2.5 Million Reasons to Like Pandora

Pandora is turning more of its freeloaders into paying music fans.

The leading music streaming service posted blowout quarterly results on Thursday night, but the cherry on top of its great report is that its subscription revenue is once again growing faster than online ad revenue.

The number of subscribers to its premium Pandora One platform soared 114% over the past year to top 2.5 million users. A whopping 700,000 have joined over the past three months alone!

This still means that more than 96% of its active listeners aren't paying a dime, but it's a start.

The crowd wants an encore
It was a strong quarter.

Adjusted revenue rose 58% to $128.5 million, ahead of the $123.8 million that Wall Street was targeting. Pandora's loss of $0.10 a share isn't applause-worthy, but it did match the deficit that analysts were expecting.

Shares of Pandora had hit a fresh 52-week high on Thursday ahead of the report. It's been a good week for Pandora.

Earlier in the week it announced that it would be teaming up with T-Mobile to sponsor Pandora Premieres, a new channel that features album releases before they hit the market. It's a great way to woo music labels to help promote their upcoming retail releases, but it's also just neat to see Pandora teaming up with the country's fourth-largest mobile carrier on a branding opportunity. Creating sponsored channel opportunities is one more way for Pandora to make money as it claws its way back to profitability.

Pandora also revealed that it's making it easier for listeners to share their music through Facebook . Pandora is one of the many streaming sites that allow users to divulge what they're listening to with their Facebook friends, but a new timeline app enhances the sharing capability by making it customizable and automatic. This should give Pandora more of a viral push through the social networking website with more than a billion registered users.

Pandora's initiatives are paying off. Its guidance for the current quarter calls for $155 million to $160 million in revenue. Wall Street had been projecting revenue to fall just short of $150 million.

At a time when Pandora finds itself competing with Spotify and now Google's All Access -- the online giant's new premium music streaming service -- it can never do too much to grow its audience, keep them close, and ideally get them paying.

Spotify and All Access are marketed as premium experiences. Pandora has stood out in the past as a haven for freeloaders willing to put up with ads for free music, but if even Google is gunning for subscription revenue, it's clearly where Pandora needs to make sure it doesn't get lost.

Having 2.5 million Pandora One listeners is good. Growing that audience will be even better.

Cracking open Pandora's box
Pandora has won millions of devotees among music fans but few supporters on Wall Street. The online jukebox seems to be redefining the way we consume music, a transformation that's only likely to grow. But high royalty rates and competition from all corners threatens to silence the company. Can Pandora translate success with its listeners into a prosperous business model that will deliver for investors? Learn about the key opportunities and potential pitfalls facing the upstart radio streamer in The Motley Fool's premium research report. All you have to do is click here now to subscribe to this invaluable investor's resource.

The article 2.5 Million Reasons to Like Pandora originally appeared on Fool.com.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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