Music discovery services sprouted like mushrooms after a storm in 2006. Pandora, Last.fm, MOG, iLike, and a number of others are vying strong for consumers to use their services and/or be active users of their communities.

Pandora is arguably one of the best known of such services. While it does not cater to the social networking concept the way that the other start-ups in this niche do, it does share a common challenge with them – and the majority of social networks: without producing a good or service that users are willing to pay for, how can the company generate revenue?

Why, online advertising, of course! This simple answer, touted by many participants in Web 2.0, however is not always as simple to implement. Pandora rolled out text-based ads on their site a while back, which users seem to be at least tolerating. The company has made a bolder advertising push more recently by reportedly incorporating audio ads into their music streams.

Initial indications point to displeased users, and while Pandora is a user-focused company that will surely not commit to a strategy that alienates its users, this incident highlights the potential short-comings of relying on advertising as a sole revenue stream, as well as the challenge created by consumer expectation to receive services and consume content at no cost and without diminishing the experience whose equivalent they previously paid for.

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