Pandora, a radio
music streaming mobile app, is facing challenges from on-demand music services
such as Spotify, and ecosystem players
such as Apple and Amazon. While the number of users dropped to a level last
seen in 2013, Pandora reported an all-time high ad RPM (Revenue per thousand
impressions). I wondered if the improved RPM can be sustainable, especially
seeing how iHeart radio, another traditional music radio platform, faces the
risk of bankruptcy or restructuring. After digging into the financial details,
it seems that Pandora is using a quick and dirty way to boost its revenue: by
increasing ad-load.
Then interim CEO/CFO
Naveen Chopra mentioned in Q2 earnings call that “average audio ad load
increased from 3.3 to 5.3 spots per hour relative to the year-ago
quarter”. In fact, due to the higher
ad-load, Pandora reduced the real price per ad. The higher RPM was simply
boosted by playing more ads. Imagine if you are the listener, will you stick
with the app after finding out that your ad hour has almost doubled? Users can
easily shift to Spotify or other music apps. I believe this is one of the true
reasons why we are seeing a decline in its user listening hours.
Source:
http://investor.pandora.com/Cache/1500104909.PDF?O=PDF&T=&Y=&D=&FID=1500104909&iid=4247784
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