BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Pandora Teases Streaming Music Subscribers With A New Ad Model

This article is more than 9 years old.

Streaming music platform Pandora has tried a lot of things to both raise its income and increase its subscriber base, but the company is getting especially aggressive with a brand new ad model that promises an hour of ad-free music for just clicking on a banner ad.

The new ad product, named Sponsored Listening, has a couple of big brands that are eagerly joining in the beta testing, which is initially launching only on Pandora’s mobile app. That’s a shrewd move since about 80% of its users listen on a mobile device, although the company projects a desktop version to come a few months down the line.

So far Fox and Sony Playstation have signed up for the new format, with Fox pushing its shows Gotham and Mulaney, and Sony’s campaign to launch in a few weeks. The ads will only be available to a small group of users targeted by the advertisers for now, but a full rollout to all sponsors and subscribers is expected to begin in latter half of 2015, according to the company.

Pandora currently has around 77 million users but around 3.5 million of those are paying subscribers. A subscriber pays $4.99 per month for ad-free listening, so the Sponsored Listening campaign is a way for more listeners to be exposed to the ad-free environment. For advertisers, not only do they gain exposure via the banner ads, but there's also the hope that users will associate the positive Pandora ad-free experience with their brands.

Pandora, like the other non-interactive streaming music platforms, faces some challenges when it comes to converting users to subscribers. Because it’s a passive radio-like experience, the user has less control over the exact songs that can be accessed. While many users are perfectly happy with the free mode even with the ads, many feel that if they were to pay to access a platform, it might as well be an interactive one like Spotify, where you can call up any song at will.

On the other hand, one thing that Pandora does have in its favor when it comes to appealing to consumers is price. At $4.99 per month it’s half as much as a comparable Spotify subscription. That said, Spotify just announced its “Family Plan,” where each additional subscription is $4.99 per family member after the initial $9.99 primary charge.

That said, Pandora does need something to boost its income, which is why the Sponsored Listening ad product comes at the right time. The company may be marginally profitable but still wallows in debt, plus its stock has taken a beating in recent weeks. The company continues to see growth in both revenue and users, but many wonder if that growth has slowed, which we’ll get a better feel for in the upcoming earnings report.

It will be interesting to see if Sponsored Listening actually increases listener conversion to paying subscribers. With other streaming services now looking at lowering prices as well ( Apple is reportedly asking the major labels for a license discount so it can lower Beats Music to $4.99), it may take more than just price to get consumers to commit with their credit card number.

Follow me on Twitter or LinkedInCheck out my website