I just got off the phone with Pandora CEO Joe Kennedy, moments after the Internet radio company reported record, better than expected earnings.
He stressed that Pandora's focus on the radio market is working, and the slew of competition from everyone from Spotify to Google isn't hurting one bit.
Pandora's stock dipped after hours, ahead of its earnings call — it's down more than 30 percent since its June IPO.
Why? One reason: costs continue to rise — the cost of revenue more than doubled from a year ago, and operating income declined from the prior quarter.
Kennedy calls it a "great quarter in every way," which he attributes to record adoption of multi-platform advertising solutions. What does that mean? Marketers are buying ads for the web and mobile together — and now mobile constitutes roughly half of ad revenue.
There are a slew of new companies in the digital music space — like Spotify, which integrated into Facebook in September, and Google , which just last week launched an MP3 store. But Kennedy says they're having no impact, because they simply aren't "radio," like Pandora is. Kennedy described Pandora has having "tremendous moats to competition."
The company benefits from being embedded into six major automakers (Honda was the sixth, added last week) and numerous mobile devices and Internet-connected TVs.
In Pandora's fiscal third quarter 2012 the company reported $75 million in revenue, that's four million more than Wall Street expected, and up from a loss of $1.77 million a year ago. Earnings — excluding one-time items — came in at 2 cents per share, while analysts had expected a loss. The company raised its guidance for the fourth quarter and full year, and grew its "listener hours" 104 percent year-over-year.
And since the company continuously emphasizes that it's playing for radio market share, not downloads, the company reported that its share of radio listening more than doubled over the past year to 4.3 percent.
We'll be listening to the conference call for more on the cost of Pandora's content, which rises along with listening hours.
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