![]() It shows Pandora has changed its future by increasing its advertising revue (Edwards, 2011) As seen in the graphic below, the revenue line does seem to be rising faster than the total costs line. ![]() The advertising revenue has been increased 5.5 times since 2009. According to Tim Westergen the three most important competitors are Google, Spotify and iHeartRadio. Additionally, the competition has been increasing. Pandora doesn’t spend lots of money on advertising because Pandora uses WOM as an advertisement therefore, Pandora can’t risk losing the customers even they are unprofitable. Although the paying user create 9 times more revenue than the free user, WOM in order to bring in new customers is very important. Should They Leave Their Unprofitable Customers? In order to decrease TVC, free users should be used more efficient to create advertising revenue. The variables costs(VC) are high because of the free users (unprofitable customers). It is the major source of the revenue(TR) it is a good idea to increase that ratio because it helps to increase TR. Retrieved from Pandora’s Business Model Analysis IIIĪccording to the Pandora case study, only 60% of the available ad space was been used. They didn’t continue to be subscribers because they could use freemium option.Īlthough the paying users of Pandora are 500,000 whereas the free users are 29 million, the paying user(36,000 $) create nine times more revenue than the free user(4,000 $). However their customers accepted and started to use free hours, they quitted when the free hours were done. They were not able to generate positive cash flow. Pandora’s Business Model didn’t work and had to be improved. The advertising revenue increased 5.5 times since 2009 therefore, advertising has been their important revenue ![]() Use it as an asset to get the attention of advertisers. It is the other competitive advantages and Pandora can Pandora has 29.5 million users with their information. Understanding their customers’ need is one of the most important core values of Pandora, because it provided a way to understand the people’s desires in the music industry and offer them what they really want. The Music Genome Project has been used in order to understand people’s music habit and taste, analyze the musical elements and find out the songs that they would probably like to listen.
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