Pandora: Now We're Really Ready to Eat Radio Stations’ Lunch in Advertising
The Internet radio company Pandora is only now ready to make a successful run at radio stations’ bread-and-butter advertising, particularly outside the largest markets, the company’s founder said. “We can actively attract the interest of local advertisers … historically the largest part of revenue for radio,” said Tim Westergren, Pandora’s chief strategy officer. Previous efforts concentrated on national advertisers, and, Westergren indicated Tuesday at the Web 2.0 Summit in San Francisco, didn’t make the desired dent. “I wouldn’t be surprised” if broadcasters “weren’t far more efficient at monetizing at this point” than Pandora is, he said.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The company has been busy hiring ad sellers in smaller markets and starting to attract “the Holy Grail” of advertisers such as car dealers and grocers, Westergren said. “We've become better at selling advertising” and “at subsidizing a long-term listener, because our advertising base has become more diverse,” he said. It’s harder for the service to support power users than others, because typically advertisers will “pay $1 to reach you once but they won’t pay $2 to reach you twice.”
The company has 37 million active U.S. users at last public report, and after operating for years essentially as a desktop-computer service, “it’s becoming much more like a radio writ large,” Westergren said. The original iPhone “completely transformed our business,” he said, adding, “We almost doubled our growth rate” in subscribers “the day the iPhone launched.” And “more importantly” Pandora “suddenly became any time, anywhere,” Westergren said. He said “people are using it all over the place,” including in their cars and living rooms and at the gym. About 70 percent of listening now is on mobile devices. The service claims to have more users than the largest radio broadcasters in unspecified cities have.
"We have plenty of data to make this a very attractive advertising platform,” Westergren said. “We know the age, the gender and the ZIP code along with the kind of music for every listener at every given moment on Pandora. So we can offer tremendously well-targeted campaigns right now that can accommodate 90 percent of what an advertiser wants."
Pandora is looking at extending its programming into talk, news, sports and weather from the music it started with and the comedy it has added, Westergren said. Informational programming accounts for about half of radio time, he said. “You can certainly imagine doing something interesting in that area, especially given that we have localization,” Westergren said. “We have ZIP codes and so on. But nothing specific to talk about now.” Video isn’t as interesting to the company, he said. “The thought crosses our mind,” but “there’s nothing that we're specifically excited about."
"Being global is most definitely part of the company’s vision,” Westergren said, adding that “the issue of course is licensing.” The company has been “trying to broker some kind of reasonable licensing fees to offer Pandora outside the United States,” he said. “And by and large it’s been pretty frustrating. Our hope is that over time the rights organizations in other countries, as they watch what’s happening in the United States, … or the artists whose interests they ostensibly serve, are going to say, ‘Wait a minute. … We want that here. So what’s the problem?'” In the U.S., Pandora makes use of compulsory licenses provided by federal law and unlike broadcasters must pay royalties to artists in addition to music publishers, Westergren noted.