Essentially if people who listen to many of the same artists/tracks as I do have discovered other things I have not, then those unseen artists/tracks become candidate recommendations.
It worked as well as it did because they had a user base of music fans with a wide variety of tastes. CBS ran them into trouble when they upset those fans by breaking the radio and by being perceived as too close to the RIAA.
The will need to get the numbers up, but I'm hoping them being independent again is a good sign.
The problem will be recovering from algorithmic poisoning from folks just scrobbling from spotify
Outside of the spotify integration, last.fm doesn't have visibility into anything that isn't scrobbled AFAIK. It's based on user data only. You have "neighbors" who have similar tastes, which I think is calculated based on overlapping scrobbles (not sure if time-weighted, or just top listens). If we both start scrobbling with a limited amount of artists, and 75% of our scrobbles are the band Primus, we're probably going to be neighbors. If I decide that Primus sucks and start listening to Coldplay all day, our venn diagram overlap separates and we're not neighbors anymore.
Maybe the neighbors influence the recommendations, but playback is outsourced to spotify? I guess I don't really know. You can still browse neighbors though, and use their top lists as "recommendations", which should only be based on listening history.
Sadly many years ago pandora bacame US only, so I couldnt use it (did not bother with VPN).