How Does Pandora Works: Explore Everything About it to Know How it Exactly Works?

Pandora is one of the most popular online public listing radio providers. This music streaming platform provides automated music recommended service to the users. Users are allowed to play any of the music based on artist selection and many other categories based on their choice.

Pandora possesses more than 250 million users worldwide and is considered one of the most popular internet radio services. Moreover, this advanced music streaming platform works accurately and efficiently compared to all other music services, which has created huge confusion for the users about which platform to choose.

“Music Genome Project” is considered as the basic foundation for Pandora, it undertakes thousands of classified tracks and much more based on music attributes. Each song which users leverage on the Pandora platform is analyzed by the musicians and is being classified using more than 400 different “genes”. 

Do You Want to Explore the Brief History Related to Pandora?

In 2000 Pandora was founded by Will Glaser (“Glaser”), Tim Westergren (“Westergren”), and Jon Kraft, under the original name of Savage Beast Technologies. The founders of this platform wanted a personalized online radio service to provide users with an enhanced experience.

They started with Music Genome Project technology, which was basically based on Glaser leading, they crafted more than 400 specifications for every song, which suggests songs or artists to the users. In 2005 Pandora was made available for the users, currently, it only offers a paid-only service when it comes to advertisements.

Pandora has raised around $56 million from investors, these investors include Selby Venture Partners, Greylock Partners, and many others. This platform went public in 2011 and has raised around $234.9 million initially from the public offering; this number is measured just for the New York Stock Exchange. While its closing price in the same year was around $2.8 billion, and currently, it owns the capitalization of around $2.42 billion.

Pandora or Spotify Which Can be Considered as Best Music Streaming Service?

Pandora and Spotify both provide the best music streaming service to its users. But when it comes to comparing Spotify and Pandora platform users, then definitely Pandora is the winner in the market. According to the report, Pandora’s monthly active users are increasing rapidly, in 2014, Pandora was having around 81.5 million users which increased and reached 77.9 million MAUs by 2016.

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It is predicted that by 2023, Spotify will pose around 93.4 million users, this number is also thirty million as it was around 65.4 million in 2019 alone. Even in the same report, it was also found that Pandora users will decrease drastically in the upcoming years. It is estimated that the company loses around two to three million active listeners per year.

Pandora identifies the songs that users like to leverage, In the U.S. alone, Pandora is very popular among the users. In one of the recent surveys, it was found that almost as many people in the U.S. prefer to use Pandora over Spotify as it helps them to keep up to date with the latest music.

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The same report shows various sources which any of the individuals explore to stay up to date as of 2017. It was found that around 68% believe in sources recommended by their friends and family when it comes to staying up to date with modern music, while more than 63% of people prefer to explore the latest playlist through FM/AM radio stations, whereas around 64% use YouTube to listen to music. While only 15% of people responded that they prefer to make use of some of the music blogs to stay up to date with the recent music.

While a recent report by MusicWatch found that more than there were more than 14 million Amazon Echo users in 2016 alone, they made use of Pandora to listen to music and ranked the platform among one of the most preferred streaming services.

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Explore to Know Why Pandora is Losing Its Users?

Fundamentally, Pandora is running its platform on a highly unsustainable business model, it yet prefers to turn an annual profit. There is no doubt that Spotify is also making the profit, but the primary difference between both the platforms is both the companies, moreover, it is found that Pandora never turned to profit-making whereas Spotify is one such platform that continues scaling up its profit ration with each passing year.

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The above image shows the statistic above related to Pandora’s net results during the fiscal periods, which begins from February 2006 to December 2017. It represents that Pandora lost more than 30.41 million U.S. dollars. Explore the quarterly net results of Pandora to know whether it is making enough profit or not. (Source)

To understand it in a better way, explore some of the key aspects which are listed below, all the aspects can be considered as a business model of Pandora.


This streaming platform possesses mainly 2 types of customers, that is:

1. Users who prefer to stream music for free (free-tier users).

2. Pandora Plus subscribers (paid-tier users).

Users who prefer to opt for a subscription plan can leverage numerous benefits like no ads while enjoying the songs, very lesser skips, lesser timeouts, and much more.

Value Creation

For both types of customers, Pandora provides unique value. Users can easily leverage personalized music experience, easy-to-use interface, while paid-tier listeners are provided with numerous products and services, they can leverage numerous advantages at pocket friendly.

Value Capture

Pandora prefers to make use of advertising dollars to pay for those content that has been consumed by free-tier users, it charges around $5 per month to subscribers, this is a very negligible amount compared to that which users pay for leveraging most other music streaming services. The company generates some revenue through TicketFly, which was purchased by the company by spending $450 million in 2015.

Operating Model

Pandora’s technology stems from the Music Genome Project and is considered as the heart of the company. The company’s founders crafted a music recommendation system that was based on a complex algorithm and also on more than 450 musical attributes. Some of the other attributes which are involved with are content rights, artists, and many other rights. It also involves some of the engaging platforms such as TicketFly, Next Big Sound, Rdio, and many more which the company acquired in 2015.

One of the basic problems with the business model is its dependency on advertising, the company tries to capture its values through the advertising revenue. This music streaming platform has always relied on a large portion of revenues to come from advertising.

Advertising dollars can successfully build value for free-tier users by availing their content free of charge, but this can’t help them to create much value for paid-tier users. Furthermore, it also encourages management to focus on vital aspects of Pandora’s free-tier. After all, it proves to be more beneficial for the company to invest their money and efforts in an advertisement while helping them to raise more than 80% of revenue and create around 95% of the value of customers in no time.

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During the fiscal year ending in December 2016, Pandora generated around 1.07 billion U.S. dollars through advertising. Paid-tier users are very crucial for the survival of the company. Subscribers who choose for paid subscription mainly pay for a personalized music experience, which is mainly driven through Pandora’s technology. 

The fact is that only 5% of Pandora users opt for paid subscribers, compared to that more than 25% of Spotify active users opt for the subscription plan, it is found that though Pandora’s technology provides enough value to free tier users, it might not provide enough value for the users to justify Pandora’s monthly subscription fee.

Wrapping It Up

Pandora is an online service provider that was launched in 2005. It provides subscribers with music recommendations and music streaming, which is mainly dependent on user preferences. It possesses around 81 million active users during 2016, company revenue has increased to a great extent after its launch.

Pandora’s business model is very attractive, especially for free-tier users, but underlying the model is not quite enough for converting free-tier users into paying subscribers. There is a lot more to discover related to Pandora, in terms of how it works and also about the music it plays.

Post by Alphanso Tech

Created in 2013, Alphanso Tech is a leading IT Consulting company with a presence in the USA, Canada, and India.We are a trusted and leading service provider to many top-tier companies in the area of Custom WordPress Development , Web Application Development , iOS App Development , Outsourcing Services, Online Marketing and many other related activities.

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