McAndrews: 'Meaningful' Investments To Grow Listener Base

Pandora's listening hours -- which provide the inventory for advertising it sells -- disappointed some analysts. 

Total listener hours rose 25% to 4.99 billion for the third quarter. Mark Mahaney, at RBC Capital Markets, had expected 5.06 billion.

In Thursday's earnings conference call with analysts, CEO Brian McAndrews addressed what he called "slowing growth in monthly active users."

"In an increasingly competitive environment, driving monthly active user growth will be more challenging, particularly given our already significant market position. As a result, looking ahead, expecting monthly active user growth at historic levels is not realistic. 

That said, we continue to believe in the long-term opportunity to grow our audience in excess of 100 million monthly active users in the U.S., as growing smartphone penetration, connected autos and other devices accelerates the transition of the 250 million weekly U.S. radio listeners to internet radio. 

The significant investments we have made in the quality of our service, the development of our audience and the effectiveness of our monetization engine, enable us to address this opportunity from a position of strength. 

And we have put ourselves in the fortunate position to be able to make meaningful additional investments to responsibly and profitably grow our loyal user base. And you will see us make more of these investments in our product, our distribution and our marketing. 

It is also worth noting that, in our view, monthly active users is not the best measure of the true growth in Pandora’s audience as it does not speak to the success in growing the loyalty of our users. 

As I mentioned a moment ago, our active users are increasingly loyal and engaged with overall listening hours growing 25% and hours per active user per month increasing 18% in the last year. The average Pandora listener now uses Pandora for almost 10 days per month, almost three quarters of a day more than same time a year ago. 

This growth in loyalty has helped drive strong double-digit growth in active daily users on Pandora, which are now over 25 million."