Pandora 2016 Annual Report Download - page 56

In 2016, we expect to substantially increase our investments in our operations to drive anticipated future growth. One of
our key objectives is to be the most powerful music discovery platform, which we believe will strengthen our brand and help us
to convince advertisers to allocate spending towards our ad products. As such, a central focus is adding, retaining and engaging
listeners to build market share and grow our listener hours. As our business has begun to mature, our revenue growth has begun
to exceed the growth in our listener hours. However, we expect to incur increasing annual net losses in the near term because
our current strategy is to leverage improvements in gross profit by investing in broadening distribution channels and developing
innovative and scalable products. These investments are intended to drive further growth in our business through both increased
listener hours and monetization of those hours, and as a result we are targeting gradual improvements in gross profit over time.
Our planned reinvestment of the resulting incremental gross profit will continue to depress the growth of our profitability.
We completed four acquisitions in 2015, and we may continue to pursue acquisitions as a means of expanding our
product offerings and technology assets. Our completed and potential acquisitions require extensive management time and
capital resources to complete and integrate, and there is no assurance that we will ultimately realize the expected benefits of our
acquisitions.
Key Metrics
€
The below key metrics do not include Ticketfly amounts unless otherwise specifically stated.
Listener Hours
We track listener hours because it is a key indicator of the growth of our business. Beginning with the listener hours
disclosed in this annual report, we are also including listener hours related to our non-radio content offerings in the definition of
listener hours. These offerings include non-music content such as podcasts, as well as custom music content such as Pandora
Premiers and artist mixtapes. Historically, listener hours related to non-radio content represented a negligible number of listener
hours. Including non-radio content in the listener hours we have previously reported for 2013, 2014 and 2015 would not have
changed the reported listener hours for any such period. We calculate listener hours based on the total bytes served for each
track that is requested and served from our servers, as measured by our internal analytics systems, whether or not a listener
listens to the entire track. For non-music content such as podcasts, episodes are divided into approximately track-length parts,
which are treated as tracks under this definition. To the extent that third-party measurements of listener hours are not calculated
using a similar server-based approach, the third-party measurements may differ from our measurements.
The table below sets forth our total listener hours for the eleven months ended December 31, 2013 and the twelve months
ended December€31, 2014 and 2015.
Eleven Months Ended€
€December 31,
Twelve Months Ended€
€December 31,
2013 2014 2015
(in billions)
Listener hours 15.31 20.03 21.11
Active Users
We track the number of active users as an additional indicator of the breadth of audience we are reaching at a given time.
We define active users as the number of distinct registered users, including subscribers that have requested audio from our
servers within the trailing 30 days to the end of the final calendar month of the period. The number of active users may
overstate the number of unique individuals who actively use our service within a month as one individual may register for, and
use, multiple accounts. Beginning with the active users disclosed in this annual report, we are also including active users who
only request non-radio content offerings in the definition of active users. Including users who only request non-radio content in
the calculation of active users would not have materially changed the reported active users for 2013, 2014 or 2015.
The table below sets forth our total active users as of€December€31, 2014 and 2015.
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