Pandora Makes no Profit but has Filed IPO

Pandora is a very popular online radio station and has been around for a while. The company does very well in terms of subscribers and has expanded their product across many mobile platforms. The problem is the company has made no profit.  According to “Pandora: The money-losing music machine” by Dan Mitchell of CNN Money/ Fortune.com, the company had lost of $6.8 million in the most recent quarter and $3 million the quarter before that. Despite the continual losses, Pandora has filed an IPO and might debut in the market tomorrow.

The reason Pandora cannot make profit is they lose money every time the product is used.  The article explains the problem as:

“The trouble is the music royalties Pandora has to pay to music labels every time it streams a song. Those rates are higher than the advertising revenue Pandora collects. Every transaction is a money-loser. In its IPO filing, the company says it will continue to lose money through ‘at least’ fiscal 2012. But there’s nothing to indicate what might change in that time to turn around its current losses.”

People are Starting to Realize LinkedIn was a Bubble

The first day of LinkedIn’s debut was filled with much excitement and media fanfare. Even though valued at $45-a-share, the stock hit an amazing high of $122.70. But there were some people, like myself, not so excited. I felt that LinkedIn could not be valued so highly unless their was a plan to validate the value. LinkedIn is a great professional social media tool and makes it money from advertising but what else could the company do beyond maintaining current operations and software updates, especially with millions more dollars, which is what the high stock numbers equates to. That day, I watched “Mad Money” on CNBC. If you’re familiar with the show, you know Jim Cramer, the host, is very animated, aided by a colorful set and a sound effect board. The beginning segment of the show was without the extras and had a serious tone. Why? Because Jim Cramer had experienced the dot-com bubble and survived. He clearly stated that LinkedIn acted and smelled like a bubble; the company was good but not worth its value; and a lot of the spectacle and cap on shares on the initial day were tools to hype the stock and thus cause a buying frenzy. He was serious because despite having the dot-com bubble as a means of reference of past mistakes, we were repeating the past. Also, the warnings of a bubble have been floating the internet for some time (I wrote a post on this months ago); the “bubble what?” ignorance of LinkedIn’s opening was sad. Now, the stock has dropped significantly and both the current price and academia are stating, for sure, that the stock was a bubble.

Entrepreneur.com: Their Guide to Your Startup - Days 5 & 6

I’m back with another update on Entrepreneur.com’s “2 Weeks to Startup” Series. I have previously written about Days 1 to 4, which can be found in post archives. Also, my posts are quick summaries; take the time to go to the website and read the articles. This post will be about Day 5 and 6.

Two Weeks to Startup: Day 5: Find Financing

As an Entrepreneur, you will need money. Even if you run a non-profit, money is needed to cover costs. The article mentions many ways to find financing:

Microloans: “private and SBA-backed agencies make loans from a few hundred dollars to $250,000”

Crowdfunding: “a way of networking with people online willing to invest usually smalls amounts of money…”

Niche or specialty loan: loans given to certain groups such as minorities, women, students, etc. or certain types of business

Venture or angel funding: great ideas can get large amounts of funding but in exchange, for a portion of the company. The process for venture or angel funding can be a long process and as the article points out, needs a well-put-together business plan. I learned a little about the process from watching the reality show “Start-up Junkies”.

Take the time to search online. One of the websites I visit for quick business news and resources is theCashflow.com. The website is about helping small urban entrepreneurs. On the website, the creators offer $10,000 funding to businesses. It is an application process, and the site is filled with stories on funded companies. There might be other similar sites or major business sites that have their own funding program.

Two Weeks to Startup: Day 6. Name Your Business

The name is very important. The name identifies your business and is your brand. But sometimes we like names that might be taken. The article advises to take some time to search through public resources to be sure the prospective name of your company is not taken. Also, search the website. Every time I think of my future domain name, I put it in the address bar or Google it. The article also offers a link to a trademark database.

The next step is to hire a trademark professional to help ease the process of trade marking your name and then, the next step is to determine the type of business you will have, for tax purposes. For all of the paperwork, the article states, your city should have a business resource center.

As stated read the articles for more information and for links to other similar articles on the website.

Skype: Moving On to More Markets

 Skype. It is very popular and well known. Many friends and family members “skype” across long distances. Oprah even uses it now to talk to Guests not present on her set. Skype users who talk to other Skype users pay nothing to use the service. But if Skype users contacted non-users, Skype gets paid. According to “Skype Looks for a Spot in Offices and Cellphones” by Verne G. Kopytoff, Skype wants more paid users, the wireless industry, and a piece of the business communications industry.

After seven years, being brought and sold by EBay, Skype has a new CEO, Tony Bates. His previous job was “[leading] [Cisco Systems] enterprise, commercial and small business division”. His plans for Skype are ambitious. The company only has 6.5% of consumers paying. Not a very appealing outlook for investors as the company has filed for public offering. Here is the gist of the plan presented in the article.  

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Tech Bubble of the 2000s

A few days ago, I read “As Technology Deal Booms, the Talk Turns to Bubbles” by Heidi N. Moore. Within the article, she reported that most within the tech industry consider the current era a bubble. This bubble has been crafted by the rise in social media integration, ad placement on such social media, and smart phone networks. Technology deals have peaked through the roof, and venture capitalists are seeking out companies that take advantage of this bubble. The article goes on to report that many including VC John Doerr consider this bubble “a third wave of innovation” whereby “ the previous two waves were the PC revolution…and the internet boom”.

Today, I read “A Business Creator Sees Big Returns from Social Media” by Darren Dahl. The article profiled Eric Lefkofsky, an entrepreneur with a worth of an estimated $750 million. He has made the bulk of his wealth from starting up businesses that take advantage of advanced accessible technology, such as Groupon. The most important point of the article is Lefkofsky just started Lightbank, an investment firm which “invests only in early stage technology companies that are built around social media”.  The rest of the article is a short interview whereby Lefkofsky states the belief that all businesses should be using social media and using it well.

Social media has crafted the flow of money. I agree with others in the tech industry that we are living in another bubble. Almost all new companies spawn their internet alter egos and clone themselves using social media. This has led to advertising doing the same thing. And now, investors are seeking social media focused companies. All the money is flowing down this river.

Its not too much to expect businesses to advance using social media. The other night, inspired by my boyfriend playing “Call of Duty: Black Ops”, I explored the game’s twitter page only to find the page to be subpar. I was disappointed. "Call of Duty: Black Ops" is an international multiplayer communal game and should be using social media frequently to advance that community. This is my point. Social Media should be used where it makes sense.

While Lightbank is a great idea capitalizing on the moment, it worries me that technology might be in a moment. A moment whereby any and everyone is creating apps to make money from ads and everyone is connecting their businesses to social media to keep up with theJones, Inc. Hopefully, (not to be sarcastic) this bubble will not burst.  Let’s not forget, the dot-com bubble and burst of the 90s. And if it does burst, most of the businesses that will survive are the ones who used social media as an aspect of their business but not as their entire business.

Note: clearly, a few social media focused businesses would survive a social media bubble burst, which is why I stated most and not all businesses.