Pandora (Etilities Forum), the popular internet radio service, has been struggling for some time with profitability issues. One of its biggest challenges is that it pays higher royalties than broadcast and satellite radio and therefore has to work harder than a lot of its competition just to stay afloat. Thus far, most of its revenue has come from visual ads next to the playlist. But typically, when you listen to music, it is playing in the background while you browse other pages, so it is likely that Pandora gets fewer ad clicks than your typical site.

In order to work around this problem, Pandora has started playing 15 second audio ad segments throughout its playlists. These are, for now, only airing every 10 to 20 songs, which comes out to every one to two hours provided you don’t do too much skipping. While this will no doubt be a turn-off for many users, 15 seconds of commercials every two hours most certainly beats any radio station, and given that you are still getting personalized stations that let you pause and skip tracks, it’s easy to see that you’re still getting a pretty good deal.

If you don’t want any ads whatsoever, Pandora has been offering a subscription service for $36 a year ($3/month). However, the fact that they are still investigating other avenues for generating revenue suggests that not many are signing up for it, which is of course the core of the problem: we always want all of the content in the world, playable anywhere, anytime, for free and without ever being hassled with ads. No wonder it’s tough to make a living trying to meet those expectations…

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