Pandora. A Crisis of Disbelief

Dear Tim Westergren and the Pandora.com team,
This is an open letter to you, my dearest friend at Pandora, the worlds best (free) internet radio. Like a brother in arms or a fraternity brother in the wee hours of a long night of debauchery, I’m going to shoot you straight, but I won’t leave you hanging.

Let’s talk about your identity crisis, or as I like to think of it:
Pandora, a Crisis of Disbelief.

Lets start with the fundamental issue. The root cause if you will. The Positioning of Pandora.com.

The marketing classic, “Positioning – a battle for your mind”, is a great book by Al Reis and Jack Trout and considered by many in the industry to be the authority on the topic of positioning for companies, products, and services. Although there are different definitions of Positioning, probably the most common is: “A product’s position is how potential buyers see the product”, and is expressed relative to the position of competitors. In this book, they have some great examples of positioning. One such example illustrates why Xerox can’t sell computers and IBM can’t sell copiers despite the millions of dollars they put into product development and advertising. In the mind of the customer, Xerox means copiers and IBM means computers no matter how much money either entity puts into trying to do something different than their core. You see, IBM = Computers and Xerox = Copiers. Just ask anyone on the street, they will tell you the same thing.

Enter Pandora. Pandora, you have built yourself on the back of free internet radio. This means all those years of saying and doing free internet radio has positioned you in the customers mind to mean free internet radio. So, like it or not Pandora = free internet radio in the mind of the customer. Hence your identity crisis and why your customers are going through a Crisis of Disbelief.

<title>Pandora Radio – Listen to Free Internet Radio, Find New Music</title>

To further confuse things, you still keep the “free internet radio” message in your Pandora.com browser title and repeat that message all over your website. So, after 9 years of operations and roughly $65 million in funding, all your users from the internet to iPhone to Blackberry and on and on have bought into your position of free internet radio. This is good, Pandora. This means unlike deezer.com, dizzler.com, bluebeat.com, grooveshark.com and all the others, you have earned the position as free internet radio. You, not anyone else, means free internet radio. What a wonderful position to own. Just like craigslist.com means free internet classifieds and pentyoffish.com means free dating site. All great places to be in the long-term.

Perception is reality (or should we say Position is reality).

The reason your listeners are crying like little girls at a midnight showing of the Titanic is because you have spent your whole life saying one thing and now you are doing something completely different.

I have plenty of money, but I didn’t expect to give you any.

If you go to the movie theater you expect to pay to watch it. If you go to a restaurant, you expect to pay for your food. If you go to the park, you don’t expect to pay for the sun to shine. Wait, what? See, the park has a position in your mind and by default that position means fresh air, family fun, and sunshine. If you put a park ranger out there to charge for being in the sun, it won’t matter who the people are (millionaires or bums), you’re going to run them off because the position and expectations don’t match what it means to go to the park. In your case, Pandora means free internet radio – all the time, not up to 40 hours. Where you might be tempted to think you are just getting backlash from the ‘poor’ listeners, that would be completely inaccurate. These listeners are operating on the position and expectations you created. The same things they fell in love with. See, it’s really not about the money, it’s about the position of Pandora.com no longer syncing up. Unfortunately most people can’t tell you what they are feeling in a meaningful way, they just throw up the price because it’s the easiest to zero in on. Additionally, with the paid advertising, they expect that you are making money and don’t need to charge them. Stupid, I know.

Stop your belly aching, we gotta make money don’t we?

Absolutely. I can assure you every one of your listeners wants you to make money and stay in business. This is also why the listeners are accepting of the ads because they know you have to make money somewhere since you are “free to listeners”. The key here, is that the listeners don’t expect you to try to make money off of them. If you want to give up your dominate position as free internet radio and see your listeners drop thus dropping your traffic and number of ad impressions, then keep on the path you are on now. If you want to continue to be the biggest player, clearly head and shoulders above everyone else, rethink the value of your position and what it means before you reposition yourself to something you wish you hadn’t.

What would Google Do?

Just like they don’t charge for all those extremely valuable search results, they wouldn’t charge for listening to the radio either.

It’s the listeners, stupid.

Your die hard listeners, the ones busting the 40 hour limit are your most loyal listeners and also make the best prospect for your advertisers because these listeners provide advertisers the consumption of their ads over and over – an advertising concept known as frequency. Because you have customers that stay on your site for HOURS, you are proving to be one of the most prominent ad networks online. You want as many of these ‘power listeners’ as possible because your advertisers want them. From looking at blogs and comments posted on the 40 hour limit, I see a trend of people reaching this limit as a product of listening at work. This is great news for Pandora. This means your listeners are by-passing their local radio station to listen to you, thus Pandora is becoming their local radio station. This is huge! Add elements to user profile to indicate the area you live in. Then you have the ability to target users in a market for advertisers and ultimately would open you up to allow media buys from hyper local advertisers who want to tell that guy at work that he can go to the sandwich shop in his home town for lunch instead of the current advertiser, Jimmy Johns, which isn’t in my market – but their ad and message is perfect for this medium and if they were in my market, mmmm sandwich time.

By limiting 40 hour or more listeners you do 3 things:

Erode your best asset for the advertisers you sell
Debunk your evangelists who praised and recruited people to Pandora.com causing them to work twice as hard to undo you, either intentionally or not.
Push your loyal fans into the arms of the next best “free internet radio” service which will later monetize their site in a better way having learned from your mistakes.

Buzz meter goes up then goes bust.

You will see a drop in your traffic as well as your apps downloads, your impressions served, and your new user signups. This is inevitable due to the power of buzz going from positive to negative like a wildfire with increasing winds. Your buzz has been positive overall, continually building on your position of free internet radio, but that may shift quickly and with a tremendously negative impact. As more and more people talk about this 40 hour limit, more people will seek alternatives before they ever sign up.

Begin the demise of Pandora.com (see also the twitter effect killing Bruno the first week in the box office). I like Pandora so much, I can not even vet out what the demise of Pandora.com would be like. Lets prevent this before it happens.

What is the best way to handle this?

Assuming Pandora.com values, cherishes, and wants to maintain the position of free internet radio in the mind of everyone, they need to keep the free internet radio message and own it at all levels. It means that instead of penalizing the 40 hour listener, they embrace and develop that habit, that addiction to the service. Perhaps a few suggestions can get you thinking about other ways to monetize it.

Let the ideas flow:

Sponsor a listener program
Offer people, business, corps, causes etc to pay any sum $10 or $10,000 to sponsor free listening for others. You can hold an annual fund raiser for this, put a huge marketing spin on it for all kind of PR that will grow the Pandora brand. Promise to donate a portion of the revenue to a good cause so it has the warm fuzzy element, then reward listeners with ongoing free listening (with ads showing). This way you can continue to monetize the user clicks for thumbs up/down, play/pause etc which is good for your advertisers. Your fans will love you more and will work harder for you. For more clarity on this model, just look at what PBS does every year (or NPR for radio) both of which aren’t far from Jerry’s Kids. The point here is that it works and will work for you if you just have a little imagination. And its not just for funds but great PR (and will not run off your listeners).

Promote membership
If you want to monetize the user, go for it, but don’t put me in fight or flight mode. Offer things that reward membership or transactions. For example, Pandora exclusive concert ticket purchasing at a Pandora price for paid members. Partner with an advertiser and give Pandora members special incentives when they purchase the membership. For example, pay $50 and get $25 in Rock Band credit. In other words, you can use promotions to drive membership, not a road block to your service.

Make me feel special and I’ll give you more
Develop Pandora exclusive content only available to members. This can be tshirts, books, compilation CD’s etc. Take a look at bluebeat.com and see about a similar setup where members can create their own playlist and share with friends this way they can have a little more control over the Pandora experience. Similarly, with grooveshark.com you can play a specific song pretty much on demand which is might be an example of something a member could do. Lastly, since you know so much about my musical interest, use that information and present hyper relevant products to me. By doing this, you give me access to things that I otherwise may not have known about. For example, I am a major nine inch nails fan, but don’t always know what’s going on with nin fan club promotions – however, I am always on Pandora.com and you can see I have a nin station and thumbs up nin when they play on my other stations. This means you can keep me tapped in as a one stop location for all my musical interest.

Feel free to chime in, agree or disagree. Think about your position. Pandora = Free Internet Radio. Or does it?

Potentially more to follow…

Regards,
Justin McCullough
leader4hire

http://www.pandora.com/people/leader4hire

About Justin McCullough

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