With the economy hurting just about every industry, it looks like even some of the most successful and “sticky” websites on the net are going to be making changes to increase revenue. This time, it looks like it’s Pandora that is going to try their luck with increasing their advertising potential:

Pandora has recently rolled out ads between songs, though, moving into a format slightly more akin to traditional radio. CEO Tim Westergren told California’s Press-Democrat that the commercials were just one of many things that Pandora was experimenting with, but that the service would never run as many as traditional radio.

From a business stand point, I can understand the logic behind them wanting to do this, it’s a simple concept. However, I can’t help but wonder how this is going to affect Pandora’s visitor loyalty.

While the “music genome” concept is extremely unique and interesting in its own right, I think that if they open up the advertising floodgates on the site too much, people are going to be more inclined to utilize other online radio services, such as AOL Radio, which now features a smoother integration with AOL Instant Messenger.

If Pandora is going to continue to ramp-up their advertising as a means to generate additional revenue, before they take it even further, they should consider modifying their subscription model. Instead of having it be a $36 annual fee, they should break it down into a monthly fee-structure, as people are more likely to put $3 on their credit cards than they are $36.

Beyond the monthly pricing, they should consider “add-on” features that would be available for an additional fee, such as unlimited listening (without the time-outs), which would make the product even more attractive for office and retail environments.

While many companies are struggling during this difficult economy, I think that Pandora, of all of the online companies, is in a position where they can make minor structural changes that will help them generate the necessary revenue, without having to go overboard on advertising.

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