Pandora Shifts Into Drive

The connected car will be a big theme in the coming years, and Pandora wants to make sure that it's the one behind the wheel.

The leading streaming service became an early star of this week's Consumer Electronics Show, or CES, announcing that it will be rolling out in-car advertising solutions later this month.

Pandora's announcement was enough to send the stock to new highs yesterday, and the stock went on to extend its peak today.

Pandora may be seen largely as a streaming service for the home or for active walkers and runners with mobile devices, but Sirius XM Radio has shown us that it's the car where we do the lion's share of our audio consumption.

Sirius XM Radio closed out its latest quarter with 25.6 million subscribers, and the vast majority of them consume the medium behind the wheel. Pandora has grown its reach to 76.2 million active monthly listeners -- meaning that the two leading services now combine for more than 100 million subscribers or active users -- but it also means that the connected car has never been a bigger opportunity for Pandora than it is right now.

Pandora's always lined up a worthy roster of advertisers for its new in-car marketing solution. Major brands in gas stations, auto manufacturers, fast food, and insurance have signed up to be part of the Pandora service that served up a record 1.58 billion hours of content last month.

Pandora had spent the past couple of years brokering arrangements with car makers to make Pandora easily accessible through dashboard entertainment systems. There are now deals in place with all but one of the 10 best-selling cars, and more than 4 million unique users have activated the service through their cars. The carmakers aren't making the same kind of scratch that they do when drivers convert to self-pay Sirius XM subscribers, but it helps sell vehicles.

Pandora's already doing well in getting sponsors to pay more for access. Ad revenue grew twice as much as usage in its most recent quarter. Could things get better? Absolutely. One can only imagine what's possible if Pandora eventually goes from serving up national brand ads to spots that may have more relevance based on where someone is driving at the moment.

Pandora's just scratching the surface, and the in-car advertising solution may not be a big step, but it's definitely the next one.

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Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Pandora Media and owns shares of Sirius XM Radio. 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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