pandora's 2017 definitive guide to...

pandoraforbrands.com

Audio—Definitive Guide to

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Audiopandoraforbrands.com

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Why Audio?

AM/FM Radio

Streaming Audio

Podcasting

Audio Insights

C O N T E N T S

H I T T I N G T H E B I G

T I M E I N 2 0 1 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2

T H E P R O M I S E O F A U D I O

I N A C O N N E C T E D W O R L D . . . . . . . . . . . . . . . . . . . . . . . . 3

T H E O R I G I N A L A U D I O

P L A T F O R M F A C E S H E A D W I N D S . . . . . . . . . . . . . . . . 7

A F E W H U R D L E S A W A Y

F R O M M A I N S T R E A M A C C E P T A N C E . . . . . . . . . 1 9

F R O M P A N D O R A

S V P , L I Z Z I E W I D H E L M . . . . . . . . . . . . . . . . . . . 2 2

S O U R C E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4

1Why Audio?

Whether it’s to music or news, via smartphones

or computers, at home or on the go, we reach for

audio as a necessary accessory to our increasingly

kinetic and multitasking lives. It’s why we spend

four hours a day with audio, on average.2

Today, over half of daily listening time among

people in prime advertising demos (A18-54) is to

newer forms of audio2—much of which features a

personal and personalized experience that barely

existed 15 years ago. As a culture, we are entering

an earbud era where audio personalization is key

to achieving resonance.

These are the hallmarks of an Audio

Renaissance, as we like to call it. An elevated

level of user engagement with content and

brand messages paves the way for advertisers

to cultivate close and accountable relationships

with people through audio.

E A C H A N D E V E R Y D A Y W E F I N D A W A Y T O C E L E B R A T E T H E P O W E R O F A U D I O.

T H E P R O M I S E O F A U D I O

I N A C O N N E C T E D

W O R L D

3/ Pandora's 2017 Definitive Guide to AudioW H Y A U D I O ?

AM/FM Radio still commands big reach, despite declines in time spent listening over the last decade as listeners seek out other options. Radio ratings in some markets improved over the last year, but those increases were largely due to a massive methodology change. We expect the platform to continue losing market share as advertisers put more dollars toward mobile and digital.

Streaming Audio popularity soars and will continue to grow as over half the U.S. population streams weekly and smartphone ownership approaches near-universal penetration among people under 50 years old. While on-demand streaming gathers momentum, ad-supported streaming will continue to thrive thanks to superior targeting and advanced audience metrics.

Podcasting is a fast-growing platform that now attracts millions of regular visitors, even though a jumble of apps and usability issues hamper faster growth. But it’s a lack of quantitative and advanced metrics that keeps advertisers skeptical of podcasts for now.

Also in this report, Starcom Executive Vice President, Kevin Gallagher, who oversees close to a billion dollars in annual audio ad spend, offers his insightful perspective on the Power of Audio and how his team works to harness its benefits for their suite of brands, and Pandora SVP Lizzie Widhelm, an industry authority on online ad products, discusses why audio remains an important ad format in a digital era.

I N T H I S R E P O R T

W ith our inaugural Definitive Guide to Audio report, you’ll gain a complete understanding of audio and the complex audio advertising landscape. Some key learnings you’ll walk away with from this year’s report include:

Together as marketers, we’ll master this ever-changing industry, one insight at a time. We hope you enjoy our guide to everything audio—we certainly enjoyed compiling it for you.

Cheers!The Pandora Team

Of the four hours a day that listeners spend with

audio, half of that time is to digital sources.2

T I M E S P E N T L I S T E N I N G T O A U D I O

AM/FM RADIO49.2%

DIGITAL AUDIO50.9%

15.8% Owned Music

18.0% Streaming Audio

7.3% SiriusXM

4.6% TV Music Channels

3.0% Podcasts

2.2% Other

Share Of Daily Time Spent Listening To Audio

POPULATION 18-54


Starcom Weighs In On

T H E P O W E R O F A U D I OWhat opportunity does streaming audio provide you and your clients?

Our job is to find audiences, target them and spend

our clients’ dollars efficiently. When we started look-

ing at streaming, the data became intriguing. We’ve

always used data—whether it was Nielsen broadcast

ratings or something else—but the fact that stream-

ing audio allowed our clients to more precisely target

based on behaviors, rather than traditional demo-

graphics, meant we could be more efficient. That’s the

advantage of digital.

You still spend on broadcast. What keeps you on that platform?

There’s some strengths that broadcast continues to live

on: the advantage of reach, localization and personal-

ities who create content unique to an individual mar-

ket. On the other hand, broadcast needs to be more

data-driven. In my role, I’ve encouraged broadcasters to

figure out ways to use data for better targeting. That’s

how they’ll compete in the digital world.

What have your attribution models said about audio?With regard to radio, it’s rare that we run it alone. Ra-

dio’s always part of a mix, so it’s hard to point to the

efficacy of just radio. We can do things like dial up the

amount of radio as part of the overall mix, which can

get us to: ‘We think it’s working and the sales results

suggest that it’s working.’ But digital has the more

unique ability to say: ‘We targeted this ad to these cus-

tomers, they clicked on the ad, it brought them over to

the client’s website, then they bought something.’

How does your team handle platforms that offer multiple media options, such as audio, display and video on Pandora?

That’s something we’ve had to work through. Does the

radio team buy display or does the digital team buy it?

Today we’re buying it out of our audio team in most

cases, but we’re tagging the ad in the same way the

digital team would, so we can get metrics and look at

attribution and ROI.

How have roles at your agency changed with digital?There’s been a lot of talk about getting more involved in

the creative process. Social media and online media have

brought that on, making the media departments almost

like content creators—like a creative agency used to be.

Is that the result of a more immediate need for creative?Right. Another popular buzz phrase is ‘real-time mar-

keting.’ And it presents a huge opportunity in the au-

dio space. We can get on air quickly with a customized

message that’s relevant to what just happened with a

client’s brand.

What’s happening in the ad industry that’s getting your attention these days?

As agency media planners, we’re always paying at-

tention to what’s going on with measurement. At

one point, we believe we’re targeting perfectly… then

suddenly we aren’t. We now pay close attention

to transparency and viewability, including having

conversations about viewability standards for display,

online video and streamed audio.

K E V I N G A L L A G H E R is Executive Vice President and

Director of Local Markets for

agency giant, Starcom. He and his

70-member team allocate a billion

dollars annually to local media—

including TV, audio, newspaper,

digital and out-of-home—on behalf

of a top-flight roster of clients like

Allstate, Bank of America, ESPN,

Samsung and Visa. He took the

time to talk to us about the Power

of Audio, the transition toward

digital audio, podcasting and the

challenge of too much choice.


Agencies have long spoken about the difficulty of buying audio. How does the entry of digital audio complicate that issue?

The challenge for audio buyers is that the medium is

evolving so fast that it’s becoming harder to buy. We

try to think about it in terms of an “all-audio” land-

scape. Whether it’s broadcast, broadcast streams,

pureplays or podcasting, there’s an audio spectrum

where we can find our client’s audience. But logisti-

cally, while it’s great to think about and plan audio

holistically, we still have to execute through a variety

of partners to make it happen. That’s a challenge.

Will audio programmatic solve for that challenge?If you define programmatic as some blend of auto-

mation and data, I think programmatic will be im-

portant for audio. Agencies have to automate and

execute all these different forms of audio over the

fewest number of buying platforms. I’m not defin-

ing programmatic right now as a real-time bidding

model; I think the automation and the data are more

important than going real-time.

We at Pandora evangelize on the Power of Audio. How does that power work for you and your clients?

From a listener standpoint, the Power of Audio was

always about a one-to-one connection. Granted, some

audio, such as broadcast, is transmitted to a bunch of

people at the same time—but when you’re in your car

listening, you feel like it’s a one-to-one connection. For

years the broadcast medium was static, but in the dig-

ital space—whether it’s streaming or podcasts—audio

has opened up a lot of innovation and opportunity.

"In the digital space—whether it’s streaming or podcasts—

audio has opened up a lot of innovation and opportunity"

K E V I N G A L L A G H E R

S T A R C O M


Time put radio at No. 2—only behind the personal

automobile.8 As the first electronic mass medium,

radio delivered the Power of Audio directly into

millions of homes. Originally invented nearly

a century ago, radio remains widely used today

thanks to its ease of use, broad availability and

free content.

But like all traditional media, radio

faces numerous headwinds: young listeners

accustomed to streaming media, advertisers who

value the data-driven targeting of digital, and an

evolving array of connected devices that deliver

more personalized audio options.

Will radio survive this digital revolution?

While nobody recommends betting against the

medium, it would be foolish to ignore the difficult

environment that traditional media has endured

in the last decade.

2 I N I T S R A N K I N G O F 2 0T H C E N T U R Y T E C H N O L O G I E S,

AM/FM Radio

T H E O R I G I N A L A U D I O P L A T F O R M F A C E S

H E A D W I N D S

7/ Pandora's 2017 Definitive Guide to AudioA M / F M R A D I O

16%

14%

12%

10%

8%

6%

4%

2%

0 2000 2001 2002 2003 2004 2005 2006 20082007 20102009 20122011 2013 201620152014

13.8

%

14.0

%

14.2

%

14.4

%

14.6

%

14.9

%

15.1

%

15.3

%

13.2

%

11.1

%

10.4

%

9.7

%

9.2

%

8.5

%

7.9

%

7.7%

7.7%

Ave

rag

e A

ud

ien

ce (%

of

po

pu

lati

on

)

Radio's steepest ratings declines occurred in the last 10 years, as consumers have found

other audio options, including satellite radio and streaming audio on their smartphones.

L I S T E N I N G P R O F I L E A N D T R E N D S

Radio currently accounts for nearly half of the four hours of audio that Americans consume each day2—not bad for

a 100-year-old medium! Broadcasters routinely tout its most impressive stat—that AM/FM’s industry-wide, weekly reach is 93%. However, reach is only part of audience measurement. Time spent listening is a reliable indicator of radio’s health. As the above ratings chart infers, radio ratings have declined by 45% over the last decade.

S A T E L L I T E R A D I O : A Growing Force in Cars

Since its debut in 2001, satellite radio has

built a significant presence in the car. Today,

more than 30 million SiriusXM subscribers pay

an average of $13.04 per month19 to receive

about 100 commercial-free music channels

and about 100 ad-supported news, talk, traffic

and weather channels. SiriusXM makes radio

devices for use inside and outside the car, but

in-vehicle listening makes up more than two-

thirds of its total listening time.2

SiriusXM’s 2015 ad revenues total $122

million representing just 2.79% of its reve-

nue.19 Overall only 17% of its listening time

goes to ad-supported channels (news, talk

and sports).2 More significantly, SiriusXM’s

audience is not currently measured by any

third-party research agencies.

H D R A D I O : Still Looking for a Market

In the mid-2000s, radio began offering “HD

Radio” with the promise of better quality

sound and additional “multicast” channels of

AM/FM Listening Trends, 2000-2016 10

AVERAGE AUDIENCE

R A D I O ’ S L A T E S T T E C H S T I L L S E E K I N G A D V E R T I S E R A T T E N T I O N


100%

80%

60%

40%

20%

0

57%

53%

47%

45%

39%

34%

31%

44%

53%

61%

71%

76%

�Shift to personalized audio: Where radio was once the only source of free music, listeners of all ages can now access music content that’s not only free, but personalized. People aged 18-34 now consume more audio from the internet than they do from traditional radio. As a result, 40% of all radio time is now dominated by people 55 years and older.2

�Smartphone adoption: Radio’s steep declines in time spent listening align exactly with smartphone adoption. Almost all of the younger age groups and a majority of adults aged 55+ own a smartphone—including all the apps that make the device a center for media and information.12 We’ve seen that heavier smartphone use equates to more streaming. What’s more, adults spanning ages 18-49 now spend more time with their smartphones than with AM/FM.13

�Home (not so) sweet home: Gone are the days of listening to radio as a family. People now spend more time with TV and mobile in the home than with radio. In fact, in-home listening accounts for 25% of all radio listening vs. 44% in 1998. About 20% of the population—and a third of Millennials—don’t even own a radio at home.12

�Popularity of satellite radio: The first broadcast radio disruptor, satellite radio continues to be especially popular among higher-income, middle-aged male commuters. Consuming nearly 7% of listening time, this is an attractive alternative to traditional radio for many.

With these trends contributing to an overall decrease in radio consumption, the vast majority of commuters still turn to radio during drive time. As a result, overall radio listenership rises on workdays and falls on weekends and holidays. Still, drivers are gravitating to alternate sources of audio thanks to faster mobile data, ease of Bluetooth connections and the rising popularity of connected car technologies (See Chapter 3's “On The Rise” section for more about in-car audio listening).

Radio’s ongoing decline in time spent listening can be attributed to:

content beyond what’s available on a stan-

dard AM/FM radio. The content on these addi-

tional channels features niche music genres,

out-of-town sports broadcasts or foreign lan-

guage programming.20

To hear HD Radio, listeners need a spe-

cially equipped portable or in-dash radio, as

well as reception from a commercial or pub-

lic station that broadcasts in HD. The service

is commonly available in the nation’s largest

markets, but not all major market stations

broadcast in HD, and even fewer smaller mar-

ket stations use the technology at all. After a

decade of service, consumer confusion about

HD Radio abounds,21 and based on Nielsen

Audio ratings, HD Radio usage is low.

N E X T R A D I O A P P : Putting FM Radio on Smartphones

Many broadcasters believe that radio would

be more popular if listeners could hear sta-

tions on their smartphones. In addition to

the fact that many stations can already be

streamed on mobile, most phones also have

a built-in (but frequently-inactive) FM receiv-

er chip that can tune in FM stations via the

NextRadio app.

At this time, only a few Android phone

models have the FM receiver activated.

Sprint began enabling FM reception on

some of its phones in 2013, but AT&T and

Verizon only recently agreed to do the same.

iPhone owners are out of luck; Apple has

chosen not to activate its FM chips. Further,

the technology requires the use of a corded

headphone, which serves double-duty as an

antenna. The newly released iPhone 7 rides

the growing popularity of wireless Bluetooth

2011 20132012 2014 20162015

Growth In Streaming Aligns with Smartphone Adoption12

POPULATION 12+

M O N T H L Y O N L I N E R A D I O L I S T E N I N G

SMARTPHONE OWNERSHIP


A D T R E N D S A N D R E V E N U E P R O F I L E S

In 2016, broadcast radio didn’t undergo any fundamental changes in ad products, ad length

or ad loads—nor is there evidence of such changes in the coming year. While most AM/FM ad revenues still come from 15-, 30- and 60-second local, national or network audio spots, advertisers also must rely on audience targeting based on a station’s format and day/daypart.

In its ongoing survey of advertising agencies, the ad data firm STRATA found that 53% of agency execs reported that client interest in radio was the same as the prior year, with 33% of clients having less interest and 14% having more interest.14

Broadcast radio’s share of total media ad spend is forecast to decline from 7.8% in 2015 to just 5.9% in 2020. Despite projected growth in total ad spend between 2015 and 2020, radio isn’t expected to grow at all in the same period. However, digital revenue—which includes audio, display and video on broadcast and pureplay streaming platforms—is expected to grow substantially through 2020 (see chart on Page 15).15

A C C O U N T A B I L I T Y A N D A U D I E N C E M E A S U R E M E N T

A s with TV, broadcast radio depends on sampled research for audience metrics. Radio stations

in most of the Top 50 markets are measured with the Nielsen Portable People Meter (PPM). In 2015 Nielsen implemented a technical change to its PPM encoding methodology that made it easier for a station to receive listening credit. This change was made after many radio stations had installed third-party audio processing technology that claimed to accomplish the same thing.16

In 2016, following Nielsen’s implementation, Nielsen claimed credit for a 13% YOY increase in radio AQH ratings in the PPM markets.17 Prior to

headsets and does not include a traditional

headphone jack at all.

Even still, just 505,000 unique visitors used

the NextRadio app—that’s less than 1% of

AM/FM’s audience and only a fraction of the

millions of visitors to streaming audio sites.22

S A T E L L I T E R A D I O, H D R A D I O,

F M S M A R T P H O N E O U T L O O K

�Industry analysts expect SiriusXM to grow

as more new cars with advanced dash-

boards are sold. But top-line advertisers will

largely bypass the platform until they see

accountable listening metrics.

�A lack of compelling content on HD Radio

channels has led to low listener growth.

There are also no ratings available to ad-

vertisers who are interested in the medi-

um. Furthermore, there aren’t any pend-

ing developments in 2017 that might

change this.

�The radio industry’s attempts to enable FM

reception on smartphones is hampered by

spotty device availability. While FM is get-

ting activated on more phones, it will take

years before the feature will be available on

most Android devices. There’s currently no

indication that iPhone users will ever have

the feature. Far more mobile users continue

to listen to FM via streaming.


this so-called enhancement, radio listening levels had been declining by an average of 5% per year over the last five years.9

While the Nielsen radio diary is MRC-accredited in all 50 states, the PPM system remains unaccredited in 20 major markets, including New York, Boston, Washington, DC and Seattle.

As over-the-air broadcasters struggle to provide the detailed audience metrics that online publishers do, they will also struggle to offer advertisers the depth of data and visibility they demand.

O U T L O O K

L ike all traditional media, AM/FM may have been a solid bet for advertisers in the past.

But personalized audio—with hyper-targeting and detailed audience metrics—now offers more of what marketers need to make smart buying decisions. While radio does possess great characteristics, advertisers have started questioning the audibility of audio ads that are part of a 10-spot pod. There are now more efficient ways to reach listeners, especially younger generations who are more inclined towards digital audio.

Broadcast radio’s share of total media ad spend is forecast to decline from 7.8% in 2015 to just 5.9% in 2020


3Streaming

AudioH I T T I N G T H E B I G T I M E

I N 2 0 1 6

the opportunity to listen digitally. When Pandora

launched in 2005, throngs of enthusiastic listeners

flocked to the service eager to create their own

personalized “radio” stations. This was promising

behavior, but it wasn’t until Pandora debuted on

the iPhone in 2008 that listenership skyrocketed.

The pervasiveness and mobility of smartphones

allowed listeners to stream wherever they went,

and whenever they wanted.

You could say that the smartphone is today’s

version of the transistor radio of past generations.

But unlike traditional radio, streaming listeners

are liberated from one-size-fits-all playlists and

long commercial breaks, allowed to enjoy content

they choose for themselves.

Chad Stoller, EVP, Global Information

Director for IPG Mediabrands observed, “We

are in the midst of an unprecedented era of

consumer control. With every trip to the app

store, consumers discover new ways to connect

with friends, content and services.”23

S I N C E T H E E A R L Y D A Y S O F S T R E A M I N G , U S E R S H A V E E N J O Y E D

12/ Pandora's 2017 Definitive Guide to AudioS T R E A M I N G A U D I O

T H E L I S T E N I N G ‘ P I E ’ I S E X P A N D I N G

L isteners take advantage of new audio choices that are delivered digitally into their

smartphones, cars and homes. For that reason, streaming audio listening time is projected to double between 2015-2020, lifting overall audio time.23

Streaming audio comes in many flavors—from free, streamed simulcasts of broadcast radio to paid, on-demand listening experiences. These services broadly fit into three buckets:

�Linear: Pre-programmed content where the listener has little or no control. Includes simulcasts of AM/FM commercial and public stations in the U.S. and abroad, and pre-programmed celebrity music playlists. Most of these services, such as iHeartRadio, are both free and ad-supported.

�Custom: Personalized stations that listeners create around a song, artist or genre. The stations can be further customized based on user interactions like song skips, thumbs, human curation or data-driven recommendations. Many of these services offer both free and ad-supported products. Several have introduced “mid-tier” services to offer additional features and commercial-free listening for a monthly fee.

�On-Demand: This format offers listeners near-complete control over their experience, including the ability to play specific songs, build custom playlists and download music for offline playback. Most on-demand services are ad-free with a paid subscription—although Spotify does offer an ad-supported, on-demand product for desktop computer users.

"We are in the midst of an unprecedented era of consumer control.

With every trip to the app store, consumers discover new ways to connect

with friends, content and services."C H A D S T O L L E

I P G M E D I A B R A N D S

2015 2016 2017 2018 2019 2020

Streaming 2.9 3.4 3.9 4.5 5.3 5.8

Owned Music 4.3 4.2 4.1 4.0 3.9 3.9

AM/FM 11.5 11.3 11.2 11.0 10.8 10.7

Satellite Radio 1.8 1.9 2.0 2.1 2.2 2.8

Podcasts 0.5 0.6 0.6 0.7 0.8 0.8

Other 0.2 0.1 0.1 0.2 0.2 0.1

TOTAL 21.2 21.5 21.9 22.5 23.2 24.1

With More Choices, People Will Listen to More Audio23

HOURS OF LISTENING PER WEEK



A side from the mass adoption of smartphones, streaming audio hit another major milestone

in 2016 when we learned that half of the U.S. population—136 million persons 12 years and older—stream music weekly.12 This figure is nearly triple where it stood in 2010, demonstrating a flourishing habituation with the medium.

Streaming is most popular among people aged 35 and younger, and particularly so among those between the ages 18-24. This Young Adult demo became the first to spend as much of their listening time with streaming as with AM/FM radio, indicating that younger demos are pushing this trend mainstream.2 But streaming’s popularity is not only restricted to the young; 56% of adults aged 25-54 listen online weekly too.12

The percentage of the U.S. 12+ population that listens to internet radio each week reached

50% in 2016. The streaming growth spurt began in earnest in 2008, when Pandora became

available on iPhones and later on Android phones.

As we've noted, streaming audio maps closely to smartphone usage. Researchers have tracked an impressive 67% jump in smartphone app and web usage in just the last year, across all age groups. Adults aged 18-49 are now spending more time on their smartphones than they do with traditional radio. Likewise, adults 50-64 are quickly closing the gap between time on smartphone and time with radio.13

While smartphones remain popular, listening on connected car and connected home devices constitute the fastest-growing segment of streaming audio (See page 17, “On The Rise: New Places to Stream Audio” for more on this topic).

Internet Radio is a Lifestyle Activity for Half the U.S.12

% OF 12+ PERSONS WHO LISTENED TO INTERNET RADIO IN LAST WEEK

2008 20102009 20122011 2013 201620152014

50%44%36%33%29%22%17%17%13%

2000 2001 2002 2003 2004 2005 2006 2007

12%12%8%8%8%6%5%2%

136 M ESTIMATED

Weekly Time Spent with Smartphones and Radio13

IN HOURS AND MINUTES

PHONE RADIOAGE 2015 2016 2015 2016

18-24 11:46 15:45 10:05 10:24

25-34 10:31 13:46 11:30 11:20

35-49 10:06 14:48 13:33 13:42

50-64 7:29 13:10 14:56 15:15


2015

2015

2016

2016

2017

2017

2018

2018

2019

2019

2020

2020

CAGR* 5

CAGR* 5

‘15-‘20

‘15-‘20

AM/FM Spot

Broadcast Digital6

Pureplay Digital7

T O TA L U . S . A D S P E N D * *

Mobile

$14.32 $14.18 $14.20 $14.25 $14.28 $14.30

$1.02 $1.07 $1.12 $1.18 $1.24 $1.30

$1.58 $2.08 $2.62 $3.65 $4.25 $4.66

$31.69 $45.95 $57.44 $68.93 $77.89 $86.64

$183.06

$195.76

$207.30

$219.27

$242.77

$230.93

-0.03%

+4.97%

+24.50%

+22.28%

+5.84%

A D V E R T I S E R S A R E G O I N G M O B I L E

I t’s projected that advertisers will increase ad spend by nearly $60 billion over the next five years,3 with much of it

going to mobile. Traditional AM/FM spot advertising spend will stay flat over that period despite the broadcast industry seeing some gains in digital spend. For pureplay streaming services, however, advertising spend is expected to nearly triple over the next five years. Successful marketers will be primed and ready to capitalize on this growth.

*Compound Annual Growth Rate**Total also includes digital, TV, print, out-of-home and directories spend. Broadcast digital and PurePlay digital revenues include non-audio digital revenue.

As a culture, we are entering an earbud era where audio personalization is key to achieving resonance

U.S. Total Media Ad Spending, 2015-20204


Pandora vs Spotify Addressable Audience24

S treaming audio is the only platform to offer the advanced planning and performance metrics that

advertisers need in today’s competitive environment. Unlike broadcast, where targeting capabilities are based on listener characteristics by format (or through third-party qualitative research), streaming provides additional segmentation based on multiple, detailed sources of data:

�DECLARED: First-party data supplied directly to the streaming service and used for demo and geo targeting, including age, gender and zip code. While some services such as Pandora only use first-party registration data, other services don’t require registration and depend on second-party sources, like Facebook registrations or game console accounts.

�BEHAVIORAL: Includes information on listener interactions such as music/genre selections, time of day, devices used, skips and thumbs. For example, Pandora collects a billion such data signals each day.

When combined with declared registration info, behavioral data helps predict a listener’s ethnicity, language, even political preference.

�THIRD-PARTY: Consumer profiles made up of online interactions, purchase transactions and other data further refines declared and behavioral sources for more in-depth targeting. Pandora uses a combination of declared, behavioral and third-party data leads to create over 1,300 audience targeting segments, including categories as broad as “auto intenders” and as specific as “Hispanic Mom Pizza Enthusiasts.”

Advertisers continue to move dollars to streaming for this level of granular targeting, plus guaranteed digital ad-serving technology and post-campaign delivery metrics, including actual reach and frequency reports. In a recent survey of ad agencies, 55% said they are more interested in streaming audio than they were last year—compared to just 14% who said they were more interested in broadcast spot radio.14

A U D I E N C E A D D R E S S A B I L I T Y

A s streaming audio grows, advertisers are increasingly challenged with differentiating

between users and platforms that are addressable by advertisers, and those that are not. For example, brands can place their messages on Pandora’s free, ad-supported service but not Spotify’s on-demand, ad-free service. It’s a slight but important delineation.

In the media, Spotify often touts the size of its worldwide audience—which is estimated at 115 million unique visitors. However, this number represents listeners in 59 countries, all of which are not “addressable” by U.S. advertisers. Based on company declarations and press reports, their Fall 2016 U.S. addressable audience is closer to 40 million monthly unique visitors. The graph at left shows the breakdown of streaming listeners by addressable vs. non-addressable.

Similar to the comparison of Pandora and Spotify, each streaming service described in this chapter includes both addressable and non-addressable portions of their user base. Media buyers are encouraged to dig a little deeper to determine the actual audience their message can reach. Triton Webcast Metrics Local has been one beneficial tool in this regard.

A D T R E N D S A N D R E V E N U E P R O F I L E

POPULATION 13+ In the U.S. Pandora’s

advertiser-addressable

audience is twice the

size of Spotify’s estimated

addressable audience.

40MU.S. Free

82MU.S. Free

4MU.S. Paid

17MU.S. Paid

58MOutside U.S.

PANDORA

SPOTIFY

Adults aged 18-49 are now spending more time on their

smartphones than they do with traditional radio


O U T L O O K F O R S T R E A M I N G A U D I O

S treaming audio opened the door to a personalized media revolution, where consumers now expect

to get what they want, when they want it, on all of their connected devices. As people devote more attention to smartphones, streaming audio usage is projected to grow 15% annually from its current 3.4 hours per week to 5.8 hours per week in 2020.6 Streaming will surely benefit from increased usage in connected cars and connected home devices in the coming years.

This media revolution is undoubtedly led by Young Adults, aged 18-24, who grew up using mobile devices and personalized media. They adopted streaming audio as the primary audio format they listen to—and will likely take these characteristics with them as they enter into the workforce, start families and age into older demos. But older listeners are intrigued by the promise of personalization too. As they continue spending more time with their phones and connected devices, their streaming usage will increase accordingly.

Thanks to a growing audience, and an ability to execute and account for precise campaigns, advertisers are expected to increase their media spend on streaming by 19% YOY in 2017, and 17% annually through 2020.4

New Places To Stream Audio

C O N N E C T E D C A R S G O M A I N S T R E A M

For close to 80 years, radio has been a con-

stant and reliable companion for drivers. How-

ever, in much the way that technology has

transformed media consumption outside the

car, drivers are increasingly using digital media

inside the car too.

According to a recent study of in-car me-

dia usage conducted by Edison Research,

drivers of newer cars are far more likely to

listen to digital audio through the dash than

drivers of older cars.26 The trend toward more

in-car digital audio consumption will contin-

ue as more people purchase vehicles with

advanced dashboards.

Carmakers are currently refining their dash-

board media interfaces. As of 2015, they’ve also

began offering interfaces developed by tech

leaders like Apple, whose CarPlay interface

By next year there will be a total of 35 million connected cars on U.S. roads; about a quarter of those cars will have been sold just in 2017.28

(continued on next page)

C O N N E C T E D C A R S I N U . S .

O N T H E R I S E

60

50

40

30

20

10

0

M

34.8

M 45.

2M

58.7

M

2014 20162015 2017 20192018

A M E R I C A N ’ S A R E B U Y I N G C O N N E C T E D C A R S

15.9

M

20.6

M

26.8

M


uses a driver’s iPhone functionality by way

of large icons on the “center stack” display

(dashboard) or through Siri voice control.

Many models also feature Google’s An-

droid Auto, a similar interface but for An-

droid phone owners.

Both CarPlay and Android Auto play a

vital role in connected car adoption and

usage, creating dashboards that look and

feel as familiar as their smartphone. Even

broadcasters have expressed concerns

about connected dashboards because

traditional AM/FM controls appear depri-

oritized, with streaming audio services

showing up front and center.29

Streaming services, like Pandora, un-

derstand the importance of in-car audio

consumption and have prioritized vehicle

integrations. Pandora reports 18 million in-

dash activations across 190 vehicle mod-

els.30 Some 22% of frequent commuters

listen to Pandora with a connected dash-

board,26 and the number of drivers with in-

dash access to Pandora has been growing

73% annually over the last four years.30

Still, driver behavior shows that a con-

nected dash isn’t necessary for enjoying

streaming audio in the car. Some 40% of

commuters instead listen to audio by con-

necting their smartphones to the car via a

USB, AUX jack or Bluetooth connection.26

H A C K I N G T H E C O M M U T E R C O D E

Earlier in 2016 Edison Research con-

ducted an extensive study of in-car me-

dia usage among daily car commuters.

While the vast majority of drivers use AM/

FM, they’re also using many other media

options including CDs, digital music files

and streaming audio.

When faced with the choice of having

just one audio source in their vehicle, only

one in three drivers of cars 2012 and newer

chose AM/FM. By comparison, 53% of driv-

ers of cars 2006 and older choose AM/FM.26

The study also detailed the amount

of “switching” by commuting drivers,

and found that those listening to AM/

FM switched significantly more than

streaming listeners to avoid long com-

mercial breaks. To learn more about this

groundbreaking study, visit the Pandora

For Brands site for more about the State

of In-Car Audio.

C O N N E C T I V I T Y AT H O M E

Nearly all smart TVs, OTT set-top boxes,

game consoles and voice-activated Blue-

tooth speakers offer streaming audio

today. This includes Pandora, where the

number of monthly listeners on connect-

ed home devices has grown 43% annual-

ly over the last five years, with over eight

million visitors listening each month.30

On average, this cohort is listening for a

substantial three hours, 24 minutes per

day—93 minutes more than Pandora’s av-

erage smartphone listener.30 The massive

time spent with these devices reflects a

gravitation toward multi-purpose devic-

es that offer high-quality, personalized

content options.31

As of 2016, two-thirds of U.S. homes had

at least one TV with internet connectivity

(smart TV or TV connected to OTT box,

game console or smart STB).31

C O N N E C T E D T V H O U S E H O L D S & P E N E T R A T I O N

Both CarPlay and Android Auto play a vital role in connected car adoption and usage

100

80

60

40

20

0

68.8M

80.0M88.3M

93.5M97.3M

20162015 2017 20192018

78.1%75.5%

71.7%

65.4%

56.6%

C O N N E C T E D T V H O U S E H O L D S

�Connected TV Households %

M


A F E W H U R D L E S A W A Y F R O M M A I N S T R E A M

A C C E P T A N C E

4Podcasting

when an investigative team from public radio’s

This American Life re-examined a 15-year-old

murder in a landmark audio series that sparked a

nationwide boom in podcast listenership. To date,

episodes of Serial have been downloaded more than

130 million times.32 Pandora began streaming the

series in November 2015 and has seen a collective

10 million hours spent with the content.30

Listeners can now choose from more than

200,000 podcast episodes in the iTunes store

covering every imaginable topic, yet podcasts still

occupy a small slice of the audio “pie.”33 Difficulty

in finding and playing programs is likely to

blame. Yet advertisers still show a willingness to

advertise with podcasts, even though listening

metrics and meaningful user insights are elusive.

P O D C A S T I N G T R A N S F O R M E D I N T O A M A S S M E D I U M I N 2 0 1 4,

19/ Pandora's 2017 Definitive Guide to AudioP O D C A S T I N G


Some 57 million people listened to podcasts monthly in 2016, a 40% boost from two years

earlier when Serial debuted. Podcasts are especially popular across ages 12-54, and 71% of podcast listeners on their smartphones.34

Those that listen to podcasts tend to get hooked. Of the 35 million people that listen to podcasts weekly, the average person listens to five programs per week—one per each work day. Of the listeners that consume podcasts daily, these listeners spend an outsized six hours with podcast audio, almost two hours more than average.

Still, podcast growth is hampered by inconsistent listening experiences. The challenges in finding and consuming podcasts differ wildly depending on whether a listener is on desktop or mobile, has an iTunes account or not, owns an iPhone or Android, or streams versus downloads. The difficulties of podcast listening even spurred the respected tech news site Recode to publish a “Layman’s Guide to Podcast Listening ”33 just last year. This only further illustrates the deep interest the industry has in this medium.

Since Serial’s debut in 2014, the monthly podcast audience has grown by 35%

among 12-24-year-olds, 41% among 25-54s year-olds and 57% among people 55+.

2013 2014 2015 2016

Age 12-24

11% 20% 23% 27%

Age 25-54

16% 17% 19% 24%

Age 55+

7% 7% 10% 11%

More Listeners of All Ages Are Consuming Podcasts 12

% LISTENING TO A PODCAST IN LAST MONTH

Some 57 million people listened to podcasts monthly in 2016, a 40%

boost from two years earlier when Serial debuted


U.S. Desktop vs. Mobile Podcasting Ad Spending35

A D T R E N D S A N D R E V E N U E P R O F I L E

Ad spending on podcasts has hardly moved in recent years and, based on a ZenithOptimedia

forecast, are not expected to rise significantly in the future. While some podcasts have top-brand title sponsorships and transactional ads, most podcast ads are performance-based, where the sponsor uses offer codes to track the source of new leads.

Yet the ad community is intrigued by the possibility of reaching many different life groups via podcasts. Kevin Gallagher, Starcom EVP of Local Markets, looks forward to putting dollars against podcasts. Although, he acknowledges that the industry needs more numbers: “In our targeted and precision-based world, we’re looking to quantify the audience, either from a sheer number point or with behavioral data. Once we get that, you’ll start seeing marketers jump on pretty quickly because it just makes sense. There’s an audience there.”

Gallagher noted, however, that because there are so many podcasts, it needs to become part of a programmatic buy/sell process—perhaps in concert with other audio platforms. Media buyers simply won’t have the time or resources to plan around and evaluate thousands of individual podcasts.

MILLIONS AND % CHANGE

2014 2015 2016 2017 2018

Mobile $33.40 $33.80 $34.40 $35.80 $37.30

% change — 1% 2% 4% 4%

Desktop $0.68 $0.69 $0.70 $0.73 $0.76

% change — 1% 2% 4% 4%

Total $34.10 $34.50 $35.10 $36.60 $38.00

% change — 1% 2% 4% 4%

A C C O U N T A B I L I T Y A N D A U D I E N C E M E A S U R E M E N T

Thanks to the wide disparity by which podcasts are served and consumed, they can be difficult

to measure. John Rosso, President of Market Development for Triton Digital noted, “While a podcaster can obtain a good amount of listening data when the podcast is streamed, downloaded podcasts are a different story. Once the content has been downloaded onto a device, there’s no visibility into if, when or how much of that content gets consumed. This limitation extends to ‘progressive downloads’—podcasts that are being consumed by the listener while being downloaded.”

Once the podcast industry solves for the number of ways people listen, it will still need the kind of lifestyle and targeting metrics advertisers crave to be successful.

O U T L O O K

Podcast usage could reach the mainstream if listeners can find and consume content as

easily as they can with other streaming formats. User experiences vary widely based on which app and devices are selected, making it difficult for advertisers to understand and measure listenership.

Advertisers will almost certainly flock to podcasts when there are quality listening metrics and listener profiles that permit better targeting. Due to the sheer size of the podcast market, they will likely also need a way to analyze and buy programmatically. Until then, podcast audiences will continue to grow substantially but ad revenue will lag.


5 L I Z Z I E W I D H E L M H A S B E E N W I T H P A N D O R A F O R O V E R 1 0 Y E A R S

Audio Insights F R O M P A N D O R A

S V P , L I Z Z I E W I D H E L M

and is currently the Senior

Vice President of Ad Product

Sales & Strategy. She and

her team are responsible

for bringing innovative ad

products to market that help advertisers tell their

stories and build deeper connections with their

audience. But her impact on Pandora started

when she joined as the company’s very first

salesperson, selling “digital audio”... a product

no one had ever heard of. Lizzie sat down with us

to discuss Pandora’s decision to integrate audio

advertising and what she sees as the long-term

promise of audio.

22/ Pandora's 2017 Definitive Guide to AudioA U D I O I N S I G H T S

Tell us about Pandora’s decision to integrate audio ads into the service.Pandora’s early days were so exciting. We were growing only by word-of-mouth, ultimately attracting millions of passionate music fans who wanted a better radio experience. The iPhone was the catalyst that created the right moment for us to launch audio ads. The app experience was new, but Pandora quickly became a must-have for anyone buying a smartphone. This shift created a dramatic increase in listenership for us—and soon our audience reached the size of many of the top radio stations around the country. But our product was different, in that we knew who was listening. The ability to target, combined with our commitment to less interruptions, allowed us to create excitement and interest.

What led Pandora to take a drastically different approach to advertising than other audio platforms?

We defined a purpose, which was to service our audience first. We then built a monetization model that worked for our clients and our listeners, under the mantra “What is good for the listener is good for the advertiser.” So, the total time we run ads compared to the total time we play content was—and still is—our primary concern. Our interruptions would be short and include messages relevant to each listener, and we wouldn't run longer-form ads to ensure our listeners know what to expect. This philosophy created a behavior that runs counter to what radio experiences: Our listeners were not tuning out or changing stations because of the ads.

What kinds of innovation do you see with audio ads?As we look to the years ahead, we are thinking about variable spot length and creative best practices to develop an even better listening experience. I am thinking quite a bit these days about the equation of ad length plus creative plus listener behaviors equaling advertiser attention and interest. Today we sit on more data and better technology to play with that equation to find the most enjoyable experience for every individual listener.

Audio can be a very personal medium. In today’s earbud era, where people are constantly plugged into earbuds or headphones, audio messages are—quite literally—delivered directly into the ears of a desired audience. How does this impact creative development?

Every Pandora listener is an individual to us, and we work hard to make their music as personal as possible. So, why can’t we

strive to do that with advertising too? The key is to align with data, so you know exactly who you’re talking to. Using audio that references a known behavior can make a great impact. Audio ads that call out the fact that “we know you’re on the road” or “your home is a special place” will draw attention from a listener because it feels personal—just like their music.

Transactional ads aside, can you tell us more about the intersection of music, advertising and data—and what this looks like when done well?

Many brands set out to engage consumers on a deeper level. Driving that connection through music and experiences is extremely effective. Today, Pandora sits on more data and better technology than ever to help us bring bands, brands and fans together in impactful ways. My favorite example is the YG Call of Duty Station we built for the launch of Call of Duty: Infinite Warfare. We worked closely with Activision to define their audience target and the type of artist that would resonate with them. That led us to rapper YG, who is very popular among Call of Duty fans, and a huge fan of the game himself! The outcome was a station that captured attention and attracted engagement among the brand’s ideal audience. Nothing can do this quite like music—especially when combined with the Power of Audio and the personal touch only smart data can provide.

Are there any ad technologies that are getting your attention?

I am very interested in how technology can combine with user behavior to deliver better and more interesting advertising. For example, what if I’m the type of person who just loves a southern accent? Maybe all the audio ads I hear should be in a voice that I prefer. Or what if I’m listening to the AC/DC station and then switch to Steve Aoki? Shouldn’t the music bed in my next ad also reflect that change? There is a future for scalable, data-driven creative tied to frictionless programmatic pipes. I’m really excited to see how that plays out.

"We then built a monetization model that worked for our clients and our listeners, under the mantra 'What is good for the listener is good for the advertiser ' ”

L I Z Z I E W I D H E L M ,

P A N D O R A

23/ Pandora's 2017 Definitive Guide to AudioA U D I O I N S I G H T S

S O U R C E S

1 95% of Persons 13+ use some form of audio daily; Edison Research, Share of Ear

Study, Q3 2016

2 Edison Research, Share of Ear Study, Q3 2016

3 eMarketer, U.S. Total Media Ad Spending by Media, September 2016

4 eMarketer, September 2016. Figures in billions. Radio figures do not include off-air

revenues Magna Global, Media Economy Report, Capturing Consumer Attention in

an On Demand World, June 2015

5 Compound annual growth rate

6 Cowen and Company, Music Industry Poised to Get Its Groove Back, June 2016

7 eMarketer data net of Cowan and Company Broadcast Digital revenue estimates

8 Time Magazine, 20th Century Technologies

9 Radio inSights blog, Shocker! Radio is Growing!, August 2015

10 2000-2012: calculated using Arbitron Radio Today reports; 2013: calculated using

Nielsen Cross Platform Report, Q4 (12+ persons); 2014-2016: Nielsen Comparable

Metrics Reports (18+ persons).

11 Edison Research, Share of Ear Study, Q3 2016

12 Edison Research, Infinite Dial Study, 2016

13 Nielsen Total Audience Report, Q2 2016, which notes that some of the annual

smartphone increase was inorganic due to a methodology change; usage would

have risen 42% without the methodology change.

14 Inside Radio, Audio Industry Growth Attracts More Ad Agency Interest,

September 2016

15 eMarketer, U.S. Radio Ad Spending, by Segment, 2014-2020, March 2016

16 Inside Radio, Ratings-Boosting Box Sweeps PPM Markets, April 2015

17 Nielsen, Audio’s Growing Ratings and Enhanced Encoding, March 2016

18 Cumulus 2Q 2016 Earnings Release Presentation

19 SiriusXM Q3 2016 earnings report; FY2015 earnings report

20 HD Radio station guide

21 Crutchfield.com, customer comments about HD Radio, May 2016

22 comScore Mobile Metrix (NextRadio), Media Metrix (iHeart, Pandora), July 2016

23 Magna Global, Media Economy Report – Capturing Consumer Attention in an On

Demand World, June 2016

24 Spotify global and U.S. paid numbers from Spotify news reports, January,

June 2016. Total U.S. audiences for both services, comScore Multi Platform Top

Properties, September 2016

25 Media Rating Council website

26 Edison Research, Hacking the Commuter Code, April 2016

27 Automotive News, Forecasters see U.S. Sales Up This Year, But Softer 2017

28 eMarketer, Connected Cars in the U.S., 2014-2019, May 2015

29 Jacobs Media blog, You’d Better Worry About Connected Cars, August 2016

30 Pandora Internal Metrics, July 2016

31 eMarketer, Connected TV Households and Penetration, 2015

32 The Wrap, Adnan Syed Case Lands ID Special Based on New Evidence,

May 31, 2016

33 http://www.recode.net/2015/12/6/11621192/how-to-listen-to-podcasts-a-guide-

that-still-has-to-be-written-in-2015

34 All data from this section, except where noted, from Edison Research, The Podcast

Consumer, 2016

35 eMarketer, U.S. Desktop vs. Mobile Podcasting Ad Spending Quoting

ZenithOptimedia report, December 2015

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