Sep 4, 2014 · 6 minutes

As music continues its transition from physical to digital spaces, there's a lot for consumers to celebrate (artists less so, but that's another story). There's no more need to buy music a la carte via exorbitantly-priced $17 CDs, or even on iTunes for $0.99 a song and $9.99 an album. That same price gives listeners unlimited access to tens of millions of songs on all-you-can-listen services like Spotify. And users who are even too cheap for that crazy bargain can still listen to algorithmically-powered radio or suffer through ads to access expansive catalogs which put even the biggest Virgin Megastores to shame.

But one area of music appreciation that hasn't translated very effectively over to the digital realm is the social element -- which is surprising considering the much-vaunted network effects of Facebook and Twitter. People still participate in the communal sharing of music while hanging out in dorm rooms and lofts with friends, but those experiences, as before, are driven by real-life interactions. Big social platforms, however, have not been terribly conducive to that kind of discovery. Maybe it's because there's simply too much noise -- after all, Spotify's idea of a "social" experience involves spamming Facebook with every song a user plays.

Furthermore, as physical stores continue to die off, no digital equivalent has arisen to replace the relationship fans had with record store clerks, immortalized by the film "High Fidelity," which in retrospect feels almost like a eulogy. I remember going to my local record store in high school and watching the store clerk refuse to sell my friend Bob Dylan's classic break-up album "Blood on the Tracks" because when asked if "a woman ever really fucked him up" he answered, "No." Nothing like that exists on the Internet.

But with a major overhaul of its iOS, Android, and desktop offerings launched today, Rdio, the smaller hipper cousin to Spotify, has recreated these beloved social music interactions in the digital sphere better than anyone else in the game. In addition to features that better prioritize its free Pandora-style radio offering, the redesign now provides users with a host of social tools to interact with each other and help each other discover new music.

Thanks to the update, when users first log on they will be presented with a "Home" screen that feels a lot like Facebook in all the right ways. They're presented with "Stories" about friends liking certain songs, suggestions for radio stations, and tips and tricks on how to get the most out of Rdio. This is part of the company's new "Stations First" mentality which seeks to offer a Pandora-like experience for free users while making the transition to becoming a paid user as seamless as possible.

"No trials, no paywalls, no credit cards to put down, stations first," says Rdio's Head of Product Chris Becherer. The idea is to only prompt users to upgrade to the paid experience when they initiate an action that requires a subscription, like wanting to hear more from an artist they heard on a free radio station.

As for the radio stations themselves, Rdio has launched two new types of stations which lean heavily on the kind of human curation that existed back when "curating" was something only museums did. The first is a radio station based on the listening preferences of a friend. Because your friends' tastes are often unpredictable yet still valuable, this offers more variety and is a refreshing alternative to Pandora-style radio stations which are algorithm-driven based on genre or artist and therefore can become repetitive or homogenous. For example, if you pulled up my station, "DavidFM," you would likely hear a lot of rapper Killer Mike, the punk band Japandroids, and sixties psychedelic legend Donovan. That's not a combination an algorithm would likely conjure by itself.

The second are stations programmed by Rdio employees -- music experts that curate songs like a college radio DJ might. With Pandora having set the precedent and the standard for Internet radio stations to rely on algorithmic curation, it's great to see Rdio integrate human tastes so seamlessly into its app. Listeners can also turn any playlist, whether it's curated by a friend or an expert, into a station.

Meanwhile, Rdio's standard algorithmic stations have received a shot in the arm. While Pandora's stations learn about user tastes from thumbs-up and thumbs-down votes alone, Rdio now lets users "favorite" almost anything, from a song to an artist to a playlist. It then collects that data, along with thumbs-up and thumbs-down votes, to create a more detailed listener profile and, ideally, provide a more personalized radio experience. Consider too that Rdio, like Spotify, has 20 times as many songs as Pandora thanks to extensive dealmaking with record labels.

It's too early to judge the full effectiveness of Rdio's algorithm, but it's not unreasonable to suggest that the app now stands to offer a better radio experience than Pandora. It also offers a more social experience than Spotify. And even with all the new features and functionalities, Rdio is still the cleanest, best-designed streaming app by a wide margin – at least in this writer's opinion.

The only problem? Users.

Pandora has 76 million users. Spotify has 40 million users, 10 million of whom pay for the app. Rdio doesn't reveal specific numbers, but COO Marc Ruxin tells me its user base is "in the millions." Just like the best bands never get signed, the best app doesn't always win.

So how can Rdio, with only $17.5 million in funding compared to Spotify's $537.8 million, expect to compete against the 800 pound gorillas in the room? That's to say nothing of Beats Music which, while slow to pick up users, has Apple's monstrous marketing budget behind it; Amazon's Prime Music which will benefit from bundling that service with other attractive Amazon offerings; and the upcoming subscription service from YouTube which has perhaps the best brand recognition in the game when it comes to music?

To help better popularize its service, Rdio will look to Cumulus Media under a recently signed a strategic partnership between the two companies. Becherer told me that Cumulus, the second largest terrestrial radio operator in the country, will run $100 million worth of Rdio ads on its stations, which, according to its own website, reach 150 million listeners. He then hinted at a partnership with the Internet-connected set-top box Roku which will include an Rdio button right on its remote. I also reported earlier this summer on a partnership between Rdio and Shazam that can send subscribers straight to Rdio after identifying a song to hear the tune again or add it to a playlist.

Whether that will be enough for Rdio to compete against Pandora, Spotify, and the rest when it comes to user acquisition remains to be seen. With the global market having barely dipped its toes in the streaming music subscription waters, and smartphones continuing to proliferate around the world, Ruxin believes the number of people using services like Rdio is set to explode.

"I don't think that this is a zero sum game on a global basis," Ruxin says. And while Rdio, like Spotify, is available in around sixty countries, Pandora is only available in the United States, Australia, and New Zealand. So despite its dominance in these markets, Rdio's scrappy decision to gun for the Goliath-like Pandora with its latest update may not be such a fool's errand after all.

With less cash and fewer users than its closest competitors, Rdio still faces an uphill battle if it wants to share in the spoils of the streaming music wars. Also there's the not exactly insignificant detail that none of these companies are profitable except Pandora, which is just barely in the black. Hopefully Rdio's new design, which offers a softer sell to potential paid customers, will funnel a greater percentage of users from free radio to paid streaming.

As I've written before, paid subscriptions are the best way to increase revenue for the struggling music industry and its increasingly starving artists. If wider adoption of paid subscriptions doesn't take off, somebody's going to have to come up with a new model to ensure streaming music is a sustainable business. And judging by its newfound aggressiveness and devotion to innovation, Rdio could very well be the one to do it.

[illustration by Brad Jonas]