In the following video, Jeremy Bowman and Isaac Pino discuss investment risks associated with Internet radio provider Pandora. The company is a high-risk, high-reward investment, and Jeremy believes investors need to be aware of two major pitfalls.

First, competition is growing. While Sirius XM Radio and Spotify are the most obvious competitors, Apple has indicated its intention to enter the Internet radio market. The industry is changing fast, and Pandora's competitors are not sitting still.

Second, Pandora's revenue has struggled. Pandora relies on advertising rather than subscription fees, and this has not proved as profitable as originally hoped. The company hasn't really carved out a space for itself and is laboring to grow as the market matures. Further, content costs, particularly royalties, are eating into revenues. Pandora is thus left with the choice to either increase advertising space and risk alienating listeners, or find other revenue streams.

Isaac Pino has no position in any stocks mentioned. Jeremy Bowman owns shares of Apple. The Motley Fool recommends Apple and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.