Pandora VP on “replacing” radio, and how it is winning local

pandora wall streetPandora is not shy about its invasive business plan. Brian McAndrews has repeated that Pandora’s goal is to “disrupt” radio. This week at the JP Morgan Small/Mid Cap Conference, VP of Investor Relations Dominic Paschel sounded more imperialistic: “When you look at the market Pandora is looking to replace, it’s really broadcast radio.”

He also spoke to institutional investors of redefining radio and disrupting radio. That’s a lot of beating on radio. But like Spotify founder Daniel Ek who spoke to media yesterday in New York, Paschel acknowledged radio’s strengths (free, effortless, ubiquitous, good for discovering music), compared them to the advantages of digitally interactive music (personalized, interactive, one-to-one), and sought to combine them. The nearly identical frameworks laid out by Spotify and Pandora in the same week underline the question of how music services define and position their brands in a crowded market.

To hear Paschel talk, the market is not crowded at all from the mountaintop perspective of Pandora’s audience and financial metrics. He ran down the latest monthly report, and observed, “We view broadcast radio as our prime competition.” He claimed a 72% listener share of Internet radio, and credited the proprietary Music Genome under Pandora’s hood for the company’s main advantage. Mobile listening accounts for 79% of Pandora’s hours, 21% belonging to the desktop, according to Paschel.

pandora verticalLocal advertising is a big part of Pandora’s buzz these days, and Paschel unwrapped some behind-the-scenes history around the company’s local effort. “It’s ours to own,” Paschel said of local ad revenue. “None of the other interactive players can tap this $15B pool of money.¬†Pandora has essentially been ranked the number-1 radio property in most major local markets. In the 275 markets that Triton [Digital, which provides web metrics] looks at, Pandora is the leader in most.”

Paschel spoke about the difficulty of breaking into the radio ratings platform, and how Pandora solved that issue with respect to attracting local ad dollars. “Arbitron was not going to necessarily validate [our leading local market positions], simply because it would be biting the hand that fed them, which was broadcast radio. It was a bit of a conflict of interest. A leader emerged … Triton has become the mainstay of Internet radio measurement.”

“With Triton we were able to advance into the ad-buying platforms (STRATA and Mediaocean), the buy-side platforms that radio has traditionally bought from.¬†Our goal was to sound, talk, and act like radio. Pandora today does that. We are side-by-side with Arbitron data; if you look in Chicago you would see “WPAN” ranked next to Z-100. You would see our AQH rating. All of that is radio speak. All of that allows us to tap the dollars that [in the past] have had no alternatives. We give radio buyers attribution, measurement, and ultimately calls to action. This is leaps and bounds ahead of what radio has provided to traditional broadcast advertisers.”

According to Paschel, Pandora’s expansion of the local sales force returns its investment quickly: “Pandora has rapidly expanded our sales team. We are in 29 of the top 50 markets, with roughly 80 people in those markets. Our cadence of hiring is usually to hire heavily in the first half of the year, and absord and ramp in the second half — traditionally the strong advertising period. We’ve got a large, blue-chip local advertising base across the board. The CPMs associated with that hyperlocal market are from 2x to 2.5x that of the audio CPMs you would get otherwise. For us it’s a clear priority that has immediate ROI.

Related: RAIN talks with Greg Cutler, an independent voice-over artist who cuts many of Pandora’s audio commercials.

 

 

Brad Hill