A historic day for digital music took place yesterday with the announcement of the Pandora IPO. Probably the biggest winner was Walden Venture Firm director Larry Marcus, who pocketed $455.5 million (other big winners here). Traders pushed the stock to $26/share before it closed at $17, only one dollar above its initial offering. Not bad for a company that hasn’t turned anything resembling sustainable profits. Here’s some red flags raised already:

1) Ad-based business model not sustainable: All ad revenue goes toward paying royalties for the music. Only 10% of users have premium subsciptions

2)Increased Competition: Slacker, Spotify (just signed a licensing deal with Universal), MOG, etc.

3) Inadequate form of music discovery: This where GoRankem comes in. If you read Bob Lefsetz‘s blog post you will see just how turned off listeners are with their one directional, casual structure. GoRankem should be the vertical to Pandora’s horizontal. You hear an obscure artist for the first time and want to see what their top 10 songs are. You just click on the artist icon and bam there they are. Simple and effective, right? As impressive as Pandora’s music discovery algorithm is, it would be vastly enhanced by what we bring to the table: tapping into fan sentiment. Any money raised from this colossal IPO should be invested in enhancing their product, not gold parachutes and marketing.

Hey, look our company is worth $2.6 billion now!