Pandora’s Revenue Gets A Boost From Local, Programmatic Still Nascent

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Pandora is enjoying rising ad prices aided by its SMB sales efforts, CEO Brian McAndrews told investors during the company's second quarter earnings call.

“Our advertising investments, particularly in local, are paying off,” McAndrews said, adding, "RPMs were up 25% year over year, to a record $49.94.”

According to McAndrews, Pandora’s success with local advertisers is evident, with “increased sell-through of premium ad units and increased pricing across video, display and audio.”

In Q2, Pandora’s local ad revenue grew 67% YoY, to an all-time high of $60 million, representing 26% of the company's total ad revenue of $231 million. Pandora has grown its local sales force since 2014 and today has 151 local salespeople in market, up from 109 a year ago. That sales force now manages 7,000 accounts in 38 markets.

Aside from growing in local, Pandora has also focused on bringing its programmatic offering to market in recent months.

“We’re very pleased with the early advertiser interest and reaction, which we expect to translate to more meaningful revenue in 2016,” McAndrews said, in regards to the programmatic platform that debuted in mid-June.

Pandora’s efforts surrounding programmatic have largely centered on bringing automation to mobile display. And according to Pandora CFO Michael Herring, programmatic hasn’t yet affected Pandora’s premium direct sell-through rates.

Herring explained that though demand-side platforms can now plug into Pandora's ad supply, advertisers don’t have yet have a self-serve option.

“That’s on our road map, but it’s not something we’re moving quickly to,” Herring said.

In recent quarters, Pandora has struggled to grow its active user base, but that challenge may be lessening. Pandora’s active users totaled 79.4 million in Q2, compared to 76.4 million one year ago. That's about neck and neck with Spotify, Pandora’s main competitor.

For 2015’s second quarter, Pandora reported total revenue of $285.6 million, a 30% jump YoY.

“The continued momentum in advertising sales and confidence in our advertising strategy has allowed us to increase expectations for the year,” said Herring.

Pandora expects revenues to be in the range of between $1.175 billion and $1.185 billion for the full year.

 

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