News Column

Internet radio giant Pandora seeks local advertising revenue

August 11, 2014

By Robert Channick, Chicago Tribune

Aug. 11--Internet radio giant Pandora has more listeners in Chicago than most local radio stations. Veteran radio executive Gabe Tartaglia is working hard to make sure the fast-growing streaming music service gets its fair share of local radio advertising revenue, a sales pitch that seems to be gaining traction.

Chicago-based Tartaglia, 42, serves as vice president of sales for Pandora's central region, overseeing 13 markets from the company's North Michigan Avenue offices. The 2-year-old office includes 20 salespeople beating the streets to compete with Chicago's AM and FM stations, a market projected to generate nearly $478 million in over-the-air revenue this year, according to BIA/Kelsey.

Nine years after rolling out its free service, Pandora dominates Internet radio with 77 million listeners and more than 9 percent of total U.S. radio listening as of May, according to the company.

Pandora had total revenue of nearly $638 million last year, with 82 percent from advertising. The balance came from a small subscription base, which receives the service commercial-free. The company lost $41 million last year, due in part to a higher royalty rate it pays compared with traditional radio stations, executives said.

Advertising on online radio stations has lagged consumer usage, but there are signs it is beginning to catch up. Research firm eMarketer forecasts digital radio advertising will more than double by 2018 to about 21 percent of total audio advertising revenue.

Pandora has 1.7 million active monthly listeners in Chicago, which would rank it near the top of local radio stations. While Tartaglia would not disclose Chicago ad revenue, he said it is up 50 percent year over year.

Listeners can customize Pandora based on musical preference. Advertisers get 15- and 30-second commercials that pop up at intervals for each listener. Using users' registration data, including their musical tastes, ZIP codes and ages, Pandora serves up targeted ads and guaranteed impressions, which Tartaglia argues make it a better buy than traditional radio stations.

A number of local advertisers have bought into Pandora as an alternative to traditional radio, including Chicagoland and Northwest Indiana Honda Dealers, Ravinia Festival in Highland Park, and Village Cycle Center in Chicago.

Advertising agencies also are getting on board, using buying software that ranks Pandora with comparable audience metrics to traditional radio stations.

"A traditional radio buyer can access it just like a regular radio station," said Joy Baer, president of Chicago-based media buying and selling software company Strata Marketing, which processes about 25 percent of all U.S. ad spending.

Before joining Pandora in 2011, Tartaglia spent 17 years with CBS Radio, most recently as general sales manager for WUSN-FM 99.5 and WCFS-FM 105.9 in Chicago. A Cleveland-area native, Tartaglia has a bachelor's degree in marketing from Miami University in Ohio. He has lived in Chicago since 1999.

The Tribune recently sat down with Tartaglia for an interview. What follows is an edited transcript.

Q: What's a typical budget for Pandora advertisers in Chicago? What do they get for that investment?

A: If you're a local radio advertiser in Chicago, you might spend $5,000 in a week on an ad schedule on a big radio station. You could spend that same $5,000 and reach our audience in a comparable way -- $5,000 delivers hundreds of thousands of impressions.

Q: Radio broadcasts to a mass audience. Pandora serves the same ads one at a time to individual listeners, so-called unicasting. How do you target those ads?

A: When you create a Pandora account, you gave us your email address, your age, your gender and your ZIP code. If you're 25 to 44 years old, in Chicago, and that's what an ad buyer wants to buy, we can serve you that. If you're 23 years old, you're never going to hear the ad.

Q: Do you use any third-party data to target ads?

A: If someone's been in for a test drive in the last six months at any dealership, that makes them an auto intender and we get that data from Polk, as an example. We are able to serve that person an auto ad, knowing that they're in the market for a car.

Q: Geo-targeting -- serving up ads based on location -- is a growing segment of mobile advertising. Do you use this technology?

A: Pandora needs to be respectful of our listeners' privacy. The creep factor of knowing exactly where you are at all times is available technology, but it's not something we do.

Q: With Pandora finding its way into an increasing number of auto dashboards, serving ads where people travel seems like a great advantage over traditional radio.

A: Most advertisers would prefer to have your home-based ZIP code. It's where you do your grocery shopping, your furniture shopping, your car shopping.

Q: For a growing number of Chicagoans, Pandora is their radio station. How do you convince local advertisers that it deserves a place in their radio advertising budget?

A: If we were a terrestrial station, we'd be the No. 1 station in the Chicago metro. Listeners don't care about the designation of terrestrial radio or Pandora. They just want their music. For an advertiser, what you're concerned about is the demo that you're buying and the geography that you're buying, and maybe some of the third-party targeting. To that point, Pandora can deliver scale like no other radio station in Chicago.

rchannick@tribune.com

Twitter @RobertChannick

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(c)2014 Chicago Tribune

Visit the Chicago Tribune at www.chicagotribune.com

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Source: Chicago Tribune (IL)


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