Two years after launch, Rdio finally ready to make a splash

Rdio, as, a music industry insider told me recently, is a bit of an enigma. The Spotify competitor has been chugging along ever since its launch two years ago, quietly rolling out product updates as other players like MOG were making headlines. “They seem to be very heads-down. You don’t really know what those guys are up to,” that insider said.

Rdio CEO Drew Larner laughed when I told him this story during a recent sit-down, but he also made it clear that he wants to change that perception. He wants more people to know about Rdio, and he wants to tell them exactly what makes the service different from the rest. That’s why the San Francisco-based company rolled out a massive ad campaign this fall, with big billboard ads in New York’s Times Square as well as in cities like Los Angeles and San Francisco.

The ads feature musicians like Snoop Lion, Santigold & Chromeo, and Larner told me about an interesting twist: Each ad shows artists following other artists – just like Rdio users can follow other users, including some of the artists featured in the ads, on the service. “We have from Day One built our service around social discovery,” said Larner.

Doing social differently

Social is one of a few notable differences between Rdio and Spotify. The latter has been heavily relying on Facebook’s social graph, relaying all the listening habits of folks you may know, but not necessarily value for their taste in music; that’s why Spotify apps like the just-relaunched Soundrop have had so much success with their own take on social.

Rdio has always had a different approach to social. Instead of random social connections, it relies on musical influencers that you follow for — not despite — their listening habits. Larner told me he follows a few hundred people on Rdio, but only knows a small number of them personally.

Another difference from Spotify is that Rdio now pays artists to promote its service. The company recently launched its Rdio Artist Program, which pays artists $10 for every new paying subscriber they help recruit. It’s an industry-first, even though it’s not exactly designed to get rid of the middle man and turn the music biz upside down. Still, it could get some artists some extra pocket change.

And for Rdio, the benefit is twofold: Not only will artists try to win over new users, but their increased use of the service will also make it more interesting to existing subscribers who chose to follow those artists. It’s a subtle side benefit that likely wasn’t lost on Janus Friis, the Skype founder that is financing Rdio. Friis was the brain behind the artist program, Larner told me: “It came from Janus, it really was his idea.”

Next up: carrier billing

So what’s next up for Rdio? Larner said that the company is going to take its ad campaign to Europe, Australia and Brazil in the first half of 2013. Rdio is also planning to make its API more widely available to developers, making it possible for them to use Rdio’s tracks within their own sites and services. That used to be a licensing challenge, but Larner told me that he sees the industry ease off on licensing terms.

But the biggest step forward for Rdio – and the music subscription market in general – could be a partnership with mobile operators. Muve music has demonstrated that bundling music with other phone services works, and Larner agreed that it is an important piece of the puzzle. “To me, the key is the billing relationship,” he said.

His company struck a billing agreement with Canada’s Telus last summer, and has similar agreements in place in Brazil. When will we see Rdio partner with a U.S. telco? Larner wouldn’t say, and just smiled. Maybe some things won’t change about Rdio after all.