SAN FRANCISCO — Pandora Media Inc. chief executive officer Joe Kennedy said the streaming-radio service isn't finding enough advertisers to buy all the space created by mobile phone users, underscoring concerns about its ability to convert popularity into revenue.
"The sheer level of aggregate advertiser demand for mobile is limited," said Kennedy, 51. "Pandora is one of the top five players in mobile, so we generate a lot of inventory and are ahead on where aggregate demand is for mobile advertising."
The online radio company, which held its initial public offering last month, is getting most of its growth from users of mobile devices, such as smart phones and tablet computers. Sixty percent of Pandora listening comes from the mobile market, up from just 12 percent two years ago, according to the company.
Pandora isn't profitable, with losses of $92 million since 2000, the Oakland, Calif., company said earlier this year. Pandora's costs continue to grow because of higher licensing fees for the rights to music. Increasing mobile ad sales will be needed to help offset those expenses, said Rich Tullo, an analyst at Albert Fried & Co. in New York.
When Pandora's stock made its June 15 debut on the New York Stock Exchange, it joined a wave of Internet businesses going public this year.
The company generated $119.3 million last year from advertising, or 87 percent of its sales, and $18.4 million from subscriptions to an ad-free version of the service and other revenue sources.
In all, marketers will spend $2.55 billion on mobile ads in 2014, according to New York-based research firm EMarketer Inc. That's more than double the $1.1 billion in spending this year.
While Pandora already competes with Sirius XM Radio, a subscription-based satellite radio service, it may face a bigger challenge from Apple and other established technology companies, which are investing in their own online music offerings.
Much of the growth from mobile advertising will come from small businesses, said Rich Greenfield, an analyst at BTIG in New York. Pandora may not be equipped to reach those smaller, local businesses, he said.