Pandora Expects to Make a Profit in 2010 - Still Growing Rapidly
We have seen our fair share of doom and gloom this year, but, according to a report from Bloomberg.com, at least Pandora, the free online music discovery service, expects to be profitable next year. Pandora was founded in in 2000, and derives its revenue from targeted audio advertising in its music streams and affiliate sales through Amazon's MP3 store and iTunes. In the interview with Bloomberg, Pandora's founder Tim Westergreen also disclosed that the service is currently adding about 50,000 new users a day, and that the service's successful iPhone app is responsible for bringing in about 20,000 of these new users.
In January, Pandora first introduced 15-second audio commercials between songs that come up about two or three times per hour. At a recent industry event, however, Pandora's CEO Joe Kennedy predicted that as Pandora's audience grows, the service will also start to add more commercials. Given how annoying traditional radio ads tend to be, Pandora will have to introduce a lot of ads to drive its dedicated users to other services like Slacker Radio or Last.fm's iPhone app, though like other services that started out ad-free, the company has to be careful not to alienate its users as it attempts to become profitable.
The service now also shows display ads on its website, which, to be honest, don't seem to fit into the general design of the site and look like they were just added for the sake of it.
In the Bloomberg interview, Westergreen also acknowledged that Pandora's struggle with the music industry to negotiate royalty rates could still stop the company from becoming profitable, though Westergreen also said that he is optimistic that these negotiations will come to a positive conclusion for Pandora.
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Another encouraging sign for Pandora. I think what sets them apart is their solid strategy around their content. They spent many years crafting their song database and taxonomy for their music collection: http://www.scattergather.razorfish.com
@M. Geraghty - very true - the data from the Music Genome Project is definitely one of Pandora's most important assets.
I listen to Pandora every day and have never heard an audio commercial of any kind. Who were they rolled out to?
I want to listen pandora in Italy... Pleeeease!!!! I'll even pay... pleeeease!!!!
David, I don't hear them every day but they do occur. I heard an ad for Terminator about 3 times today. They are unobtrusive, similar to Hulu. TV might want to take a cue here... a 15/30 second commercial every so often would be harder to skip on the DVR and not pull viewers out of the show.
I love to hear that a site that makes people happy and costs nothing to use can turn a profit in a non-annoying way. Pandora's great - though I wonder why they keep giving me coldplay songs!
Josh
Have they considered just a subscription service without commercial ads? It would be great to be rewarded for what you actually do rather than a destination for advertising eyeballs.