After years of battling over royalty fees, internet radio station Pandora is finally moving its balance sheet into the black. Getting a boost of subscriptions from its iPhone app, Pandora is also learning that its users have a much higher tolerance for ads than it previously thought.

A beloved service with a host of financial problems stemming from record industry copyright fees, Pandora now intersperses ads into its free content and the company is finding that audiences don't seem to mind.

Pandora founder Tim Westergren spoke to Bloomberg News about the company's finances Tuesday:

"With budgets tightening in the recession, advertisers are becoming more selective about where to spend money. That benefits Pandora because it can deliver ads to targeted users, making sure commercials aren’t “wasted” on the wrong demographic group, Westergren said."

After decades of advertising interruptions on terrestrial radio, Pandora's relatively minor advertising additions are not turning people away. In fact the opposite, they are winning 50,000 to 60,000 new users per day, and Pandora expects to earn as much as $40 million this year.

Westergren says that Pandora’s iPhone app has “changed the perception people have of what internet radio is, from computer-radio to radio, because you can take the iPhone and just plug it into your car, or take it to the gym.”

He predicts that the company will include more advertising as its customer base grows, but the company has tried to introduce ads in a smart way. in January, they started adding advertising between songs. And on the web and the free iPhone app, the Pandora's visual ads only update when a user looks at the interface.

With the amount of data that Pandora collects from its users, the company can sell ads in a very targeted manner. And the current economy is proving to be a boon in changing customer perception to adds. 

While consumers may have expected as much as possible to be free online a year ago, as services based on a free model struggle to stay afloat in this economy, customers are proving amenable to money making attempts from companies they like. For instance, the free, ad supported iPhone app brings in 20,000-30,000 new users a day.

Meghan Keane

Published 20 May, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

721 more posts from this author

You might be interested in

Comments (1)



Pandora is presumably not available in the UK still?

about 9 years ago

Save or Cancel

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Digital Pulse newsletter. You will receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.