Beware Of New Media Stocks That Haven't Changed The Business Model

When listening to the Q112 earnings call this week for Pandora Media (P), it really struck me that this company was mostly built on the old business model. Sure, companies such as Pandora, Angie's List (ANGI), and Yelp (YELP) have new relevant services, but none of them have veered much from the labor intensive model of hiring local sales reps to find advertisers.

The Pandora earnings call had one very shocking number. The company had hired 79% more sales reps than last year. Sure, the company told a great sales story of how a local car dealership found advertising on its services more compelling than terrestrial music channels since the ads could be more targeted. When, though, will these companies attract advertisers without a sales rep and large marketing budgets?

Developing a business model attracting a bunch of costly users is nice, but how about attracting paying subscribers? Sure Pandora may attract millions of users, but the real issue for media companies, including even Facebook (FB) and Twitter, is that competition for advertiser dollars is fierce.

Read the full article at Seeking Alpha.

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