Magazine Article | August 29, 2017

Pandora Courts Retailers With Data Points

By John Gregory, Retail Head of Industry, Pandora

Streaming services like Pandora deliver real-time, personalized audio advertisements to your customers via carefully curated listener data.

The human species has a long history with music entertainment. After solving the most immediate need for food, shelter, and the warmth of fire, discovering a means to celebrate that achievement was likely the next important development for cave people.

Fast forward 40,000 years — not much has changed in that equation, as humans have continued to use their auditory sense as a means to identify, explore, communicate, and entertain. For Pandora, or any music enterprise along the way, it’s the primal and emotional connection to music that facilitated our growth and success. Not until the first radio station was launched less than 100 years ago was music and voice content shared far beyond the family living room, town square, or local music hall. It wasn’t long until advertising was sold as a means to support the free distribution of audio content, and the retail industry has long been an important partner in this media channel. Whether it be the use of jingles to identify prominent local department stores or aggressive promotional messaging over local radio stations, audio ads have always been an integral part of the communication strategy to drive interest and consumer traffic to retail establishments.

Until the early 2000s, radio advertising planning and strategy for retailers was fairly straightforward with predicable outcomes. However, with the emergence of the internet, continued technical innovation, and, most recently, the proliferation of mobile devices, our understanding of the media world has been shaken to its core. In a relatively short period of time, terrestrial radio has given way to digital streaming music services such as Pandora, which had developed the technical capability to deliver a personalized music experience to a registered user base, all with limited advertising interruption. In addition, the collection of billions of data points from our registered listener base helped Pandora evolve in digital audience development and targeted media distribution.

But the world doesn’t stand still, and while Pandora led the charge in developing the first ad-based, personalized music experience, we’re on an even greater mission to build a next-generation audio ad experience to maximize advertiser effectiveness and listener enjoyment. We accept this challenge with the realization that we are living in a world where audio is the new user interface, and the way we engage with technology is rapidly changing. Touch is being replaced by voice and other natural user interfaces, and this will have a huge impact on advertisers. We are testing, creating, and learning to disrupt the industry once again. So, what’s next in audio advertising innovation? Given the importance Pandora places on delivering the right message to the right person at the right moment, we are enabling the next level of personalization for audio ads with the introduction of Dynamic Audio Ads. In an exclusive partnership with a U.K.-based company, A Million Ads, we have recently begun testing two different offerings.

"Imagine if we could combine artificial intelligence and voice activation to enable a conversation with your favorite fashion influencer, celebrity chef, or garden expert, all through an advertisement."

First, Personalized Audio, which will enable us to serve tailored audio ads in real time to listeners of different genders, ages, regions, etc., based on Pandora’s proprietary listener data. Imagine hearing an ad that knew it was the first sunny spring morning in suburban Chicago and called that out in a manner most relevant to a targeted audience. An audio script could be delivered as follows: “Good morning, Arlington Heights! The beautiful taste of spring is finally in the air, and it’s time to start planning the garden. Head down to The Outdoor Store on West Campbell Street to browse our full line of small garden tools.” In this example, the time of day (morning), location (Arlington Heights), topic (planning the garden), address (West Campbell Street), and product content (small garden tools) could be dynamically altered in thousands of variations without the need for individually created copy. This gives advertisers the ability to tailor audio advertising messages in a more personalized manner without the operational complications of a manual creative versioning process — a win-win scenario for all.

The second key innovation in our product road map this year is Sequential Audio, which will allow advertisers to tell a story through sequentially targeted ads. Imagine hearing a story told over time. In the first spot you meet the protagonist, a busy professional person like you who decides it’s finally time to buy the new suit you’ve needed for so long. In the second spot, they explore different fabrics and styles and land on their favorite, highlighting why the choice was best for them. And in the third spot, they’re at the office receiving compliments on their new look, talking about the great wardrobing advice provided by the store. This storytelling approach provides more personal interest, situational context, and helps the retailer push the target customer down the purchase funnel to transact.

These are just two examples which further illustrate digital streaming capabilities far beyond what traditional terrestrial radio can provide. But this is only the beginning, as voice is replacing touch as “the new click-through,” especially in the connected home. This is an important consideration, as connected- device usage is growing across the audio industry, up 31 percent from 2016. Pandora has seen even more growth in connected home devices, and, as a result, Connected Home usage on our platform has grown to over 9 million unique monthly users, a 43 percent year-over-year growth. For advertisers, the audience on Connected Home is extremely valuable, since they are the most avid users of Pandora, more likely to be in a higher income bracket, own a home, and be parents of young children.

With the addition of voice-enabled applications to the audio mix of Connected Home, the next wave of innovation is upon us, as consumer behavior has also shifted with devices like the Amazon Echo and Google Home. While only 11 percent of the U.S. population currently has one of these devices, adoption is expected to grow to 16 percent by 2019, which presents a major opportunity for retail advertisers. Pandora is already investigating what this could mean from a listener standpoint and for client ad messaging content. For instance, we want to enable our listeners to find a station or create a playlist in a hands-free environment — when you are behind the wheel of a car or up to your elbows in cookie dough in the kitchen. For advertisers, voice-enablement will allow consumers to have conversations directly with the audio message. Imagine if we could combine artificial intelligence and voice activation to enable a conversation with your favorite fashion influencer, celebrity chef, or garden expert, all through an advertisement.

It’s an incredibly exciting time to be in the digital music streaming arena. Pandora’s Dynamic Audio, Sequential Audio, and voice-engaged advertising initiatives already in the pipeline are just a few innovations that will provide retailers an outside-the-box way to use audio media to improve, enhance, and personalize the customer experience.