Pandora now has more than 150 million registered users, and more than two thirds of that number has listened on a smartphone or tablet. More than 70 percent of all listening to Pandora occurs on a mobile device.
To that end, mobile revenues grew from $25 million in 2011 to $100 million in 2012 for the most listened to online radio platform in the US. That puts them second only to Google in terms of mobile advertising revenues, according to a recent press release. This is a good response from Pandora to Wall Street analysts who have been skeptical of the company’s ability to monetize its mobile ad inventory.
Pandora also noted that they are now included in the dashboard of 48 models of cars, and have partnerships with 25 brands of autos and auto aftermarket devices.
Pandora’s mobile strategy has been a key component of their growth – they were early into the iTunes app store and experienced enormous popularity from the beginning that continues today as a mobile platform. With more than 70% of their listening occurring on mobile, their ability to monetize that listening is critical. $100 million sounds like they are on the right path..
Triton Digital recently announced that they will add standard radio measurement AQH, or Average Quarter Hour, to the ratings metrics offered by their Webcast Metrics server based audience measurement service. In addition to the MRC-accredited audio metric of Average Active Sessions (AAS), customers subscribing to the new Local Reports feature inside of its Webcast Metrics® product will receive Average Quarter-Hour Rating (AQH Rating) by market – the same metrics typically used when measuring analog radio stations.
This is actually a return to previous practices for Webcast Metrics – the service originally offered ratings in terms of AQH and Cume, metrics used by traditional radio stations to discuss the size of their audience. Webcast Metrics later began using the AAS term instead. Now subscribers will have access to both terms. This will make it much easier to offer side by side ratings between on-air and online listening to services. That’s what advertisers want to see.
“Seeing internet audio in the same terms as traditional radio gives a holistic sense of the audio market, making it easier for buyers to make informed decisions when purchasing ad space,” said Lauren Russo SVP and Director, Audio & Promotions at Horizon Media. “We are excited to see how the ability to provide such a direct comparison will impact advertisers’ views on the value of streaming.” Triton will provide the data to third parties such as advertisers at the request of subscribing stations and platforms.
This is a good decision by Triton Digital, one that is meaningful for the Internet radio marketplace in terms of stimulating revenue. While there are some in the industry that may be in favor of keeping everything separate and magnifying the differences between on-air and online listening, it’s all audio in one form or another. Facilitating the use of data so that advertisers can more easily evaluate and invest in the space is a good thing. This decision by Triton is a step in that direction. Hats off..
Targetspot has updated its yearly study of Internet radio listeners. The newly released information was first presented at RAIN Summit West by Targetspot CEO Eyal Goldwerger. Today, the company made the whitepaper more widely available on its website.
The benchmark study, done by Parks Associates and with the support of the Interactive Advertising Bureau, was first released at last year’s RAIN Summit West. Results of this year’s update show increased listening, particularly to mobile devices, along with increased social activity and response to audio ads.
The findings are all good – the audience is growing, taking Internet radio with them on mobile devices and sharing it with friends on social platforms. Listeners are interacting with their stations, and that’s having a very positive impact on advertising as well. Ad recall and response rates increased 11% since last year, with 58% recalling having seen or heard an Internet Radio ad within the last 30 days compared to 52% in 2011. Of those listeners, 44% responded to an Internet Radio ad in one way or another compared to 40% in 2011, a 10% increase versus last year.
Robin Flynn of SNL Kagan hosted a panel discussion called “Charting Digital Audio Ad Dollars” at RAIN Summit West on April 15th. Advertising is on the upsurge, she concludes, and cpms are solid.
Pandora SVP of ad sales Steven Kritzman, Katz Online President Brian Benedik, Spotify VP of ad sales Jon Mitchell and Alexis Van de Wyer, President of Adswizz, Inc. were the panelists contributing to the panel hosted by Flynn.
There is a healthy interest in advertising on Internet radio, and the cpms are getting stronger. Contributing to the interest is Internet radio’s ability to deliver key groups such as 18-34 year olds, Hispanics and upper income groups. Advertisers from many leading categories are now active in Internet radio, including finance and entertainment along with auto, restaurant and retail. Mitchell said that Spotify has 1,400 different advertisers.
Nonetheless, audio ads continue to be under monetized. Campaigns that include video in the mix with audio will produce a higher cpm overall, but targeted local campaigns are also pulling higher cpms. Benedik estimated that while generally network radio CPMs are $4 to $6, he said that geo-targeted campaigns can boost CPMs to $6 to $12.
Local advertising is gaining interest on Internet radio, led by the precise targeting abilities of Pandora. Thanks to listener registration, platforms like Pandora and Spotify can target by listener demographics, geographics, or taste in music. Benedik is looking for local revenues from political campaigns this year to be healthy.
The group acknowledged that monetizing audio effectively remains a challenge. Flynn notes: “Given that 70% of Pandora’s listeners listen on a mobile device, Kritzman said, the company is working hard to better monetize those listeners. Pandora execs have recently said the company’s RPMs, or revenue per 1,000 listening hours, are $60 to $70 for its desktop Internet business versus $20 for the mobile side, but mobile is expected to catch up.”
At RAIN Summit West last week we introduced a new segment called POV, a familiar acronym for Point of View. In business circles, POVs are a type of presentation used to briefly define a position – often on a new or widely debated topic. We thought it would be interesting to invite leaders in the industry to weigh in on a broad topic, so this time around we invited several folks to make a brief presentation on “Redefining Radio”. We didn’t offer any further instructions about the topic than that.
Triton CEO Neal Schore took the stage early in the day and used his POV presentation to talk about something that I think is critically important for Internet radio – listener registration. Schore told the audience that it’s time to require listener registration in exchange for online content.
I couldn’t agree more. As Schore pointed out, most online stations are already requiring registration. This enables them to offer highly targeted ads and content that is more interesting to the listeners and more valuable to advertisers. It expands the time that listeners are willing to spend with a station, and it raises the likelihood that they’ll interact with an ad because that ad is specifically targeted – by gender, geography, or perhaps other criteria, to their specific situation.
Folks that don’t register their listeners argue that it depresses audience growth. But in the next breath they’re arguing that streaming expenses are too high. Those two things go hand in hand — require registration and maybe you lose a few listeners but that lowers your overall expenses while at the same time raising your ability to effectively monetize the remaining listeners. They’re more valuable because you know exactly who they are, you can interact with them and expand your relationship, and offer them targeted ads.
This is not broadcasting folks. Internet radio has the ability, as Schore pointed out at RAIN Summit West, to uniquely target every single listener and develop a unique one to one connection that is far more valuable and meaningful in today’s content marketplace. There is no reason not to. Schore’s message was an excellent contribution to the smart exchange that took place at RAIN Summit West last week.
2011 revenues for the record industry from streaming music royalties jumped to more than half a billion dollars, according to a year end report by RIAA. Revenues from subscripton services (like Spotify, Pandora One, Rdio, MOG, Slacker) jumped 13.5% to $241 million, and Digital Performance Royalties, paid by all other streaming services (including Pandora) rose 17.2% to $292 million.
In its fiscal year ended January 2012, Pandora paid out more than $285 million in “content acquisition”, the bulk of which is performance royalties to SoundExchange. The time periods don’t match up perfectly because the RIAA report is calendar year, but you get the picture — Pandora’s paying a huge amount to SoundExchange.
Which should make for an interesting next round of negotiations for streaming royalty rates. Tim Westergren has always been very vocal on this topic, stating over and over again that he’s not against a royalty, but that the current costs are too high. With the next round of CRB hearings looming, he’s talking about it again. But this time, he’s coming to the table with over a 100 million registered users. And he’s SoundExchange’s biggest customer.
Pandora’s also got a lot of investors, and they’re working that crowd as well, including this statement in their recent SEC filing:
“Since our inception in 2000, we have incurred significant net operating losses and, as of January 31st, 2012, we had an accumulated deficit of $101.4 million. A key element of our strategy is to increase the number of listeners and listener hours to increase our market penetration. However, as our number of listener hours increases, the royalties we pay for content acquisition also increase. We have not in the past generated, and may not in the future generate, sufficient revenue from the sale of advertising and subscriptions to offset such royalty expenses.”
This new revenue report from the RIAA shows very clearly that the recording industry is becoming increasingly dependent on the streaming industry as a very real source of bread and butter.
NPR Digital has teamed up with Triton Digital to offer new services to member stations. The new tools will include audience measurement and sponsor management tools that are intended to help stations grow their digital sponsorship revenue by more effectively presenting listeners with audio sponsorship messages, while at the same time providing measurement of audience and sponsorship impact.
Bob Kempf, Vice President of NPR Digital Services, (and an old friend – hi Bob!), says “these new tools will help stations to better identify and quantify the rapidly growing number of listeners that are accessing their programming through online streaming, and to translate that into metrics that are meaningful to potential sponsors.”
Triton’s Webcast Metrics will provide the audience measurement piece and Ad-Injector ad insertion will enable the corporate sponsorship tools. Combined, these tools will provide NPR stations with the ability to coordinate, measure and confirm corporate sponsorship campaigns in a similar way to ad campaigns.
This seems like a natural for NPR, rounding up their network of stations online for measurement of audience and sponsor campaigns – so much so that I’m kind of wondering what took them so long – my guess there is that it smelled a little too much like commercial station behavior and that kept them away for a while.
Local radio stations grew online revenue at a 15% pace in 2011. Total industry online revenues were $439 million, according to a new report by BIA Kelsey.
According to BIA Kelsey, radio’s ability to create and sell local content, combined with the ability to cross promote on and off air, has “has given broadcast stations the opportunity to expand their position in their local markets from solely an over-the-air media source to a local media company that can provide access to local audiences in different, effective ways for their advertiser clients.”
In fact, local content assets, sold by a trained local sales team, are the combined forces that will enable local radio stations to grow online revenue to $767 million by 2016. BIA Kelsey predicts a steady 11.8% growth rate 2012 – 2016.
Pandora reported 4th quarter 2011 and fiscal year results during a call tuesday afternoon, during which they highlighted huge gains in revenue and audience last year. Fiscal 2012 revenue of $274.3 million grew 99% year-over-year and total listener hours of 8.2 billion grew 109% year-over-year. Total revenue was $274.3 million, a 99% year-over-year increase. Total advertising revenue was $240.0 million, a 101% year-over-year increase. Total subscription and other revenue was $34.3 million, an 87% year-over-year increase.
Pandora now has 47 million active users and 125 million registered users in their database.
These are impressive numbers by any account, Pandora’s ability to grow audience seems endless. Advertising revenue is growing only slightly more slowly than audience. But despite all of that, profitability is eluding them, fortifying some who argue that Internet radio’s basic model, which has a high per play performance royalty, will be impossible to monetize. “Pandora put up impressive numbers but the royalty treadmill will always match their speed making them unable to ever get to profitability.” said digital music entrepreneur Michael Robertson.
At one point during the Q&A, Pandora CEO Joe Kennedy talked about Pandora’s need for audience measurement that is more like radio station measurement that is integrated into ad planning and buying software by Donovan and Strata. He said Pandora is working with Triton to accomplish that. In answer to another question about Pandora’s mobile listening, Kennedy said that they still see about 70% of their audience on mobile, but that number is edging up and they expect that trend to continue. Pandora’s ability to monetize their mobile ad units will continue to be a measure of their success.