Pandora 2012 Annual Report Download - page 28

Table of Contents
We also compete for listeners on the basis of our presence and visibility as compared with other businesses and software that deliver audio and other
content through the internet, mobile devices and consumer products. We face significant competition for listeners from companies promoting their own digital
music and content online or through application stores, including several large, well-funded and seasoned participants in the digital media market. Search
engines, such as Google, and mobile device application stores, such as the iTunes Store, rank responses to search queries based on the popularity of a website
or mobile application, as well as other factors that are outside of our control. Additionally, mobile device application stores often offer users the ability to
browse applications by various criteria, such as the number of downloads in a given time period, the length of time since a mobile app was released or
updated, or the category in which the application is placed. The websites and mobile applications of our competitors may rank higher than our website and our
Pandora app, and our app may be difficult to locate in mobile device application stores, which could draw potential listeners away from our service and
toward those of our competitors. In addition, our competitors' products may be pre-loaded into consumer electronics products or automobiles, creating an
initial visibility advantage. If we are unable to compete successfully for listeners against other digital media providers by maintaining and increasing our
presence and visibility online, in application stores and in consumer electronics products and automobiles, our listener hours may fail to increase as expected
or decline and our advertising sales may suffer.
To compete effectively, we must continue to invest significant resources in the development of our service to enhance the user experience of our
listeners. There can be no assurance that we will be able to compete successfully for listeners in the future against existing or new competitors, and failure to
do so could result in loss of existing or potential listeners, reduced revenue, increased marketing expenses or diminished brand strength, any of which could
harm our business.
We compete for advertising spending with other content providers.
We compete for a share of advertisers' overall marketing budgets with other content providers on a variety of factors including perceived return on
investment, effectiveness and relevance of our advertising products, pricing structure and ability to deliver large volumes or precise types of ads to targeted
demographics.
We face significant competition for advertising dollars from terrestrial and, to a lesser extent, satellite radio providers. As many of the advertisers we
target have traditionally advertised on terrestrial radio and have less experience with internet radio providers, they may be reluctant to spend for advertising on
traditional computers, mobile or other connected device platforms. In addition, terrestrial radio providers as well as other traditional media companies in
television and print, such as broadcast television networks such as ABC, CBS, FOX and NBC, cable television channel providers, national newspapers such
as the New York Times and the Wall Street Journal and some regional newspapers, enjoy a number of competitive advantages over us in attracting
advertisers, including large established audiences, longer operating histories, greater brand recognition and a growing presence on the internet.
Although advertisers are allocating an increasing amount of their overall marketing budgets to web and mobile-based ads, such spending lags behind
growth in internet and mobile usage, and the market for online and mobile advertising is intensely competitive. As a result, we also compete for advertisers
with a range of internet companies, including major internet portals, search engine companies and social media sites. Large internet companies with greater
brand recognition, such as Facebook, Google, MSN and Yahoo! have significant numbers of direct sales personnel and substantial proprietary advertising
inventory and web traffic that provide a significant competitive advantage and have a significant impact on pricing for internet advertising and web traffic.
The trend toward consolidation among online marketing and media companies may also affect pricing and availability of advertising inventory.
In order to compete successfully for advertisers against new and existing competitors, we must continue to invest resources in developing and
diversifying our advertisement platform, harnessing listener data and ultimately proving the effectiveness and relevance of our advertising products. Failure to
compete successfully against our current or future competitors could result in loss of current or potential advertisers or a reduced share of our advertisers'
overall marketing budget, which could adversely affect our pricing and margins, lower our revenue, increase our research and development and marketing
expenses and prevent us from achieving or maintaining profitability.
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