Since going public in June, Pandora Media (NYSE:P) has been a nightmare for shareholders.  The aftermarket return is a gruesome -43%.

And on Monday, the stock fell to an all-time low, even though it was able to make up for its losses at the end of the day.

There’s little doubt that Pandora has a great service – it’s the dominant player in Internet-based radio.  With it, people can create their own stations and the music is personalized to their listening patterns.

And Pandora is growing at a rapid clip.  In the latest quarter, revenue spiked by 99% to $75 million and total listening hours also doubled to 2.1 billion.  Pandora’s share of the U.S. Internet radio market is 66% and there are 40 million active users.

So what’s the problem with the stock?  It’s really the competition.  Besides the traditional “terrestrial” radio providers, Pandora must also contend with satellite radio companies like Sirius XM (Nasdaq:SIRI).  There are also Internet-based rivals like iheartradio, Last.fm and Slacker Personal Radio.

But perhaps the biggest threat is Spotify.  Founded in late 2009, the company initially focused on the European market.  A key part of its service was to leverage Facebook by allowing users to share their music.

Then in July, Spotify launched in the U.S. – and the growth has been substantial.  In November, it reached 2.5 million subscribers, up by 500,000 from the prior month.  The service is $5 a month for computers and $10 when adding mobile devices.

But Spotify has now increased the pressure on Pandora by launching its own radio service (this has always been a part of the platform but it was difficult to use and was only based on genres.)

But now Spotify Radio is a worthy contender.  You can pick a song or artist and then get a stream of other similar music (there are no limits to the number of stations or skips of tracks – unlike with Pandora).  It’s a great way to discover new music and put together playlists.

Pandora’s service has little to differentiate itself – other than its brand.  But with Spotify’s success on Facebook, this advantage could quickly go away as well.

Tom Taulli runs the InvestorPlace blog “IPOPlaybook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.