In today's world of mobile advertising, being the most popular just doesn't cut it like it used to.

A Bloomberg report from yesterday is shedding some dim light on Pandora Media's (NYSE: P) advertising revenue prospects. It mentions that Pandora users are migrating en masse to mobile platforms like Apple's (Nasdaq: AAPL) iOS and Google's (Nasdaq: GOOG) Android. That bit shouldn't be news to anyone; the real shocker is that more than 70% of Pandora usage is delivered via smartphones and tablets, yet less than 1% of overall U.S. ad spending goes to mobile.

Competitors are storming the music streaming business. Rivals include Europe's Spotify, which made a big splash when it crossed the Atlantic, as well as music-based social networker Last.fm, which was bought by CBS (NYSE: CBS) in 2007 for $280 million. Clear Channel (OTC BB: CCMO.PK) also recently revamped its iHeartRadio mobile app.

Pandora and Spotify are both also trying to hitch a ride home with you. Pandora hooked up with Toyota (NYSE: TM) and Spotify is going steady with General Motors (NYSE: GM). Think there's still room in the backseat for Sirius XM Radio (Nasdaq: SIRI)?

Pandora's first earnings release as a public company mostly went well in terms of revenue growth, which jumped 117%. The problem I've always had is that content acquisition costs – the company's largest cost component -- continue to grow faster than revenue, rising 130% last quarter. Additionally, income from operations shrank by 42% despite the revenue gains.

The mobile market is evolving so quickly that it will take time to monetize the trend. According to research firm IDC, mobile ad spending is set to reach $10.5 billion in 2015, compared to overall ad sales of $328.6 billion. One reason that Pandora's ad growth has been sluggish is that the company has struggled to grow its sales force as quickly as its user growth.

As much as I love using the service, I hate the idea of investing in Pandora. I have no problem with companies being unprofitable in the early years, but there has to be hope that the company can overcome the money-losing hump eventually. In this Fool's opinion, even if Pandora does start putting up black ink, content acquisition costs will keep net margins razor-thin and the risks outweigh the potential rewards.

Add Pandora to your Watchlist to see if it ever becomes profitable.