive until Microsoft bought it for $6 billion. (Kennedy's exit from Pandora was planned, having been previously announced in March.)
In announcing McAndrews hiring, founder Tim Westergren touted that "no one better understands the intersection of technology and advertising" than the Microsoft vet. And the company has described its plans to ratchet up investment frequently around the prospect of boosting its ad-sales force, as well improving its technology. Together, the indications are clear that Pandora is, more than anything, an advertising-driven company.
While its monthly listener metrics may be telling the world at large less about how Pandora is doing, it's telling advertisers more.