Pandora Media Inc (NYSE:P) couldn’t be accused of being a company with one fundamental flaw. The company’s business has been on the verge of breakthrough or disaster since going public, and its shareholders have ridden the roller coaster of its stock chart up and down and around again. After yesterday’s earnings report that ride is almost certainly over for many of them.

Pandora

Pandroa Media Inc (NYSE:P) revealed in an earnings report released on Thursday that its user numbers are actually declining. The company no longer has the status of a growing looking for a way to monetize. Right now it appears to be an unprofitable firm in a market with growing competition and shrinking margins.

Pandora sheds users in 2014

If you’re a web company and your user numbers are always going up, you can justify an incredible valuation on no profits. Investors will throw money at you to burn, and eventually, if you’re successful, you’ll go public on the back of strong abstract growth and no financial growth.

This model has been followed time and time again and left many companies struggling for a way to make money. Pandroa Media Inc (NYSE:P) appears to have fallen before that hurdle. According to the firm’s earnings report Active listeners fell to 75.3 million from 76.2 million in the first three months of 2013. this is the first time since going public that the company’s active listener growth has reversed.

Pandora Media Inc (NYSE:P) is, however, monetizing its earnings. The company’s revenue came in much higher than analysts had expected in the three month period, and its losses were less than analysts thought they were going to be. An internet company with no profits and user-shed is a stereotypical bad investment. That’s exactly what Pandora looks like this morning.

Competition spooks Pandora investors

Perhaps it would be easy for Pandora to wave off the fall in listeners at another time, but right now investors are less than confident about their momentum plays, and Pandora Media Inc (NYSE:P) has problems that may seem unresolvable. Shrinking user numbers are the most obviously negative metric, but the causes of that slowdown are even more likely negatives for the company.

Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) moved into music streaming last year and both companies have been pushing their offerings aggressively. On top of those and other competitors, Pandora Media Inc (NYSE:P) faces rising content costs, and the obvious margin problems as a result.

Pandora Media Inc (NYSE:P) has never been a value play. The company has always been a shot in the dark for those who thought of music streaming as the next big transmission mechanism. With slowing user growth it appears that if music streaming takes off, it will not be Panora that supplies the platform. Investors are running with that idea in mind.