Table of Contents

Critical assessment of a corporate website: www.Last.fm ....................................2

1. Overview .................................................................................................................................2

2. Service Offering ......................................................................................................................2

3. Audience Profile .....................................................................................................................2

4. Objective & Business Model ..................................................................................................3

4.1 Subscription Fees ......................................................................................................................................3

4.2 Advertising ................................................................................................................................................3

4.3 Affiliate Relationships ..............................................................................................................................4

5. Web Evaluation .......................................................................................................................5

5.1 Content .......................................................................................................................................................5

5.2 Usability & Accessibility .........................................................................................................................5

5.3 Search Engine Optimisation ...................................................................................................................5

5.4 Technology ................................................................................................................................................6

6. Competitor Analysis ..............................................................................................................6

6.1 Porters 5 Forces .........................................................................................................................................7

6.2 Channel Strategy ......................................................................................................................................7

7. Conclusion ...............................................................................................................................8

Appendix ....................................................................................................................10

Bibliography ...............................................................................................................20

1. Webpages ...............................................................................................................................20

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CRITICAL ASSESSMENT OF A CORPORATE WEBSITE: WWW.LAST.FM

1. Overview
Last.fm is a UK-based internet radio station and social network that was acquired by CBS
Broadcasting Inc. for $280 million USD on the 30th May 2007. Last.fm is available in 12
different languages and is actively used by over 30 million users in over 200 countries1 . This
report aims to critically analyse and give recommendations on Last.fm’s website, business
model and strategy.

2. Service Offering
Last.fm’s key service offering is an online radio station that is personalised to the music taste
of each individual user. A user can begin listening to Last.fm by simply entering the name of
an song or artist. Last.fm then servers the users with a series of songs that are similar to - but
not the same as - the user’s request. Hence, Last.fm is not an “on-demand” music streaming
service, but rather a music discovery service. As an avid user of the service, I can confirm
that the service adds considerable value to my music listening experience. This view is
reinforced by the fact that 75% of it’s users return to the site within 24 hours 2 and that
unique user visits has increased by 90% year over year 3.

This service is possible because Last.fm aggressively collects data from all activity on it’s
site. As users browse and listen to music on the Last.fm site, their listening history is
recorded. Users are also given the option to “love” or “ban” a song (See Fig 1) depending on
whether or not they like it. Users can also download a small program called Audioscrobber
(See Fig 2) that monitors the users iTunes library. As users listen to music (on their iPod or
computer), this information is sent to Last.fm and stored on their servers. Additionally,
Last.fm collects information regarding the users gender, age & location.

3. Audience Profile UK User age breakdown

Empirical evidence from last.fm4 shows
that the vast majority of the their users are U18 15%
under 30 years of age. And with a 62% 18-24 49%
majority 5, Last.fm tends to attract more 25-30 18%
males than females. Statistics produced by 31-35 7%
Last.fm show that 84% of it’s users like to 36-40 5%
introduce their friends to new music and 41-45 3%
99% of their users listen to music stored 46-55 2%
on their MP3 players or digital libraries. 56+ 1%
Additionally, 23% of their users own or
plan on owning an iPhone. Given the above needs, I believe Last.fm is effectively targeting
it’s user base by providing them with the functionality to quickly share and recommend
music to a friend via their social network of choice (See Fig 16). Additionally, Last.fm

1 Wikipedia 2009, Last.fm Radio Announcement, 4 May 2009,

http://blog.last.fm/2009/03/24/lastfm-radio-announcement.

2 Neilsen Online 2009, Last.fm audience stats: Nielsen Online @plan customer profile Study, Jan
2009.

3 Compete 2009, Site Profile for Last.fm, 3 May 2009,

http://siteanalytics.compete.com/Last.fm/?metric=uv+sess&months=12.

4 Last.fm 2009, Media Kit, 4 May 2009, http://www.last.fm/resources.

5 Last.fm 2009, Media Kit, 4 May 2009, http://www.last.fm/resources.

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provides it’s users with multiple integration points to the service; allowing users to listen to
music on their MP3 player or computer. And Last.fm recently developed an iPhone
application in response to the the growing mobile needs of it’s user base (See Fig 3).

Additionally, Last.fm actively engages with it’s customers and collects their requests and
feedback 6. They are committed to serving their users with an excellent service, and their
commitment to user centred design is a reflection of this.

4. Objective & Business Model

It is the objective of Last.fm to syndicate audio content, build a community around music
and to generate revenue via 3 core business models; Subscription Fees, Advertising and
Affiliate Relationships.

4.1 Subscription Fees

Users that wish to avail of additional premium features can pay a monthly fee of £3, $3 or
€3 depending on their country of residence7. As shown below, the difference between the
free and premium service is minute.

Features Free Premium

User Profile ✓ ✓
Last.fm Radio ✓ ✓
Recommendations ✓ ✓
Groups ✓ ✓
Events ✓ ✓
Global Charts ✓ ✓
API usage ✓ ✓
Monthly Prescription ✓ ✓
Play Custom Playlists ✗ ✓
User Profile Analytics ✗ ✓
Server Priority ✗ ✓
“Black” labeled Avatar ✗ ✓

This lack of differentiation is a fundamental flaw in their subscription fee business model. In
order for a consumer to part with their money, the value proposition needs to clearly
distinguish between the free and premium services. In order to create a greater value
proposition, I would recommend that they increase the feature offering of their premium
account.

4.2 Advertising
Last.fm displays non-contextual banner advertising throughout their site. In recent months,
Last.fm have struggled to generate significant revenue from their advertising activities 8. In
response to this, they have begun forcing users outside of the UK, USA and Germany to pay

6 Last.fm 2009, Website Support, 4 May 2009, http://www.last.fm/forum/21713.

7 Last.fm 2009, Subscribe to Last.fm, 4 May 2009, http://www.last.fm/subscribe.

8 Last.fm 2009, Radio Announcement Revisited, 29 April 2009,

http://blog.Last.fm/2009/03/30/radio-announcement-revisited.
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a subscription fee to support the cost of running the service9 . I believe this negative reaction
to low advertising revenue will significantly hurt Last.fm in the long run.

This problem is rooted in the fact that their user base is spread out over 200 countries. This
poses several difficulties as they try and sell advertising space in each country to support
the service. Advertisers are interested in targeting a specific user demographic but
unfortunately, Last.fm only offers advertisers a limited amount of granular targeting.
Advertisers can specify gender, age range and region for their advertising campaigns.

Given the degree in which Last.fm profiles it’s users, I recommend that they offer advertiser
a greater degree of targeting. Specifically, I recommend that Last.fm engages in behavioural
based advertising. Studies have shown that users can be segmented by their personal taste
in music 10. PhD student Virgil Griffith has shown that a correlation exists between a
student’s SAT scores and the types of music you listen to. Listeners of Beethoven received
the highest SAT scores on average whereas listeners of Soca scored the lowest. Additionally,
a user can be segmented by their listening patterns; a user that listens to music erratically
during the week and late at night has a fundamentally different profile than a person who
listens to music at regular and predictable time periods. The geographical location of the
user could also offer a unique insight into their life. For example, I have lived in Dublin for 5
years and recently moved to London. It would be possible for Last.fm to identify this
permanent change of address (IP address) and serve me with advertisements related to
mobile phone contracts or banking services; an advertisement in which I would be very
interested. Embracing this level of behavioural advertising will improve the relevancy of the
advertisements being served to the user; resulting in higher click through rates, higher CPM
(cost per 1000 impressions) and hence higher advertising revenue.

4.3 Affiliate Relationships

As a user listens to Last.fm, they are presented with music that closely matches their
personal profile. Despite the fact that I have an obscure taste in music, I find their
suggestions to be excellent and highly relevant. While listening to Last.fm, users are
presented with an option to purchase the song from 3rd party vendors such as iTunes,
Amazon or 7Digital. In the case of transactions that are completed through iTunes, Last.fm
receives a “5 percent commission on all qualifying sales”11. The “Buy” button is prominently
placed in the Last.fm player (See Fig 1) and the process of purchasing a song - from click to
download - takes less than 30 seconds. I believe this is an excellent revenue model that is
well implemented. One suggestion would be to bundle a users favourite songs together
(songs that are not present in their iTunes library) and allow the user to purchase them in
one simple process.

In an attempt to generate additional revenue through affiliate relationships, Last.fm could

integrate their existing event recommendation service with a 3rd party ticket vendors such
as TicketMaster.com.

9 Last.fm 2009, Radio Announcement Revisited, 4 May 2009,

http://blog.last.fm/2009/03/30/radio-announcement-revisited.

10 Virgil Griffith 2009, Music that makes you dumb, 4 May 2009,
http://musicthatmakesyoudumb.virgil.gr.

11 Apple Inc., Frequently Asked Questions, 28 April 2009,

http://www.apple.com/itunes/affiliates/faq.html.
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5. Web Evaluation
5.1 Content
Given that Last.fm is a personalised radio station, the content on the website is dynamic and
highly relevant. Last.fm recognises that it’s site is used in different ways by many of it’s
users. This is reflected in it’s home page, where it presents users with multiple focus points.
As one would expect, a user can easily enter in the name of an artist or song to begin the
Last.fm radio station (See Fig 4). Additionally, users are shown recommended music (See Fig
5), recommended events (See Fig 6), recommended videos (See Fig 7) and their friends recent
activity (See Fig 8). The home page acts as a dashboard of the most important and relevant
information (See Fig 9).

Last.fm presents more generic information when the user is not logged in. They are
presented with the most popular music (See Fig 10) and videos (See Fig 11) on Last.fm. The
user is also presented with a location aware list of events for his/her area.

In an attempt to comply with AIDA marketing guidelines (Attention, Interest, Desire,

Action), the users attention is captured by a prominent banner (See Fig 12) that appears
above the fold on the home page. Their interest is captured by the statement “What music
do you like?” and a desire to use the service is created when the user reads “Based on what
you listen to, Last.fm recommends you new music”. Finally, a cause to action is created by
prompting the user to enter the name of an artist of song into the provided text field.

5.2 Usability & Accessibility

In general, the Last.fm site is very easy to use. It’s navigation is simple and intuitively
designed. It scored an impressive 29/31 in Waller’s seven point checklist; failing to
providing accessibility options for the visually impaired and 640px browsers.

The Last.fm web site is dependant on Flash Player 9 in order for users to listen to music.
This does not pose an accessibility issue when you consider that statistics recently produced
by Adobe claimed that 98.9% of computers in mature markets have the Flash Player
installed12 . Statistics of computers in emerging markets were not provided. However, the
internet connection speed would likely be the first barrier to entry in these countries. For
users that do not have the Flash Player installed, they have the option of downloading the
Audioscrobber application (See Fig 2).

I tested Last.fm on all of major browsers

and found no problems. Internet <!--[if LT IE 7]>
Explorer (IE) has historically provided
[...some code here...]
the greatest challenges for web
developers. It is clear from the web site <![endif]-->
source code to the right, that they are
catering for IE’s lack of compliance to
web standards.

5.3 Search Engine Optimisation

Last.fm has included relevant and unique meta data on all of it’s pages. It’s has attached alt
tags on most of the images on the site and has made appropriate use of the H1 tag; an
attribute that Google pays particular attention to. More importantly, Last.fm shows a clear
linking strategy within the site. Examining an artists page on Last.fm shows a number of
links to similar artists. Although simple, this rational linking structure helps Google to

12 Adobe 2009, Adobe Flash Player Version Penetration, 3 May 2009,

http://www.adobe.com/products/player_census/flashplayer/version_penetration.html.
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understand the relationships between webpages; a theory referred to as the “semantic

web” 13.

This rational and systemic linking structure provides Google with valuable information I
performed a simple search test on 20 artists and song names. I found that Last.fm was in the
top 5 Google results for 95% of the searches, and in the top 3 results for 80% of the searches.
This impressive statistics reflect Last.fm’s commitment to Search Engine Optimisation and it
is not surprising that it received a score of 95/100 on Website Grader 14.

5.4 Technology
Last.fm makes appropriate use of AJAX technologies (Asynchronous JavaScript + XML) to
create a more interactive and fluid user experience. Put simply, AJAX works by passing
small amounts of information in the background using javascript, as opposed to visibly
refreshing the page. As a result, users often do not notice AJAX because of it’s passive
characteristics. Last.fm implements AJAX functionality while a user is listening to music. As
the flash player changes to a new song, the web page content around the player dynamically
changes; a small feature that results in significant usability improvements when
implemented across an entire site.

Last.fm is created using XHTML and has provided developers with access to it’s API
(Application Programming Interface) via XML. This has resulted in a number of Last.fm
“mashups” such as LastGraph that produces a beautiful visualisation of your personal
music history (See Fig 13). A more practical “mashup” example can bee seen with the
integration of Facebook and Last.fm (See Fig 14). When a user “loves” a song on Last.fm it
automatically appears in the users Facebook page; enabling the viral spread of a users
recommendations.

6. Competitor Analysis
Last.fm is competing in an increasingly competitive online market (See table below). Services
such as Pandora, GrooveShark & Imeem have garnered significant market share. Pandora
offers a similar music discovery & streaming service (See Fig 15), however the underlying
technology used is completely different to that of Last.fm. Last.fm analyses the listening
history of it’s users and arranges its users into affinity clusters. In contrast, Pandora analyses
the audio content of each individual song and arranges the songs into affinity clusters. From
experience, Pandora’s recommendation engine is closely tied to song’s genre, whereas
Last.fm’s systemic trend based approach has resulted in more relevant recommendations.
Hence, Last.fm’s aggressive data mining practices are at the heart of their competitive
strategy.

Last.fm Competitors
Pandora Slacker
Qloud Critical Metrics
Jango Lala
GroveShark Mufin
MyStrands MixCloud
Imeem iLike
Musicovery Spiral Frog

13 Wikipedia 2009, Semantic Web, 4 May 2009, http://en.wikipedia.org/wiki/Semantic_Web.

14 Website Grader 2009, Website Marketing SEO Tool Score, 4 May 2009,
http://website.grader.com.
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High: Proliferation of free and

Porter’s 5 Forces Threat of illegal services on the internet
Ref: Strategy and the Internet, Substitutes creates new substitution
Michael Porter, Harvard threats.
Business Review, 2001.

Rivalry amongst
Bargaining Buyers
existing
Power of Suppliers Bargaining Power
competitors

High: Music labels have Medium: Last.fm’s pro-

increased royalties from
online radio stations
every year and maintain
control over Last.fm.
High: Last.fm are prietary recommendation
competing in over 200 technology increases
countries in a market switching costs and hence
that is highly lowers consumer bargain-
competitive. ing power.

High: Infrastructure cost,

Barriers to Entry contracts and proprietary

technology all contribute
to a high barrier of entry.

6.1 Porters 5 Forces

As Last.fm collects more of it’s users listening history, their recommendations become more
relevant to the user. This results in a more valuable user experience, an increase in switching
costs and hence a lower threat of substitutes. The bargaining power of buyers is clearly very
high, as consumers can choose from an array of illegal downloading services or free
streaming internet sites. In such a market, establishing and sustaining a distinct competitive
advantage is critical.

Last.fm’s data mining & personalisation strategy also results in a high barrier to entry for
competitors. New entrants to the market that wish to compete on music recommendation
features will need to gain a critical mass of users/data before any relevant recommendations
can be made. Last.fm’s catalogue of over 6 million songs and long term contracts with all of
the large music labels further increases this barrier of entry.

Music labels have maintained control over the online radio services by consistently
increasing royalty fees15. Given that online radio stations account for a miniscule amount of
their labels overall revenue, the bargaining power of suppliers is high.

6.2 Channel Strategy

Last.fm’s service model impacts on a wide range of traditional channels. It could be argued
that Last.fm negatively impacts music sales (CD’s or MP3’s) as consumers can listen to
Last.fm as a substitute to traditional media. Conversely, it could be argued that Last.fm
draws consumers away from illegal downloading channels and hence generates a small
amount of revenue for the music industry; revenue that would otherwise be lost.

15 Last.fm 2009, Pandora KO-ed by new royalties?, 3 May 2009,

http://gigaom.com/2007/03/05/webcaster-royalty-rates-go-up/.
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It is very difficult to gauge the effect that Last.fm and similar services are having on the
music industry. One thing is certain, Last.fm is adding a considerable amount of value to the
listening experience of over 30 million users. Last.fm have presented the music industry
with an alternative business model; syndicate content and generate revenue via advertising
and subscription fees.

The music industry is going through a period of rapid change. Annual revenues have fallen
for the seventh time in eight years16 and music labels are finding it more and more difficult
to monazite their content.

Despite Last.fm’s low margins, the music industry welcomes innovative service models
such as Last.fm. However, they recognise that the internet is becoming more and more
ubiquitous and that in years to come, streaming services like Last.fm may replace the need
for MP3’s & CD’s completely; a significant high margin revenue stream for the music
industry. In an attempt to strengthen the revenue generation from internet radio stations, the
music labels have tried to get royalties increased dramatically. Tim Westergren, co-founder
of Pandora believes that if royalties are increased “it’s over for us and every other internet
radio service, period. Makes it un-viable”17.

7. Conclusion
The Internet allows firms to go beyond market segmentation to market fragmentation,
dividing their markets into ever-smaller groups of customers – even tailoring their offerings
to individual consumers (Robert, 1993). Last.fm have clearly embraced the internet and
taken advantage of it’s unique capabilities; personalisation and scalability. In contradiction
to Porter’s 2X2 competitive advantage scope, Last.fm is proof that companies can target
both broad and narrow market segments whilst maintaining a distinct competitive
advantage.

Despite the fact that Last.fm has over 30 million users in 200 different countries, their Web
2.0 personalisation engine enables them to target highly specific user groups. This adds
considerable value to the users music listening experience.

Last.fm’s aggressive data mining practices are a key component to their recommendation
engine which is in turn a key component of their value proposition. By offering their
customers multiple integration points, users can listen to their music as they wish whilst
remaining connected with the Last.fm network. It is this seamless integration that has
secured Last.fm’s strategic position as the most popular music recommendation service in
the world18 .

However, Last.fm are facing significant challenges from the music industry who are eager to
increase royalties considerably. In order to generate more revenue per user, Last.fm will
need to change aspects of their 3 core business models. In particular, Last.fm will need to
generate greater revenue from their advertising efforts. As suggested, behavioural
advertising could be the catalyst in this area. Increasing the discrepancy between their free
and premium service offering should increase the value proposition and help generate

16 The Guardian 2009, Music sales decline for seventh time in eight years, 3 May 2009,
http://www.guardian.co.uk/technology/blog/2009/jan/01/music-sales-down.

17 Gigaom 2009, Last.fm, Pandora KO-ed by new royalties?, 4 May 2009,

http://gigaom.com/2007/03/05/webcaster-royalty-rates-go-up/.

18 Wikipedia 2009, Last.fm, 4 May 2009, http://en.wikipedia.org/wiki/Last.fm.

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additional revenue through subscription fees. Finally, forging strategic affiliate partners
could help generate additional ancillary revenue.

The question remains, will personalised radio stations signal the end of traditional radio
stations? Will last.fm negate the need for users to purchase traditional media such as CD’s
and MP3’s? Will the internet and it’s unique capabilities create a paradigm shift within the
music industry?

The internet has certainly undermined the value of music, and given the proliferation of
illegal downloading, the music industry needs to find new and innovative ways to monazite
their content. Last.fm have adopted a radical new service model that has shifted the focus
away from “music as content” and towards “music as a services". In doing so they have
embraced the internet and taken full advantage of it’s unique capabilities.

Final score: 18/20

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APPENDIX

Fig 1

Fig 2

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Fig 3

Fig 4

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Fig 5

Fig 6

Fig 7

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Fig 8

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Fig 9

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Fig 10

Fig 11

Fig 12

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Fig 13

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Fig 14

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Fig 15

Fig 16

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Fig 17

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BIBLIOGRAPHY
1. Webpages
BBC 2009, Music site Last.fm bought by CBS, 28 April 2009, http://news.bbc.co.uk/1/hi/
technology/6701863.stm.

Steve Krause : Blog 2009, Pandora and Last.fm: Nature vs. Nurture in Music Recommenders, 28
April 2009, http://www.stevekrause.org/steve_krause_blog/2006/01/
pandora_and_las.html.

BBC 2009, Royalties threaten internet radio, 28 April 2009, http://news.bbc.co.uk/1/hi/

technology/6430489.stm.

Apple Inc., Apple, iTunes Affiliate Program, 29 April 2009, http://www.apple.com/itunes/

affiliates/faq.html.

Wikipedia 2009, Last.fm, 4 May 2009, http://en.wikipedia.org/wiki/Last.fm.

The Guardian 2009, Music sales decline for seventh time in eight years, 3 May 2009,
http://www.guardian.co.uk/technology/blog/2009/jan/01/music-sales-down.

Gigaom 2009, Last.fm, Pandora KO-ed by new royalties?, 4 May 2009,

http://gigaom.com/2007/03/05/webcaster-royalty-rates-go-up/.

Last.fm 2009, Pandora KO-ed by new royalties?, 3 May 2009,

http://gigaom.com/2007/03/05/webcaster-royalty-rates-go-up/.

Website Grader 2009, Website Marketing SEO Tool Score, 4 May 2009,
http://website.grader.com.

Wikipedia 2009, Semantic Web, 4 May 2009, http://en.wikipedia.org/wiki/Semantic_Web.

Adobe 2009, Adobe Flash Player Version Penetration, 3 May 2009,

http://www.adobe.com/products/player_census/flashplayer/version_penetration.html.

Last.fm 2009, Radio Announcement Revisited, 4 May 2009,

http://blog.last.fm/2009/03/30/radio-announcement-revisited.

Last.fm 2009, Media Kit, 4 May 2009, http://www.last.fm/resources.

Wikipedia 2009, Last.fm Radio Announcement, 4 May 2009,

http://blog.last.fm/2009/03/24/lastfm-radio-announcement.

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