Pandora’s (P) ability to analyze data and use it for marketing purposes appears to be growing by leaps and bounds. The company has actually created music recommendation software that can tailor music playlists to specific fans. The San Francisco Chronicle reported that Pandora can now tell the age of listeners by using its recommendation software.

That way, an older fan of a band could get a playlist of classic hits, while a younger fan might get recent hits. It is easy to see how these capabilities could be for advertising and to create new streams of revenue for the digital radio service. A music fan in her 30s might be targeted with advertisements for minivans or real estate ads for houses near good schools because she would be more likely to have kids. A younger fan might get an advertisement for a hot new club or a new brand of tequila.

This capability or social discovery could give Pandora the edge in selling advertising. Its sales people could show a car dealer how to reach the most likely buyers in his immediate area. An example of this might be targeting ads for Cadillac to playlists of classic 60s and 70s hits, which would appeal most to middle-aged professionals.

This strategy obviously is not proven, but it could be what makes or breaks Pandora. The company needs an edge when faced with a competitor like Spotify that can sign up Heineken and Chevy as advertisers for a service it has not even launched yet.To continue reading, click here.