Pandora’s Q1 Ad Revenue Up 45%, But Pressures To Engage Users Are Rising

PandoraInternet radio service Pandora reported Thursday a 69% year-over-year increase in Q1 revenue to $194.3 million. Advertising revenue rose 45% year over year to $140.6 million. Subscriptions and other revenue were up 94% at $39.5 million compared to the prior year.

Mobile advertising RPMs (ad revenue per 1000 ad-supported listener hours) reached $29.46 in Q1 this year in a 44% increase from the same quarter last year.

Despite this uptick in mobile, CEO Brian McAndrews said Pandora doesn’t have immediate plans to integrate programmatic mobile capabilities into its offerings, adding he “sees an opportunity in programmatic display” but the space is still “in its early days.”

Pandora instead appears to be focusing on growing its sales team (it has 100 sales people across 37 local US markets) and on driving further engagement.

Engagement is especially important: Pandora saw a 12% increase to 4.8 billion listener hours for Q1, this isn’t as much of a jump as Q4 2013, when it reported a 16% increase.

While this gap could be attributed to seasonal influences, growing listening hours, improving monetization and managing content are company priorities, McAndrews said during the earnings call.

The service also faces a number of challenges. As competitors like Apple, Google and Spotify nip at its heels, Pandora may be running out of new users.

Pandora, which has 250 million registered users over the age of 13, is acutely aware of the importance of driving new users.

“There are about 270 million people over the age of 13 in the US,” said Pandora CMO Simon Fleming-Wood at Forrester’s Forum for Marketing Leaders earlier this month. “So the marketing challenge for Pandora is how do we grow our share of people listening (to music)? How do we get them more engaged, more often?”

In an effort to drive further engagement, Pandora is increasingly focused on cross-device listening features and automotive advertising.

In January, Pandora launched an automotive ad solution that is designed to let advertisers reach car-bound audiences through 15- and 30-second audio spots that run across vehicle models that integrate into Pandora. Consumers are more accustomed to a higher ad load in cars than they are to ads on mobile devices, McAndrews said, which gives Pandora “a lot of opportunities through targeting, paid listening and subscriptions.”

McAndrews did not discuss Pandora’s strategy for enhancing its offerings for hand-held devices or connected TVs, except to note that the company is consistently trying to further improve its playlist technology across devices.

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