Pandora CFO Mike Herring participated in a session at a Goldman Sachs conference, fielding questions from one of the financial company’s analysts. He confirmed figures from the online radio company’s latest financial results, noting that roughly 80% of Pandora’s revenue stems from advertising, with only about 20% generated by paying subscribers.
Herring said that RPM (or revenue per thousand listening hours) is one of the key metrics for Pandora. The company is currently reporting an RPM of around $53 on mobile, For context, he said terrestrial radio’s rate is in the low $70s, but that Pandora has about a tenth of the ad loads of the more traditional broadcasts. “The targeting that we do on behalf of the advertisers, our ability to segment or drive pricing, our ability to segment our audience allows us not to waste advertising on parts of our audience that aren’t going to use it, aren’t going to appreciate it, drives that advertiser ROI,” he said.
He also discussed how the company has focused its advertising efforts for mobile, which drives about 86% of Pandora’s traffic. Since mobile devices don’t operate with cookies, which are crucial for successful web targeting and retargeting, companies have had to search out other identifiers to use. Herring said that since Pandora gets the age, gender, and zip code of every individual signing up for the radio service, it has a good amount of first-party information to kickstart ad targeting efforts. With the launch of the company’s audience manager this year, Herring said Pandora has been about to connect its own first-party data with second-party data groups. “And that story is the magic moment when mobile…starts to become as efficient as web targeting, retargeting and that’s how demand will develop there.”
In addition, he explained that Pandora makes careful decisions about when and how to serve video ads on mobile, especially since, thanks to its lean-back nature, listeners aren’t constantly engaging with the app. The company only plays videos at moments when it definitely has the user’s attention, based on interactions that happen in the app. “If we just, at every skip or station change we drew in there, that would cause a lot of problems — our viewability statistics would drop significantly,” he said.
Along with the ad discussion, Herring also touched on the upcoming decision from the Copyright Royalty Board, which will impact the rates that webcasters will pay to play recorded music over the next five years. Although he voiced pride in how Pandora presented its case for the CRB hearings, he said that even a worst case ruling from those judges would not be putting the company out of business: “it might put us back a year or so in our business model but it doesn’t change our strategy.”