The term ‘freemium’ was coined to refer to any software or service offered for free use, but offers some some enhanced functionality if the user or organization pays a monthly or annual fee. Notable examples include DropBox, who offers 2GB 5GB of online storage for free — up to 1TB for paying users — or Pandora, who offers free Internet radio but allows paying customers track skips and an ad-free experience.

While ten years ago paying for a service such as Internet radio would be regarded as a frivolous expense, there are a growing number of paying subscribers who would contend such an expense is just as vital as keeping the electric bill paid.  According to an internal survey, 67% of Pandora listeners said the company’s Internet radio service made a positive impact on their life.  When narrowed to just the musical experience, some 84% said Pandora connects them with the music they love.  With stats like that, who wouldn’t want to listen to, or advertise on, Pandora?

But this presents a real problem for advertisers.

Let’s take Pandora; with over 80 million registered users, they’re arguably the widest reaching internet radio platform — a lucrative advertising medium to spend our media budgets on. Here I am, Mr. Media Buyer, trying to target the Pandora’s most loyal listeners, particularly ones who have disposable incomes what most would consider a

Add to that the psychological effect on a user who pays for a service he or she was already getting for free:  they use it a heck of a lot more.  After all, if I’m catching grief from my penny-pinching wife on spending six bucks a month on some internet radio service she gets on her iPhone for free, I had better spend every waking minute of the day using it.  This means the users with the highest frequency to the site are excluded from my advertising reach.

For a company like Pandora, it equates to the users with the highest listening hours per month — with the greatest chance of seeing my client’s ad — are totally off limits to my campaign.  This makes it a harder sell to clients, knowing that a sweet piece of a pie will never hear their clever ad.

Even with that considered, advertising on freemium services is far from a bad option.  This stands especially true if you’re targeting the coveted 18-25 demographic, who’ve all seemed to embrace conventional-media-replacing services like Pandora and Hulu.

It’s a limitation, not a deal breaker, but I sure hope these service providers fully explore every option before excluding the crème de la crème to us media buyers.