Pandora’s Advertising Strategies

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Pandora allows users to stream unlimited music with a minimal amount of ads between tracks. It’s an easy way to listen to your favorite music while also discovering new songs and artists. In order to listen to Pandora’s free streaming music, you have to accept the advertisements in between. A recent article discusses how Pandora continues to expand its advertising business, but that the company isn’t making much of a profit because of its streaming costs.

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Pandora’s main source of advertising revenue derives from mobile advertisements.

During the first quarter of 2014, Pandora accumulated around $195 million in revenue which beat analysts’ anticipations and estimates by almost 70%. Although they earned almost $200 million in revenue, they reportedly lost around $30 million. In fact, during the last few years, Pandora has only succeeded in earning a profit in the single-digit millions.

When Pandora began pushing mobile advertisements, their revenue grew 45% to $140 million.The mobile ads caused advertising revenue to continue to surge to $103 million, which was 60% increase. Overall, mobile advertisements have been responsible for Pandora’s advertising revenue- making up over 70% of ad revenue and 53% of overall revenue for the company.

Pandora claims that the company’s potential for growth going forward will be based around advertising. Mike Herring, Pandora’s CFO, suggests that advertising will be the major strategy in Pandora turning a profit. In fact, Pandora has been testing the most effective methods for boosting advertising revenue. One of these strategies includes increasing the number of ads occurring each hour. This would increase the usual 4 advertisements to 6. Last fall, Pandora also reportedly started to pitch media buyers on new ad-targeting options which would be centered around user data. Mark Herring acknowledged that Pandora had started looking into “basic experiments” to increase advertising potential and revenue.

During the next quarter, Pandora is hoping to boost income coming directly from subscriptions by increasing the paid subscription service from $3.99 a month to $4.99 a month. Again, Pandora’s best bet for increasing revenue seems to be through mobile advertising. Mobile advertising seems to be the best option for increasing profits and earning revenue.

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