Pandora Media has played more than 5 billion hours of music for nearly 74 million listeners last quarter. However, 15 seconds worth could be just what the audio streaming leader needs in order to boost profits. Recently, Pandora announced that it would be offering its ad-supported listeners access to its premium listening experience in exchange for viewing a single video ad. In other words, Pandora users who choose to watch a fifteen second video ad will be in turn be rewarded by unlocking a complimentary session of Pandora Premium, the company’s $9.99-per-month on-demand product.
“Our ad-supported listeners’ top request has consistently been the ability to directly play the specific songs, albums, or playlists they want,” explained Pandora CEO Roger Lynch. “These new features address that need by marrying rewards-based advertising with the best-in-class on-demand experience we’ve created with Pandora Premium.”
Advertisers have various reasons to be excited about the new fifteen second ads. For one, it gives the company a way to effectively transition its massive ad-supported listener base to the more lucrative Pandora Premium service. Moreover it creates a space where Pandora can boost its revenue. Pandora’s ad revenue in Q3 climbed a modest 1% year over year, to $275.7 million. That’s nearly 77% of total company sales excluding Ticketfly. According to Pandora when it launched Video Plus, most users who watched the ads were between 18 and 34 years old, which is a coveted target audience for advertisers. Pandora also said users who opted in listened for 57% longer and used its “thumb” function 65% more often.
Even without the need feature, Pandora seems to have been fairing well. Its number of paid subscribers climbed 29% year over year last quarter to 5.19 million, driving 50% growth in its “subscription and other” revenue line to $84.4 million.