With numerous new entities entering this space—including Google’s All Access Music, Apple’s iTunes Radio and MySpace’s My Radio—Pandora’s turf continues to be invaded. We spoke with Kritzman about the impact of that, as well as royalty structure deals; what makes Pandora unique; their sales structure, revenue models, apps, mobile ad sales, and more:
Tell us about your service and the revenue model.
Pandora is personalized radio. We are primarily an advertising-supported service which is free to the listener. We offer another paid tier of service, called Pandora One, and those subscribers can pay $36 a year for an ad-free experience and unlimited listening.
What is unique about your service that your competition doesn’t offer?
Pandora delivers personalized radio better than anyone else in the world. We have billions and billions and billions of data points that help contribute to making it the very best personalized experience that you will find. This is all from proprietary technology, including the Music Genome Project, and these billions and billions of pieces of listener feedback in the form of a thumbs-up or thumbs-down.
What do listeners really want from the streaming services providers?
People are looking for an easy way to find music they love. We think Pandora does the best job at that.
How well can you target audio and banner ads to specific advertisers based on location or demographics, etc.?
Targeting is one of the strengths of our advertising model. When a user registers, they tell us their gender, age and zip code. Having zip code data makes targeting very effective on Pandora.
We have seen a lot of success in a variety of local campaigns. Take, for example, a car dealer in a major market DMA. Currently with an FM buy, that advertiser buys a radio ad that reaches the entire DMA, when really all they may want is to reach one or two counties. With Pandora, they can effectively target only those one or two counties. We have also seen a lot of success in targeting with local political campaigns.
Targeting by age is also effective for advertisers. One example of how advertisers use this is with alcohol brands – now they can only advertise to consumers that are over 21 years of age.
What research and rating services do you subscribe to and do they serve you and your ad clients’ needs effectively?
One company we participate with is Triton Digital, which takes our listening data and converts the audience and hours metrics into traditional radio terms like AQH and cume. This enables radio advertisers to make an apples-to-apples comparison with FM radio. We also work with comScore for third-party measurement of digital and mobile metrics.
Tell us about your reach.
We more than 70 million active listeners every month and have more than 200 million registered listeners. When we look at the local market, we are frequently the number one radio station in terms of listeners in the advertisers most sought after demographics.
How about your sales structure?
Our sales teams are internally based. We now have feet on the street in 29 local markets. Beyond that, we also have national sellers and an inside sales team.
So, you’re not are using an outside company for national?
No. With the size and scale of our sales team now we have created different sales channels within Pandora to serve each market opportunity – Local, National, Digital, and Broadcast. This allows us consistency in all facets of our sales operation.
Tell us about your mobile app. What can you offer advertisers who want mobile placements, since that is so important these days?
For Digital advertisers we can create branded radio stations, video, tap to app features, tap to call, in addition to robust targeting. For our Radio advertisers we offer an audio ad adjacent to content. Audio is mobile’s “Killer Ad” – it allows marketers to serve the right message, to the right target, when the user in engaged with their buds plugged in! This is why our mobile engagement metrics are so high.
What platforms and devices are you on? Just about everything, right?
Just about everything. We are one more than 1,000 connected devices now and climbing. We are partners with 23 car brands. Pandora can actually be found on dealer lots in more than 100 individual models of vehicles. We are, of course, on smartphones. More than 70-80% of listening is on mobile or other connected devices. When you get into the home, we are in just about every room. We are on TV’s and set-top boxes, table top radios and BluRay players.
Do you think that the digital streaming services business has become saturated with all the new players that have come onboard lately?
I would first separate digital streaming services into two distinct buckets. One is digital radio and the other would be digital On Demand. Historically, music choices have followed an 80/20 rule, where 80% is some form of radio listening and 20% is some form of On Demand listening. This goes back years and years to when people were playing cassette tapes “on-demand.” Even as new digital options have come onto the scene–MP3’s and now digital music services–the 80/20 rule still stands strong. A lot of the new services that you see these are part of that On Demand bucket (even though some of them do offer radio as well).
Pandora going after the bigger 80% opportunity that is radio. I think you are still seeing the very early stages of the streaming audio space. I fully expect consumers to migrate away from traditional platforms and onto more digital audio platforms. It’s a trend we have seen five years running and it’s only accelerating. As new competitors enter and the market keeps growing, I expect us to take a slightly smaller share of a much, much larger market.
So, you are not really worried about iTunes Radio or Google All Access?
Those are some of your newer competitors coming onboard. Reviewers have classified Google All Access as an On Demand service. We welcome others to the internet radio category. We think it will be good for the whole ecosystem.
What do you think the future of the digital radio service industry is and how does terrestrial radio fit in going forward?
If you look at third party data, they are seeing more trends of more and more migration to digital listening rather than terrestrial listening. At the same time, terrestrial is still big. From our point of view, we see that as an opportunity to earn more listening hours and earn more advertising dollars.
What are you seeing in terms of audience composition as it relates to device? How are mobile and tablet-connected consumer electronic listening device growing from the numbers you have?
About 20% of our listening is done on a computer these days. That means 80% of Pandora is happening in some kind of non-traditional way, whether that is mobile, or on a tablet, on a TV, or in a connected car. These are numbers that we see continue to grow. In general, consumers are using tablets, desktop and laptop computers in a different way. I think that this is something that we are going to continue to see in terms of a shift of how people listen. There is a natural desire from consumers to want to take their music wherever they go. Our philosophy about offering Pandora in multiple ways is that we want to provide an “anytime, anywhere” experience.
Down the road, it is looking more and more like the car itself is going to have an IP address, and you are not going to need your smartphone to receive broadband internet. You will probably have an internet screen on your dashboard. What kind of plans in for the connected car is Pandora making?
We are really excited for development in that area. GM announced at this February’s Mobile World Congress in Barcelona that they will be offering data plans for cars. So, just like you buy a data plan for your tablet, you would buy a data plan for your vehicle. We are really excited about that, because we think that it is going to offer an even more seamless listening experience. While everyone has their smartphone with them, it is just one less step for people to connect.
–Carl Marcucci
