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Pandora’s Ads “are as Valuable as Traditional Stations'” Ads

That’s the word from newly public Pandora on their first-ever quarterly report.

Pandora posted total revenue of $67 million during the second fiscal quarter of the year, more than doubling its revenue from the same period one year ago. Revenue from ads accounted for the lion’s share of Pandora’s Q2 sales, totaling $58.3 million.  And while Pandora did not turn a bottom-line profit for the quarter — the company’s net loss was $1.8 million — it seems to be impressing Wall Street with the traction it has gotten thus far. On a phone call with investors and analysts after the stock market closed on Thursday afternoon, Pandora confirmed that pound for pound its ads are just as valuable as those broadcast on traditional radio.

Let’s assume this is true for the sake of argument.

Because I’m going to argue that in the long-run Pandora’s ads will be considerably more valuable than those of a so-called “traditional stations.”

The reasons are obvious:  Pandora – and everyone else who streams content – has access to precise metrics that can make any buy dramatically more efficient.  Want all the 20-year-old guys who live in a particular zip code?  Bam! They’re yours!  This is not news and as a result it should come as no surprise.

But wait, you might say….Most advertisers aren’t buying that level of granularity.  Not from traditional radio stations, no.  But on the digital side it’s all about granularity and the incredible added value of a Pandora is the magic of audio injected into the otherwise commoditized granularity you can buy just about anywhere online.

Add to that Pandora’s ability to quilt together audiences from a vast nationwide database of known and identifiable listeners and their ability to provide real-time 100% accurate metrics on exposure and response to any and all ads a listener receives and you have a magic formula that will eventually turn lead into revenue gold.

The good news for all in this space is that these powers are not Pandora’s alone.  They’re available to you, too.

The bad news, however, is that, as recent comparisons of Pandora’s in-market ratings compared to those of traditional stations have shown, Pandora can theoretically tap into smart digital dollars and the same not-so-smart “reach” dollars currently being plowed into traditional radio by traditional agencies. In a world of audio “reach,” advertisers will eventually be indifferent to whether or not that “reach” is driven by a tower or a server.

Are Pandora’s ads “as valuable as a traditional station’s” ones?  Maybe or maybe not.

But will they soon be more valuable?

Without a doubt.

It’s time for broadcasters to get serious about their streaming strategies and confront all obstacles to success in this area head-on, and that includes royalties.

So far I see less serious engagement here and more excuse-making, more abject surrender, more “pray and bray,” more kowtowing to certain broadcasters who have killed their streams and encouraged you to do likewise even as Pandora carves out a growing share of their radio marketplace and yours.

Pandora’s growing success can easily be anticipated.

But what is the point of anticipation unless it’s followed by action?

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