Pandora shares were down 5.9% to $12.12 Wednesday after Millennial Media reported disappointing earnings and lowered its first-quarter guidance. Millennial Media is a mobile advertising firm that helps developers monetize their mobile applications. The company’s worse-than-expected fourth-quarter earnings and lower guidance caused its shares to fall 36.3% on Wednesday. The Nadsaq was down 1%.

The connection between Pandora and Millennial Media should be clear: both are in the business of mobile display advertising. Nearly 62% of Pandora's revenue came from mobile advertising in its last fiscal quarter. Some investors appeared to take Millennial’s bad news as a sign of the greater mobile ad industry health and, thus, Pandora’s ability to monetize the lion’s share of its listener hours.
 
There's a larger story here, of course. Look beyond Pandora and you see other music services that are counting on the mobile advertising business to fuel their businesses. Slacker has a free service to go along with its subscription tiers. Spotify is about to ask record labels to approve free, ad-supported listening of the on-demand service on mobile devices, according to the Verge. Whenever Apple's Internet radio service launches it would make sense for its mobile app to have ads powered by Apple's very own mobile advertising platform, iAd.
 
Millennial's quarterly miss doesn't necessarily reflect a systemic weakness in mobile advertising, however. CEO Paul Palmieri said during the earnings call the company chose not to participate in some "lower end performance segments" and "a few large brand deals" failed to materialize. In other words, the company is saying some deals fell through and some revenue wasn't generated last quarter that won't always slip through its fingers. Palmieri reiterated later in the Q&A portion of the call that the company's market outlook has not changed.
 
What this means for Millennial is up for debate. As Forbes noted today, two equity analysts were mixed in their opinions on the greater meaning of Millennial's fourth quarter. Morgan Stanley's Jordan Monahan downgraded Millennial while worrying the company "is either losing share to larger competitors or becoming commoditized by audience platforms." He added that big competitors like Google and Facebook offer attractive all-in-one places to put advertising budgets that cover desktop, mobile and social.
 
But Goldman Sach's Heath Terry maintained his "buy" rating and believes Millenniel's bad quarter was the result of "sales execution" rather than competitive forces. He added that in the future Millennial will be a primary beneficiary of growth in mobile "as mobile takes share of overall ad spending." That would be seen as good news for Pandora and for mobile advertising in general -- and for service that will depend on a robust mobile advertising market.
 
Wednesday's dip in Pandora's share price may only temporary delay its upward trajectory. Shares are up 32% year to date and some investors expect it to go higher. As Schaeffer's Investment Research noted, the majority of an unusually high number of calls changing hands Wednesday bet Pandora would rise above $13.50 by March 12. But the article also notes there is still much pessimism on Pandora. The stock's short interest -- the percent of outstanding shares that have been shorted by investors -- is nearly one-third the shares available for trading.