Pandora Got Greedy So I Became a Subscriber

I was getting really sick of hearing audio ads on Pandora. In addition, the company is dramatically expanding its iPad ads program:

The music service is now offering display ads on the iPad to sponsors, in addition to its banner and audio ads, and now has three big takers in Starbucks, Lexus and Budweiser. When clicked, their ads open up a new page but don’t interrupt the music. While all three marketers advertise with Pandora on other platforms, the iPad offers a richer media experience, and the company is hoping it can improve on an already-high 3.4% click-through rate.

Pandora now has more than 30 million users on mobile devices — and 50 million across all media — and the company is hoping to accelerate usage by way of the iPad. Pandora founder Tim Westergren noted that the company is signing up about 100,000 new mobile users each day. “It’s just exploding for us,” he said. “And on mobile devices, the advertising — particularly advertising with video — has been really effective.”

While the iPad ads purport to be non-intrusive my growing displeasure over the audio ads was compelling me to do one of two things: abandon Pandora entirely or become a subscriber for an ad-free version at $36 per year. I decided to do the latter because I’ve come to use Pandora on so many devices.

I understand that Pandora has to make money to make a living and pay music royalties. I didn’t mind the display ads because they were non-intrusive and I could ignore them (Pandora claims a nearly 3.5% CTR). But after having gotten used to the service without audio advertising, to hear ads for travel or the Discover card on my headphones was so jarring that it actually made me angry.

Pandora was on the brink of extinction over royalties but has come roaring back as a direct beneficiary of the iPhone and, later, other smartphone platforms. Mobile is what transformed the business.

Now Pandora directly threatens the existence of satellite radio, which may find enterprise usage but will have difficulty further penetrating the consumer market.

My own behavior in this case does suggest the viability of a two-tiered model for content services. But I qualify that statement with the following: If Pandora had not gone into mobile and had remained an Internet-only service I probably would not have subscribed as I did.