I’ve always liked how outspoken Tim Westergren of Pandora is. He’s not one of those all-too-common founders who puffs up his chest and gives rationalizations for why everything is great even as user numbers are sliding or a competitor is stealing momentum. When his company is in trouble—which Pandora was for most of its life—he’ll tell you in excruciating detail, even down to ugly employee lawsuits.
And that’s worked to Pandora’s advantage. Westergren did such a good job of warning the site’s rabid fans that the RIAA may be running it out of business that those fans actually broke fax machines on Capitol Hill with complaints. Westergren gets what a lot of entrepreneurs don’t: It’s about survival, not ego. That’s especially true when you’re an online music company.
Of course, today Pandora is sitting pretty thanks to a hard work and a serendipitous one-two-three punch. Punch one: The iPhone app, which changed the nature of Internet radio by making it mobile. Punch two: A nice $35 million round of funding from top investors. Punch three: Finally a reasonable settlement from the RIAA.
Pandora has 35 million registered users (double what it had last year), it’s bringing in some $40 million in revenues and should be profitable by the end of the year, said Westergren on NBC’s Press:Here. (The show airs Sunday, but you can watch it online now.)
Most interesting were Westergren’s comments about advertising. As you can see in the clip below, the show’s host, Scott McGrew, and my co-panelist, NPR’s Laura Sydell, claim to be huge Pandora fans but couldn’t seem to remember hearing many ads. Said Westergren: That means we’re doing it right.
He said when he talks to Pandora users they always say they don’t hear many ads, and they don’t think they interact with the site much. In reality, users are hearing a good number of ads and most go to the site six times per hour to thumb up and down ads, where they get served another visual ad. “[Users] are always shocked to hear the actual data,” he said after the taping. “I think it’s because the interaction doesn’t feel like work. It’s a natural instinct tied to the ability to affect the listening, and it’s rewarding.” He added that click-through rates are way above industry average, which he credits to knowing each user’s taste so well. Depending on the product it can be ten times greater than the industry average.
Pandora also has more creative ways of advertising. Westergren also talked off camera about a recent gig in LA for Aimee Mann. Pandora sent an email to users in driving distance of the club that it knew loved her music and the venue quickly filled up. “Can we do this every night?” the club owner panted.
Pandora didn’t charge the club anything for this, but there’s clear opportunity to do so. This kind of promotion plays directly to Pandora’s strengths especially now that it’s on iPhones, Palm Pre and Android. While people gush today about Spotify’s ability to play your music on any device and its a beautiful UI, Pandora’s offering has always been about discovery. The heart of it is the “Music Genome Project,” which analyzes why you like a song and gives recommendations based on the song’s inherent characteristics, not what other people who liked that song also enjoy.
If it can translate that to the physical world of gigs, it could do for venue owners and artists what Travelocity and Expedia first did for airlines—fill empty seats that are worthless once a gig is over. That’s not only an “ad” that has value, it’s one that actually uses the unique interactive elements of the mobile Web. “This is the part of Pandora’s future that I’m most excited about,” Westergren said. “I wish they had this when I was in a band!”
Pandora may just be hitting on that much-talked-about but mostly elusive online advertising Holy Grail: Ads that users actually want. If they pull it off, and avoid the far-too-crowded online music graveyard, Pandora will be a textbook case for why execution matters more than vision in tech.
I think a lot of that “near death” talk was intended to help fuel the grassroots movement to help negotiate for better licensing terms. But whatever, it worked! I love what Tim Westergren is doing, and I love Pandora. Rock on.
I totally agree. It was meant as tactic to get people to start making noises.
I think its a bit disingenuous though… it feels like Tim was playing the masses like a puppet, to further his own agenda.
Well maybe he was, but I wouldn’t blame him. And I agree with his agenda, so I’m all for it!
I don’t know what to believe as far as the whole “near death” thing but I’m just glad pandora got through it okay.
Pandora easily has my vote on best internet radio.
http://ffwtech....ocks-literally/
Pandora set out to change the music model, and they’ve done just that, and continue to do just that. Just when you count them out, they come marching back. That’s because how dedicated they are as a company to change, as well as dedicated to their community.
Sure, but that’s not the end of story. I guess the music and movie stuff will last forever and more of the startups will find the dead pool.
I just heard my first ad of the afternoon on Pandora while reading this article – I kid you not. Both tabs are in Firefox…I wonder…
Odd, he always impressed me as a great big, whining crybaby.
All they did was have to try out a little more advertising, get an iPhone app, and boom, a couple of months later (surprise, surprise) profit.
Also, I abandoned Pandora a couple of months ago. The 40 hour limit per month for non-paying users means I can listen to it for a week at work, and then it’s dead to me. Which is no big deal because it takes about an hour before their library gets stale and you start hearing repeat songs. Switched to Last.fm and haven’t looked back. The story is still out on Pandora as a success.
P.S. I’d also argue that the alleged secret sauce of the Music Genome Project is essentially worthless; any reasonably good recommendation service with a decent library and userbase is virtually indistinguishable from Pandora. In fact, as per my above comment, I’m finding other services actually doing a better job of recommending new music.
I’ve found Slacker to be really good. Last.fm I’m not a fan of. What other recommendation services have you found that you’ve liked?
agreed, the problem with Pandora, is that it more or less gets stuck on 30-40 songs. So you’ll hear the same songs over and over again
I have yet to see a music recommendation service of any kind that actually factors in the music. They tend to go on genre, era and timbre/sound. For instance, liking Fiona Apple gives you a recommendation of Alanis Morrisette who have nothing in common on a song-writing level.
It makes the services essentially pointless except for people who listen to music mostly by genre or era, and they don’t really need much in the way of recommendation as that’s about the easiest thing to look up.
The Aimee Mann example is exactly how things are changing. Companies like Pandora, Topspin, etc… are making this world of “oh by the way” transactions -real-.
yeah that was the most interesting part of the article. i wonder how much they charged the club for the email blast.
I do enjoy Pandora, but I do hear repeats. Also, I prefer a mix of multiple genres. Not sure how to do that with Pandora, but using Last.fm’s firefox extension (fire.fm) it plays my scrobbles and other similar eclectic tunes; you don’t need to have a site open to use Fire.fm, as it’s a Firefox toolbar. Though maybe Pandora does offer a way to hear jazz, folk, country, pop, swing, etc… ?
Quickmix: lets you mix your stations together. The sequencing is random, so you may have 1-4 songs on one “station” before it switches to the other.
(BTW, I’m not noticing repeats? I have done quite a lot of thumbing up & down though – perhaps that’s the difference)
Cool, Congratulations on profitability. I suspect that they could have got there faster if Pandora had an improved user experience.
Not to totally shill, but I posted about this rant recently and I was hoping to hear a response from @tconrad or @timwestergren about it.
I love Pandora… I tried to use their name in my “high concept pitch” for BettrAt, but its surprising how few people really are familiar with Pandora as a service. I thought it was a household name!
http://www.yaks...o-cares-part-1/“>What I would do if I were Pandora, by a fan Part 1
What I would do if I were Pandora Part 2
no matter what can be said or done to prove that pandora is a stupid product with a lackluster amount of music in key niche genres, sites like this one praise their efforts
pandora has never been good, and now features more ads than regular radio
Its a great product with compromised execution because of the market. I dont listen to ad supported radio, I sure as heck heard that first ad that made me an ex-customer.
Too many great ad free music streams out there for me to accept this. There always will be.
no matter what can be said or done to prove that pandora is a stupid product with a lackluster amount of music in key niche genres, sites like this one praise their efforts
pandora has never been good, and now features more ads than regular radio
Cool, Congratulations on profitability. I suspect that they could have got there faster if Pandora had an improved user experience.
Not to totally shill, but I posted about this rant recently and I was hoping to hear a response from @tconrad or @timwestergren about it.
I love Pandora… I tried to use their name in my “high concept pitch” for BettrAt, but its surprising how few people really are familiar with Pandora as a service. I thought it was a household name!
http://www.yaks...o-cares-part-1/“>What I would do if I were Pandora, by a fan Part 1
What I would do if I were Pandora Part 2
nice to see them turning a profit…we are working really hard on my music startup jamWee…the thought is that your friends will create your radio station as opposed to algorithms.
You jest! JamWee? Okay Facebook boy where and how are you getting all the licensing money??
Can you actually afford the dinner meetings with top executives? Do you have a $2000 Armani suit x4 with the shoes to go with it? If you say otherwise then you clearly don’t have experience needed to run such a company.
To answer your question…. Today I spent the entire day with Gary Harpst.. a guy that sold his software for $150 million to Great Plains and eventually Microsoft…Connections and funding aren’t my biggest problems. Having a service and product that people like is all that I care about.
Ignore the naysayers (but why not user your realname?) focus on your product. There is still lots of opportunity. It is surpising how many people have heard of Pandora, but have no idea what it actually is.
Okay money is good.
Now you need to setup a development team. Outsourcing is dangerous unless you have a person who can setup and manage a team in China. Dont do any real work in Romania, Russia, India, Vietnam or USA.
You need only a small core team in USA. You need all the money spent on marketing, licensing and making connections. What you should do first is design a really complete “Blue-Print” for your idea. Then build it. Then tear it to shreds with self-criticism, friend-criticism, and then re-build it again. During the 2nd re-build and design you will have gained much experience. Whatever you do dont assume you can do it the first round. Much like Pandora which needs a MASSIVE redesign as their GUI is crap. Pandora’s service is good but GUI is crap…cant say that enough.
My company owns thesound.com if you want to “buy it” let me know. I tried these business models back in 1995 and failed so it would be nice to see someone use it. I would bring my company onto help you develop this solution for cash+ preferred stock and we will throw in the domain.
Matt – I thought your comment was interesting as that has always been my experience with various start-up efforts. Before I learned that lesson, I’d put 1000’s of dollars into the ultimate prototype/beta only to either have to tear 75% of it down or otherwise rework the site. No matter how much pre-planning you do, you always seem to adjust significantly if you’re boot-strapping.
We’re reworking most of our front-end now after that feedback. And it’s all shite I should have known but it just didn’t register. Anyway – congrats on your China effort too. Spent a few years in Singapore and did some biz in China.
Im a big fan-boy of Pandara :-)
However a few HUGE complaints.
1) Why does Pandora insist on using Flash to run their web player? It seems that with $35 million they could get a few GUI designers with some AJAX/JavaScript skills?? Frankly Flash is serious Amateur hour!!
2) Why does Pandora delay on International Licensing? Do you need some help?
3) Support and New Business relations is really horrible and arrogant. When I called to talk to anyone with any business knowledge I was introduced to a nobody with very little skills. I was told the managers of the company were too busy to discuss any business relationships.
On the note of development with all this money why not go to China or even better Hainan, China (Sanya Island is new hottest tech city in China despite the really lame one sided report Sarah Lacy did on China a few months back. Sorry Sarah but really??? Could you have done a bit more research? Awesome coding teams dont setup in bejing, Shanghai or anywhere near that part of the country but in Guangdong (Sherkou)and Hainan (Sanya). Also Sarah there are 3 major Universities in China that produce developers and the best coders are recruited and the others live with their parents while they find a job. The average coding salary is $440 provided the employer pays their rent. So with a 10 person office costing on average of $500 USD MAX Pandora could have an awesome secondary development team on the beach making bad ass cool stuff. But instead you hire $60k developers that frankly produce the boring work.
Bottom line is lets see some innovation with the GUI and backend. On that point I want to clarify that I am super happy with the service as a whole, its just some obvious “stinky smells” coming from the development department of Pandora.
1) you need an embedded player that browser supports that will play streams that’s multi-platform. That doesn’t leave you with many choices.
2) you’re talking as if there’s one single agency to talk to about international licensing. besides, not much of an international ad market right now to make money on, so why even bother.
3) given the amount of knowledge that you’ve shown so far, it’s not worth their time talking to you. I’d recommend doing more research on the tech involved and licensing issues on your part.
P.S. code outsourcing is just crap, especially in the “developing world”. You’ll have to hire a “babysitter” that doesn’t sleep to slavedrive the team. Turn your back for 1/2 a sec, and nothing will ever get done. You spec a 10 expect a 3, and have to go through many rounds of iterations before you get anything that’ll even be useable (if ever). If you ever need to extend what was produced, you can forget it.
You just end up getting what you paid for.
1) Ajax/Javascript works on all platforms. Flash is the last choice as you need a special plugin. Embedded? Why?
2) Im not talking about any one agency. Im talking about meeting and making friends with as many music labels as possible (ASCAP would need some work too). I worked in Hollywood for 3 years for Warner Brothers and BBC. Part of my job was to collaborate with celeberties and during this time I learned that half the battle was making connections. When I was with the BBC I watched how they made partners in 11 countries for projects with broadcasting, video and music rights. Granted a bit different but general process is similar.
3) Dont know exactly what your talking about. But I run a large development team out of China. My partner lives and manages the team full time. We tried other countries like India and Vietnam with horrific results like you are describing. But since we settled down in China we have had ZERO issues. In fact we have such a solid all-star team that I get chills thinking about all the cool stuff we can build. Seems like you have limited experience in this and from the way you talk it seems like you only dabbled from a remote computer in USA. It is true that countries like India are very difficult. I rented an apartment, office and hired guys in Hyderabad, India and the entire experience was horrific, stressful and nearly drove me mad. I then moved to Thailand for a break before moving to China and trying again. So far after 2+ years China has been so wonderful and dreamy. Were making cool products and customers are happy. Chinese are by far the easiest developers to work with out of all the developing countries. China works 6 day weeks and they are very kind and loyal. Frankly I find USA very difficult to run a company because good developers cost $60k – $70k+ a year and people always want to visit and disrupt the development environment (among many other issues such as tax, insurance, bla bla bla).
You were saying?
In particular I like what you say about #2. I was following Pandora until the cut off international services. It’s been quite the disappointment.
I’m kind of disappointed with Pandora. The systems seems to only play major label artist I already know. I was hoping to be introduced to new music, artist I never heard. It’s like the typical internet radio but Jango does a better job of introducing me to new indie artist, what gives ?
1) go check to see if AJAX work with streaming first.
2) go call the big 4 and see if they bother return your call.
3) every idiot that runs cheap outfits out 3rd world thinks the crap they spew out is great. Limited experience? hardly, I get to clean up the mess 3rd world sweatshop leave behind.
the service is free.. how do you ‘abandon’ something that you don’t even pay for with the indignation that you imply? who cares about your support, or lack of, a free, non-intrusive service?
Free? What are you smoking? Train Wreck? Purple Kush? Can I have some? Im a paid user and would never use the free service because they time your connection out after a short time. Plus the paid version gets you the high quality version plus the nifty AdobeeAIR app. Duh! :-)
Congrats to Pandora! Would love if it also worked with my existing music library. Instinctiv on the iPhone used to do that well, but the app is MIA.
Try using FoxyProxy which is a FireFox Plugin- Its $8 a month but gets you hooked up on all the blocked sites becuase you are int.
Even if people do not agree with everything that is Pandora -Tim’s accomplishment as an entrepreneur is one that stands out in music related ventures. He has hung in there – convinced his investors to hang in there – and played the delicate game of pushing the labels for better terms, while not being adverserial. Those are qualities every startup can take to heart – and make better.
I have my doubts on whether Pandora can stay independent and be profitable in the long term. But given Tim’s history over the past 7 plus years – I will give him the benefit of the doubt – he has more than earned it.
Most that throw stones will never be an entrepreneur – it takes a lot of sacrifice and persistence – and Tim has done more than his share to get Pandora to the current stage. Hats off to him.
Love pandora. I have so many radio stations. So glad they are making a profit.
Pandora service is horrible.
What is better?
When im coding late at night my nerves are shot and I cant deal with beats or drums and with Pandora I can program out what I dont want to hear.
What other service on the net has cool flute or spiritual music?
I can get rock, electronic, metal, dancehall, trance, etc. all over the net. But mellow tunes with no beat or drums with little birdies in the background is hard.
BTW- a good alternative source for all around good electronic tunes is http://somafm.com/
*yawn*
Every time I read about “profitability” of these and other 2.0 idiots I keep realizing that the fawning at the mouth adoration crowd does not know what profitability is…
Hint – if you need to keep raising money to pay your bills you aren’t profitable.
Personally, Pandora has only come in handy when I have to entertain my wife’s friends & family that really have no clue about music. So, I wonder where Tim gets his percentages about people only listening to their own play lists for about 3 hours a week. If that is true then people in the US must not take music that seriously. Well, I guess it is kind of obvious with what is now popular and all.
Anyways, I’ll stick with my own library because that way I’m not limited to the shoddy 192Kbps Mp3 format that sounds terrible on my system or being a slave to the rating system just to get the G-nome to figure out what it is I really want to hear. If I’m going out then that’s what my zune is for with WMA 9.2 Lossless.
Worst case scenario? I guess these tech geniuses have forgotten about Shoutcast(can be used with VLC). If you have a decent connection you can stream Mp3 320Kbps if you like international radio. I usually stick with the 80s in that case.
Three cheers for Tim and Pandora! My favorite startups are the ones that everyone said would never work…
If you think sites like Pandora or others of their ilk have done anything for the arts you’re highly mistaken. Eventually they will all become oldies channels as fewer artists can afford to be artists.
Tim is a great guy and his dedication to Pandora is impressive however there’s no way Pandora will be profitable. They must pay a fee for every song they stream. While those fees are small they add up to huge numbers because Pandora streams so much music. So much in fact that there’s no way they can generate enough revenue from advertising to cover those royalties and still pay for their company operations.
In addition the fees go up about 15% every single year which just adds to the burden.
Speaking of “It’s about survival, not ego”… could we start some articles without self-referential phrases… (”I’ve always liked…”)
Thanks in advance for considering this suggestion…
I’ve been using Pandora for years, and will continue to do so. Great job Tim.
I would love to use Pandora, but its not available in the UK.
I tend to use Last.fm for discovery and and then play in Spotify.
I enjoy Pandora myself. You just need more song variety.