THE PANDORA MYTH

“When Pandora plays Your message works.” “Reach the masses and

the niches.”

“Get an encore-worthyROI.” “Personalized listening

and precision targeting.”“Reaching the right audience at the right time.”

Advertising.Pandora.com

Evolution of the Audio Consumer & Advertiser

• Advances in tech expands listeners options

• Expansion of bandwidth and wireless services

• Advances in smartphone tech mobilize the internet

• As consumer options grow, advertiser’s options grow

• Seamless in dash experience

Monthly Online Radio Audience

21%

27% 27%

34%

39%

45%47%

52%54%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Edison Research Infinite Dial Study/Online Radio = Listening to AM/FM radio stations online and/or listening to streamed audio content available only the internet

Base: Total Population 12+

Estimated

124Million

Up

45%

AM/FM Local

Stations’streaming

PurePlay

webcasters like

Pandora

Up

18%

Source:

Proxi Digital Audio Landscape: The Major Streamers

Triton monthly Webcast Metrics Top 20. AAS, M-F 6A-8P Domestic . % change August 2012 vs. August 2013

Internet Audio Usage is Growing

•109 million users

•AM/FM live radio streams

•Delivering Local Curated

Programming

AM/FM Publishers Continue Impressive Growth VS. Pure Play

7.11%

0.59%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

AM/FM Streams Pure Play

January 2014 Average Active Sessions (AAS) Monday-Sunday 6a-Mid

P’s ad based strategy has been successful

• P has hired great radio sales people

• With strong radio client relationships

“We are targeting radio ad dollars”

-Joe Kennedy

P’s ad based strategy has been successful

• Converted AAS to AQH

• Backend ease of purchase

“We can offer SMB’s a better return on investment in

terms of foot traffic & brand awareness.”

- John Trimble

What Your Buyers Are Saying About “P”?

“Pandora provides demographic and geographic targeting”

“Easier to buy with a conversion of AAS to AQH”

“Affordable and trackable”

“Pandora is the #1 station in the Market”

“Good click through rates”

Pandora’s Progression

$283.00

$423.40

$598.60

$801.30

Pandora Revenues

2012 2013 2014 2015 $0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

Web Ads Ad Insertion Subscriptions

Product Breakdown

2012 2013 2014 2015

Source: J.P. Morgan based on company reports

Pandora’s Net Loss by Year

-45

-40

-35

-30

-25

-20

-15

-10

-5

02010 2011 2012 2013

- $1.8M

- $1.6M

- $26.7M

- $40M

Pandora’s Market Valuation

0

1

2

3

4

5

6

7

82011 2012 2013

$2B $1.75B

$7.09B

$5.05B

2014

SWOT Analysis of Pandora

Strengths

AccessibilityFreeLimited Interruptions vs. terrestrialFirst to market in pure play spaceStrong sales forceMore format varietyMore variety inside each format

Opportunities

Lower royalty fees 175M registered users75M monthly active usersImproving registration accuracy Ask mobile users for location

Weaknesses

RegistrationPromptingIP address trackingIncreased interruptionsLimited growthInaccurate self serving metricsLimited playlistUnsustainable business modelIncreased competitionLimited song skipping

Threats

Terrestrial radio push backIncreased competition in pure playInaccurate data on usersElevated commercial loadExpensive overhead

Registration

• Privacy Concerns = Flawed Reg. Data

• Almost 9 in 10 users provide false or incomplete information

• No prompting to update profile data

• This creates issues with demo, gender, zip code, and qualitative accuracy

• Reliability

Source: Blue Ink 88% of people who registered on the internet provide false or incomplete information citing privacy issues.

“With a 100% registered user base, there is no guesswork.”- Advertising.Pandora.com

Are You Still Listening?

• Prompting occurs 1x an hour on desktop (20% of users)

• Prompting rarely occurs/never occurs on a mobile device

• Inaccurate hours spent

• Gross impressions delivery

“Generates precise ratings based on actual listening.”- Advertising.Pandora.com

Where are you?

• Desktop IP addresses can be INACCURATE

• Reliability of registration process IS INACCURATE

• Users rarely change cell phone #’s or area codes when they move

• Cell data is inaccurate

AT&T = NORTHERN CALIFORNIA

SPRINT = KANSAS CITY

VERIZON = SOUTHERN CALIFORNIA

• Cell number portability has made area code irrelevant

“Pandora’s local targeting means that no impression is wasted.”- Advertising.Pandora.com

P’s Users Frustration Grows

0% 10% 20% 30% 40% 50%

Not enough music discovery

Miss hearing people

Gets boring

Too predictable

Too many bad songs

No local information

Can't skip enough songs

Commercials are annoying201420132012

Jacobs Tech Survey 10

Monthly Active Users by Quarter

49 53 5663 67 70 71 73 73

0

10

20

30

40

50

60

70

80

2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1

Pandora Financials

0

50

100

150

200

250

2011Q1

Q2 Q3 Q4 2012Q1

Q2 Q3 Q4 2013Q1

Q2 Q3 Q4

Revenue

Expenses

Investors Beware

• Unsustainable business model• Overall registered users are down• Monthly user base has flattened• Listener experience has worsened• Limited playlist• More competitors• Royalties increasing• User mobile data issues