Memo
To:
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Senior Management
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From:
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Allison DeLorenzo
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Date:
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April 29, 2014
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Re:
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Opening Pandora's Box
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This memo is prepared in response to the presentation held on Tuesday, April 29, 2014 with the consultant team, T.A.N.K Consultants, regarding how Pandora can increase revenue and capital, expand the customer base and continue leveraging the first mover advantage with the ultimate goal of an IPO. At Pandora's current growth rate, the company will be out of cash by the end of 2008. To compound the cash flow problem, Pandora is also facing a serious threat on the licensing costs. As stated in the presentation, Pandora had three plausible alternatives: acquisition by another company, pedal to the medal or pull back on growth levers and raise enough capital to reach an exit in the market.
After analyzing the decision criteria stemming from Pandora's need to balance the interests of the venture capitalist investors and the core values of the company, it is apparent that the company should chose pedal to the metal. There were numerous options discussed as to how additional revenue can be generated. For example, the company can foster strategic relationships with complimenting music companies. Pandora can offer links to concerts, promote tour dates and other similar sounding bands on its website. Pandora can charge a premium for hosting these links which in turn will create revenues.
The idea of leveraging independent unknown artists was discussed. Pandora can charge unknown artists to play their music on its website. Pandora will not only benefit from the charge per play but also through the viral marketing that the bands will generate on their own subsequently adding to Pandora's customer base.
Another avenue that should be consider is expanding the ad space for the free subscription users. Since 93% of revenue is generated from advertising, increasing the ad space available on the website can lead to additional revenue. This should not clutter the website or turn customers/advertisers off but this option should be tested.
Lastly, Pandora should explore the option of a premium subscription for exclusive content. This includes the ability to create playlists, listen to specific artists and access to members-only channels.
The company is the first of its kind and has been able to grow extremely fast based solely on word of mouth marketing. These four revenue generating tactics can lead to a positive cash flow if implemented correctly. I believe this recommendation will address the need to generate additional capital while staying true to the core values of Pandora.
After analyzing the decision criteria stemming from Pandora's need to balance the interests of the venture capitalist investors and the core values of the company, it is apparent that the company should chose pedal to the metal. There were numerous options discussed as to how additional revenue can be generated. For example, the company can foster strategic relationships with complimenting music companies. Pandora can offer links to concerts, promote tour dates and other similar sounding bands on its website. Pandora can charge a premium for hosting these links which in turn will create revenues.
The idea of leveraging independent unknown artists was discussed. Pandora can charge unknown artists to play their music on its website. Pandora will not only benefit from the charge per play but also through the viral marketing that the bands will generate on their own subsequently adding to Pandora's customer base.
Another avenue that should be consider is expanding the ad space for the free subscription users. Since 93% of revenue is generated from advertising, increasing the ad space available on the website can lead to additional revenue. This should not clutter the website or turn customers/advertisers off but this option should be tested.
Lastly, Pandora should explore the option of a premium subscription for exclusive content. This includes the ability to create playlists, listen to specific artists and access to members-only channels.
The company is the first of its kind and has been able to grow extremely fast based solely on word of mouth marketing. These four revenue generating tactics can lead to a positive cash flow if implemented correctly. I believe this recommendation will address the need to generate additional capital while staying true to the core values of Pandora.
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