Good entrepreneurs try different things and have a long lasting energy to flip products and business models around again and again, carrying enthusiasm and leadership so the team and investors stay tight until they hit the jackpot. Real business, market demand and revenue.
I like music, and I like Pandora. I really don’t understand Spotify and I think that if YouTube over time will grow smarts and will offer simple way to discover on demand music videos that exist today in their endless inventory, let alone VEVO’s, they can get Spotify’s business. Spotify in many ways is a layer on top of YouTube only it doesn’t work if you don’t pay. if I learned one thing from a good friend of mine Avishai Abrahami that runs Wix.com and its successful Freemium model is that people only pay when they can’t get it for free elsewhere. In many ways, Spotify is running a game I’m yet to understand but they must be doing something good as people seem to use them (or something).
Moving into why I write this post. Pandora. Today a public company with a $2B market cap, not too shabby for the online radio company that almost went bankrupt early in the game . Pandora is generating its revenue primarily through playing audio ads between the songs. Pandora is doing roughly $20M a month in revenue. For the sake of conversation, assuming they sell all ads for $10 CPM and show ads between all songs, it’s about 2B music streams a month. I don’t like their ads and I realize it’s only way they can make a living. But I don’t like it. It’s annoying, and when the internet is not too fast the ad itself can kill the entire experience. Pandora is generating revenue through audio ads because that’s what they knew from the offline radio. But why not do something that’s more organic to their product, something that can be disruptive and innovative, and potentially more profitable.
I shall call it Pandora Promoted Songs. Imagine content creators that have their songs on Pandora now could promote their songs on Pandora for money and Pandora would integrate those promoted songs into the playlist when it makes sense. Example – a song writer would pay 20 cents for every time their song is played, so a $50k “promotion campaign” of that writer would create 250k times their song being played by people. AMAZING. You could buy organic traffic of people already looking to discover videos. Oops I meant music (wink :-)).
Why is it better than ads? Experience wise – of course, but even financially – let’s assume 10% of Pandora would become “sponsored” on a 20 cents per view; that’s 200M streams a month times 20 cents = $40M a month. WIN.
Pandora could stop playing annoying ads to people, content writers that want to get some love can promote themselves while Pandora is making (even) more money.