Pandora chases the digital Mad Men

Stuart Lauchlan Profile picture for user slauchlan May 23, 2013
Not content with shaking up the music industry, Pandora is now in the digital marketing game with an e-Business advertising technology platform of its very own. But does an internet radio firm have the right digital credentials?

Pandora CEO Joseph Kennedy

Not content with shaking up the music industry, internet radio tyro Pandora is now in the digital marketing game with an e-business advertising technology platform of its very own.

With an eye to Madison Avenue, the new platform integrates the largest media buying software platforms, Mediaocean and STRATA, with proprietary software built by Pandora’s engineering team in conjunction with Pandora’s ad operations and billing teams.

This - according to Pandora - makes it:

the first and only digital publisher to integrate the planning, buying and billing phases of the buying process of digital advertising. The move brings the audience insights of Pandora’s more than 70 million active listeners to life for the media-buying community.

The proprietary engineering solution marks an important step for what has been a largely manual process for the digital advertising industry, as it automates the transactional process between media buyers and digital publishers. Pandora is initially offering this solution to capitalize on its unique advantage among digital properties to sell cross-platform audio advertising.

This is the latest stage in an ongoing effort. May last year saw the launch of Triton Digital’s measurement of Pandora in traditional radio metrics such as AQH and Cume. March this year brought integrated Pandora audience data via Triton ratings into the Mediaocean and STRATA media buying platforms.

Why does all this matter? On a wider scale it helps reduce costs and increase advertising margins, according to Steve Sullivan, VP Advertising Technology at the Interactive Advertising Bureau (IAB) who states:

The manual process of handling business documents contributes dramatically to the 14 percent operational cost of executing a digital marketing campaign. In comparison, the operational cost of executing a broadcast ad campaign sits at around 2.5 percent. This move will demonstrate the value of a common e-Business standard for the entire campaign planning and execution process across the interactive industry.

Pandora opens

From a purely Pandora perspective, it's another step in the journey to position itself as a mainstream - and innovative - digital publishing powerhouse rather than just 'the internet radio firm'.

Pandora's outgoing CEO Joseph Kennedy explains:

"Pandora is the first and only digital publisher to integrate the planning, buying and billing phases of the media planning processes for any form of digital advertising. These technology developments and the integrations with STRATA and Mediaocean are making local advertising easier to buy. We believe the combination of local audience reach, locals ad sales teams and technology integration, have resulted in increased momentum in local advertising revenue, our fastest growing area of advertising sales."

In particular, Pandora wants to lure advertisers to - or back to - radio as a potent advertising medium. Kennedy boasts:

"No question, we are already bringing advertisers into 'radio', into audio advertising, who haven’t been there. We still continue to get a very significant portion of our audio ad related revenue from digital accounts, not from the traditional $15 billion radio market, as those digital buyers see the effectiveness of audio advertising on Pandora. When we take audio advertising, we make it targetable and measurable and interactive. We are clearly growing the market for audio advertising." 

A differentiator for Pandora is its decision not to take 60 seconds ad slots typically preferred by marketers, but 30 or even 15 seconds slots. Kennedy says:

"There are some advertisers who do focus on 60s. In most cases even advertisers' use 60s. Just take my background as a CMO back in my automotive days. We would always have a mix of 30s and 60s. What we have been very successful at sharing with advertisers is that a 30 second ad on Pandora, even a 15 second audio ad on Pandora is actually more effective than a 60 second ad in the over cluttered environment of broadcast radio. We have substantial resources to work with advertisers to develop new, if needed, shorter audio creative. We don’t see the historical use of 60s as a significant impediment to our continued growth."

More than the sound of music

That said, it's not just audio that Pandora can offer the digital marketer, says Kennedy:

"The great power of our platform is that we are able to offer advertisers display, audio and video ads, and we continue to see the revenue with all of those categories grow. We have seen the greatest growth in the most recent period on the audio side. I think that is our killer ad product, it's our native ad product if you will."

The company also boasts an ability to target and drill down to specific demographics, adds Kennedy:

"Where we are really seeing the interest of local advertisers is the very basic but very powerful demographic and geographic targeting. These are advertisers that historically have just tried to pick a radio station format - adult, contemporary - with the hope of finding the right demographic target or what they are after. On Pandora, if you are after women, 35 to 54, you can target that straight up. [That's] also important on the geographic front."

Away from the digital advertising push, there are other interests to focus on. Kennedy explains:

"The next huge wave driving technology innovation and consumer adoption is the internet of all things, the internet connected on all devices. Everywhere the user wants access to service and applications like Pandora. Music is truly the soundtrack of our lives and thus pervasive through our daily experiences. As a result, no category benefits more and no company is better positioned to take advantage of this huge next wave than Pandora."

Meanwhile the latest product innovations from Pandora include the launch of the Pandora Premieres station and its latest integration with Facebook. Kennedy elaborates:

"Pandora Premieres will features previews from a wide variety of artists, both established and emerging, across multiple genres, up to one week prior to the scheduled US launch date. Our expanded partnership with Facebook broadens our social innovation through a new Timeline App. The Timeline App allows listeners on both mobile and desktop to automatically publish their musical activity to their Facebook timeline and curate their musical identity within the music section of the timeline."

Digital creds

All told Pandora's digital publisher credentials are firming up nicely and taking the firm into new markets. For now it remains the leading Internet radio provider in the US - even if European expansion ambitions continue to be thwarted by royalties considerations.

This week the firm reported higher-than-expected revenue in the latest quarter, with losses largely in line with analysts' forecasts. In fact the company went as far as to suggest that it may break even in the current quarter after adjusting for one-time costs.

But the competition in the digital radio space is only set to get tougher. Last week Google launched its All Access paid subscription plan, while Pandora understandably keeps a wary eye on any signs of Apple launching a radio streaming offering later this year.

So the move to monetize new digital business sectors is hugely pragmatic and leads to some unusual reference points, such as local car dealerships, an increasingly important constituency to Pandora's digital ambition as Kennedy explains:

"We've had tremendous success at bringing auto dealers onto the Pandora platform which is a cornerstone of local advertising. We've been gradually increasing the overall ad load. Our strategy is to gradually grow it over time."

Mad Men title sequence image: AMC/Lionsgate Television

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