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Title: Market Analysis of Pandora.com
Executive Summary
Through conducting a user Touch-Point Analysis of Pandora.com, multiple issues
affecting conversion are found in the Web design and in the multi-tier user's benefit
structure. Public domain Web analytics also reveal low monthly active users and low
retention rate. Improvements to its services and customer value proposition are
suggested in this report to help Pandora.com sustain competitions.
Author:
Dixon Lau
Independent Market Analyst
Contact: dilausj@gmail.com
Author: Dixon Lau
© 2013 all rights reserved Page 1
2. Market Analysis of Pandora.com 2
Contents
What is Pandora.com for ................................................................................................................ 3
Multi-tiered User's Benefits Structure ............................................................................................ 3
Differentiations ............................................................................................................................... 3
Sources of Revenue for FY 2012 ..................................................................................................... 4
Market Share................................................................................................................................... 4
Audience Demographics ................................................................................................................. 4
Web Analytics ................................................................................................................................. 5
Conversion Analysis ........................................................................................................................ 6
Conclusion ..................................................................................................................................... 12
Appendix 1 - SWOT Analysis Summary......................................................................................... 13
Appendix 2 - Conversion Analysis Summary ................................................................................ 14
Appendix 3 - Key Customer Engagement Metrics ......................................................................... 15
Author: Dixon Lau
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3. Market Analysis of Pandora.com 3
What is Pandora.com for
In brief, Pandora.com lets you create your own radio stations to play your favorite music
anywhere you go. When you are a registered user, you can play your created stations
from the Web, IP TV, entertainment devices at home, mobile devices, and also in your
car audio systems. It also connects with other social media for you to share your
listening experience with friends.
Multi-tiered User's Benefits Structure
The main focus of Website of Pandora.com is to acquire listeners. Both non-registered
and registered users have access to the same features, and both are subject to receiving
advertisements. There are the three tiers of user's benefits:
Non-register user
- Songs listening, searching, sharing, and creation of radio stations
- Subject to audio ads, display ads and video ads
- Available over Web, Mobile Apps, home devices and automotives
Registered user
- Storage of created radio stations for use across all channels
- 24-hr free trial of subscription benefits
Subscriber at $3.99/month or $36/year for individual consumer
- No Advertisement
- More bandwidth for potential better quality
- Changeable Website background graphics ("Skin")
- Less interruption from Pandora announcements
Differentiations
Pandora.com differentiates from its competition with technology and its multi-platform
delivery capabilities.
Delivery Platform for Home & Automobile
Pandora.com has integrated its API with over 23 major automobile brands, and over 450
home video-audio devices such as Ruku for IPTV, and connected Blu-Ray players.
Registered users can create radio stations that they can play from the web site, mobile
app, IPTV, and possibility in their automobiles, and can truly bring their favorite music
with them.
Business Solution
For business such as restaurants to play music in public locations, a commercial music
licenses is required by law. Pandora provides a set-top-box solution for a $25 monthly
subscription.
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Music Genome Project
Pandora.com continuously classify contents title by title based on their proprietary
methods, which they call the music genome project. The result is used to improve title
and genre searches, and the ability to automatically select titles that you might like in
your radio station.
Sources of Revenue for FY 2012
Based on the January 2012 10-K report, Pandora.com monetizes the listening hours with
advertisement incomes which constitute 87% of its total revenue.
Subscription (Individual, and Business) $34M
Advertisement (Audio, Display, and Video) $240M
Total $274M (99% growth Y/Y)
Market Share
Pandora.com announced in the same FY2012 10-K report that it had 125 million
registered users, and had a 69.8% market share of listening among the top 20
internet radio services in the U.S. However, this represented only 5.55% market share of
all US radio listening.
Audience Demographics
The current data obtained from public domain indicate that the typical users of Pandora
are young African-American and young Hispanic with annual income under $50K and
with college or less than college education.
Demographics Data Data Sources
Age Primarily <18, & 18-24; Some 25- Alexa.com,
34 Quantcast.com
Gender Female 52%, Male 48% Quantcast.com
Has Children 51% yes Quantcast.com
Education No/Some College, College Quantcast.com
Location At school, and work Alexa.com
Geography 96% US Alexa.com
Ethnicity Primarily African-American, Quantcast.com
Hispanic
Incomes Primarily under $50K Quantcast.com
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5. Market Analysis of Pandora.com 5
Currently, the data for automobile users are not available from the data sources above.
Pandora.com may have actual data for the persona of those users, and could use them for
analysis.
Web Analytics
Alexa.com shows the average time on site is only 4 minutes and 19 seconds and
the bounce rate is at 57% for October 2012. This means 57% of the visitors leaves
without getting engaged and went to other sites immediately. For those who stay tune,
listen on average about two songs.
Quantcast.com shows that the number of monthly active users peaked to 1.7
million in the same month. Insidefacebook.com shows that the daily active users in
January 2013 has fallen back to 967 thousand.
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With assumption that the analytics include the data both Web and mobile users from all
channels, the derived retention rate is about 1.4%. This means that indicate a problem in
engaging the 125 million registered users and attracting them to return.
Conversion Analysis
By conducting a User Touch-Point analysis on how Pandora.com interact with its users at the
various stages of conversion, I found the following issues.
ACQUISITION STAGE
Front page design distracts from main business goal
The main business objective is to get the user to start creating a radio station and starts
experiencing the service. However, in the home page, the hyperlinks under the text
entry box are distraction. You are detracted to explore the help menu instead.
Suggestion: Education about the other distribution channels is better off done in a
different page.
Distraction from
conversion
Conversion occurs
when user creates a
station to play any
music.
Distraction from
conversion
Author: Dixon Lau
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First impression has problem
I entered Michael Jackson and it created for me a new radio station screen. However,
first song played by the radio station was from Sarah McLachlan. Once a song started to
play, there was no easy way switch to a different song or create a different radio station.
This initial experience was discouraging me from experiencing further with
the service.
Suggestion: Pandora.com should serious consider improving the Web user experience.
I entered Michael
Jackson to create a new
station
But got Sarah McLachlan
instead!?
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ACTIVATION STAGE
Registration requires unnecessary field
While I stayed longer, advertisements started to appear. But these ads were not
relevant to me or to the music I was listening to. To investigate further, I
activated my account by registering with my email address. It asked for my birth year
which I think was unusual. But even with that information, non-contextual
advertisements were still streaming to me.
Suggestion: Not having advertisement is not necessary a preference for every
individual users. But have the ability to turn ads off and on, or receiving advertisement
relevant to my choices may be more valuable than just having no ads at all.
Got Match.com ads!
But not my types!
Register with your age?
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Free trial requires no additional user info
As a registered user, I could activate a 24-hour free trial without entering any
credit card information. This made withdrawing very easy. In fact, it was automatic.
Suggestion: When Pandora.com is able to provide more significant benefits to
subscription users, they should consider changing the trial process to one that requires
credit card information upfront.
REVENUE STAGE
Need more significant benefits to subscribe.
The better audio quality is not detectable over the headphones connected to the
computer. The Ads window is simply blanked out and there is no use of the free space
for any better visual experience.
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Suggestions: registered users should have more benefits, and subscribers should have
much more valuable features than registered users. For example, subscriber should be
able to have more control over the titles and sequence within the playlists, and have
more capabilities to find titles to add to their playlist.
Lack variety of contents to compete with traditional radio
Traditional radio has a variety of contents, but Pandora.com is currently restricted
to songs and comedies only. This limitation is an obvious reason for the slow
adoption of internet radio.
Suggestion: To expand its market share into the traditional radio audiences,
Pandora.com should expand its genre to include podcast for more types of contents.
This will attract new audience as well.
Lack gamification to encourage repeated listening
Traditional radio stations use game to encourage audience tune in. For example, you
play by calling in when a certain "song of the day" is played the next 2 hours, and the
first caller gets picked up receives a reward such as tickets to a concert.
Suggestion: Pandora.com should adopt or create similar games to give incentives to its
users to login.
Lack video contents to compete with new sites
Music lovers naturally enjoy music video more if they are not restricted to
listening over the head-phone in the office or school environment. The entertainment
value of Pandora on IPTV is low when compare to other IPTV channels that deliver
movies.
Competitors such as last.fm and vevo.com are delivering music video contents in a
similar fashion. Their platforms deliver to the Web, Mobile Apps and IP TV with more
updated user interface design. These sites already have more monthly active
users than Pandora.com and cut into the Pandora.com users base who wants more
than just listening to music.
Suggestion: Pandora.com should serious consider adding or merging music video to its
contents to maximum the use of the home entertainment devices and mobile devices.
There should be more than just delivering musics
The opportunity of using Pandora to serve and promote the music industry
is largely untapped. Musician interview, entertainment news about new album
releases, and awards are examples of contents producing activities to promote
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relationship and loyalty from both musicians and their fans. This will also facilitate
licensing of new contents in the future.
Suggestion: Pandora.com should consider expanding its service by serving additional
needs for listeners as well as those for the contents providers. This is where product
management should investigate what these communities like and wants, and decide on
what enhancements are the most beneficial and profitable.
Cancelation policy can be more explicit
Upgrade screen for credit card information is straight forward. But there is no
explanation of whether the monthly charge is pro-rated or not upon
cancelation. To some potential subscriber, this could be a deal breaker especially if
they prefer a yearly subscription.
Suggestion: add clarity to the writing to show a better refund policy.
REFERRAL STAGE
Effectiveness of the social network of Pandora users
The analytics about how much more listening would a user do because he/she finds out
what other users in Pandora are listening. The users may stay longer in the web site
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while reading comments about a song they are listening. But whether this is a typical
user behavior is questionable.
Suggestion: The web analytics may not reveal this information and actual focus group
experiments may be necessary. The traditional voting of songs to be top 10 or today's
hits is a good standard for promotion of more fan listening and more loyalty from
content providers. If Pandora.com should consider recommending users to listen to the
hits and top 10 radios in its display or audio ads.
Conclusion
Based on Web analytics and the Conversion Analysis in the above, Pandora.com must improve
its user touch-points in its website, and further improve the value of its services in order to
sustain competitions.
Author: Dixon Lau
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Appendix 1 - SWOT Analysis Summary
Strength Threat
Ability to deliver its services Other site such as Vevo.com and
beyond Website, Mobile Apps and last.fm are already delivering music
IP TV by having integrated with Car videos (but not just audio) over
Audios, Home electronics. Website, Mobile Apps and IP TV,
and have gain more monthly active
Ability to deliver to business users than Pandora.com.
solution.
Any change in the regulation for
The concept of radio station statuary license that currently
provides a means for user to collect enable them to reproduce music
music for free instead of purchasing online may impact the viability of
download from iTune or Amazon Pandora and its competitors.
Contents expanded to include Strong competitions from well
comedy and concerts. established companies such as
Google for advertisement business,
Provide a platform for display ads, and Sirius XM for mobile listeners,
audio ads, and video ads to as well as other internet radio
automobile drivers. providers for listeners.
Traditional radio audience is still
slowly adopting to Internet radio.
Weakness Opportunity
Provide services on IPTV but Contents owners such as musicians,
without delivery of music video. song writers, and singers
promotion can provide additional
Retention of registered users and to value which is largely untapped.
capture longer listening durations.
Using gamification to attract
Website is becoming outdated and repeated users for growing the
need new values to compete for listening hours and corresponding
users. advertisement timeslots.
Expand services to deliver music
video and other new contents.
Merger and acquisition of
competitors is expected to be the
on-going trend in this new industry.
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Appendix 2 - Conversion Analysis Summary
Conversion Issues
Stage
Acquisition Pandora.com front page has too many links which distract user from the
main purpose of the site. It should be redesign to prove attractiveness.
Software bug prevented the song of the selected artist from playing right
after a radio station is created. This impacts first impression and
contribute to the high bounce rate.
Activation Registration requires entering the birth year which is unnecessary and
could deter registration. The site seems to use the user's age to
determine whether single or dating ads. But this could be offensive to
some users.
Revenue Subscription benefits are not differentiating enough to make
subscription worthwhile. The improved sound quality is not detectible.
The turning off of ads is not a great value but counterproductive to the
business since the majority of the revenue is based on advertisement.
Retention Contents limited to audio for music and comedy. Other competitors
have already started with music video and podcast of a variety of
contents to compete better with traditional radio.
Lack of gamification to encourage repeated visitors.
Referral It is not evident that the users' votes are used to determine the top hits.
The top hits are not advertized in the display ads to encourage more
listening.
Lack of programming to promote content providers which other
competing sites have already done to add value to attract repeated
audiences.
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Appendix 3 - Key Customer Engagement Metrics
Metrics Data/Public Domain Analysis
Registered Users 125 million mainly in USA Leading in terms of awareness in
/ 2012 10-K USA
Bounce rate 57% About half the visitors switch away
as soon as they come to the site.
Average time on site 4 min. 19 sec. Users switch away after about 2
songs.
Monthly Active Users Peak to 1.7 million in 2012 Retention rate is 1.4% of registered
users. Extremely low.
Opportunities to improve user
conversion.
Author: Dixon Lau
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