Thursday, April 19, 2012 - 11:00am
To cover its quickly-growing royalty costs, Pandora needs to better monetize its listening audience, especially those listening via mobile devices (for which it's only making two cents an hour; see more on Pandora's finances in RAIN here).
But as it grows (Pandora's share of total U.S. radio listener was 5.79% in March; read more on Pandora's usage growth here), Pandora (and industry analysts) are betting on the more lucrative local advertising market, especially given the added benefits of targeting by age, sex, and ZIP code Pandora is able to offer.
Pandora has run more than 400 local ad campaigns across the country this year. The New York Times spoke with one advertisers, a NJ Honda dealership. "Attracted by Pandora’s ZIP-code targeting, he spent $10,000 to advertise on the service in January," the paper reports. "IPhone traffic to his Web site — which he attributes to the ads — more than quadrupled, (Planet Honda president William) Feinstein said, and so he increased his spending to $15,000, then $20,000." He told the paper, "We don’t need to buy five radio stations. We can buy one."
The Interactive Advertising Bureau (IAB) this week released a study predicting strong growth for mobile, and local, online advertising. Its press release (here) quotes PwC U.S. Partner David Silverman, "By combining some of the best features of the internet, along with portability and location-based technology, mobile advertising is enabling marketers to deliver timely, targeted, relevant, and local advertisements in a manner that was not previously possible. It is for these reasons that we expect strong growth to continue with mobile advertising."
Will this affect local broadcasters? "At the end of the day, the client budget isn’t growing; in some cases it’s shrinking," Dave Marsey, SVP at Digitas, told The Times. "You’re seeing dollars move from out of terrestrial and into more accountable, targetable channels." Broadcasters, however, maintain that Pandora's lack of true local content (news, traffic, weather, community issues) make it something other than "local media."
One aspect in which broadcasters definitively have the upper hand is sales force manpower. CBS Radio sales president Michael Weiss told The Times his company has a sales staff of 1,200. Pandora has fewer than half as many total employees. "The boots on the ground gets you the local advertiser," said Razorfish ad exec Jeff Lanctot.
Read more from The New York Times here.