Find a Need and Fill it, and…

If I’ve learned anything about marketing and how it fits into business, it’s that you must first find a need that is not being met, then fill that need, sell the heck out of the product or service, and make a killing off of it. But there is one thing missing from this formula – having a product that is profitable. This is exactly what Pandora‘s problem is. This past week they had their IPO, which ended up being somewhat of a disappointment, especially when compared to LinkedIn who’s stock price doubled on it’s first day on the market. (Pandora opened at $16, shot up then back down to its eventual close at $17.42, while its second day closed at $13.26.

And things only get worse when talking about Internet based companies. For example, Groupon and Facebook have both shown interest in an IPO, which could push out other, weaker tech companies. And this is not good news for Pandora, whose biggest weakness is monetizing their service. For example, the two main revenue streams are ads and membership fees that eliminate ads. But the membership fees only make up 14.5% of their revenues, and that’s a problem since advertisers haven’t put their full trust in Internet based advertising.

This brings us back to our original topic. Yes filling a need is crucial to success (look at the great depression which was partially created and fueled by overproduction of unwanted and unaffordable products). Pandora has met a need, but if they are going to be successful going forward (and receive my investment in their stock) they need to find ways to bring in more revenues from more avenues. It will be interesting to see what they do.

-Austin