Pandora takes aim at local radio advertisers

Source: St.迷你倉 Louis Post-DispatchOct. 20--There's a reason why advertising on Pandora in recent months has seemed much more recognizable to local listeners of the Internet music service.In March, Pandora hired local sales staff in St. Louis as part of its strategy to court local advertisers, and it's had success out of the gate landing customers. Don Brown Chevrolet, Barnes-Jewish Hospital, St. Louis University and Panera Bread Co. are just a few of the advertisers that have booked ads on Pandora so far this year.Oakland, Calif.-based Pandora first embarked on the local market strategy in 2011, beginning with offices in Chicago, Los Angeles, San Francisco, Portland and New York. It's spent the past two years expanding its sales staff nationwide.St. Louis is one of 30 markets in which Pandora has hired sales staff as it seeks to compete head-to-head with local radio stations for ad dollars. Its regional sales staff of 60 employees nationwide is growing, and Pandora plans on ultimately having an office in each of the top 50 radio markets.The advertising push, according to analysts, is a big opportunity for Pandora -- and a challenge to local radio stations."Radio is a very unusual media form in that most of its revenue comes from the local market," said Rich Tullo, director of research at New York brokerage Albert Fried & Co. "The ad rates are higher because it's local. Ultimately, it will take dollars away from other radio stations."Pandora currently employs two sales staff members in the St. Louis region and a client services employee. Pandora is searching for office space in Clayton to grow to as many as eight employees here and should have a location selected by the end of the year, said regional vice president Gabe Tartaglia, who oversees the company's sales offices in the central part of the country."It has been a definite shift to local in the last two years," Tartaglia said. "There's a $17 billion radio market in the U.S., and the majority of those dollars are local. The opportunity is significant."Pandora Radio, a free service that launched in 2005, has grown to 72.7 million active monthly users. The company also offers ad-free content to subscribers for a fee.Pandora originally focused on selling display ads visible on users' computers. Now, most of its revenue comes from audio, display and videos on smartphones or other connected devices.For those who listen to Pandora on their smartphones or laptops, they're prompted to enter their ZIP code, year of birth and gender. Users can select the artists' music they want to hear, and Pandora adds similar music."For advertisers seeking to target 30- to 40-year-old females in a certain community, we could do that exactly," Tartaglia said. "Other radio stations use survey data from Arbitron to get estimates (on users), but it's imprecise. When you compare that to guaranteemini storage delivery, it is a definite advantage that our advertisers receive."Tartaglia said another advantage Pandora has is the infrequency of its ads compared to other radio stations. "We have one-fourth the number of ad units that a traditional FM station has, so your ad will stand out more," he said.UNDER PRESSUREThe local strategy has helped buoy Pandora's revenue, but challenges remain. While revenues have grown, Pandora has yet to post an annual profit.The company, which has more than 70 percent market share in the U.S. Internet music segment, also is facing increased competition. In September, Apple launched iTunes Radio, free Internet streaming radio that runs on iPhone, iPad and other Apple devices."Apple's entry into streaming radio will reduce Pandora's current listening hours by 10-15 percent over the coming four to six months," Stifel Nicolaus analyst Jordan Rohan wrote in a recent analysts' note. "This is not an existential threat, by any means. Rather, the October listening hours will likely show significant loss of market share to Apple." Stifel has a "hold" rating on Pandora's stock.Analysts say Pandora's local sales force expansion will help the company improve its profit margins."It's been the biggest source of growth for them," said Richard Fetyko, senior vice president of investment advisory firm investment advisory firm ABR Investment Strategy in New York. "Clearly, their monetization was lagging their usage growth, and the local strategy has helped them turn that around."ABR has a near-term negative view on the stock following iTunes Radio's launch.St. Louis radio station managers say they haven't seen a decline in their ad revenue since Pandora entered the market, but they're watching the new competitor closely."It really doesn't affect news talk radio at all, but the FM stations are a little concerned about them," said Mark Dorsey, general manager of KTRS (550 AM). Dorsey said KTRS's content differentiates it from online music stations like Pandora. "When you come to listen to us, you're gathering news, traffic and weather and hearing our personalities talk."Some local radio stations have begun streaming their content online, including KMOX (1120 AM), KYKY (98.1 FM) and Fresh 102.5 FM, which all can be heard on Radio.com, a streaming service owned by CBS Radio.John Sheehan, market manager at CBS Radio in St. Louis, which operates those three stations, said local programming will remain attractive to advertisers versus Internet music services such as Pandora, iTunes Radio or Spotify."We're locally programmed, and we support local events," Sheehan said. "With the news and traffic we provide, that's stuff that they can't do and you can't get anywhere else."Copyright: ___ (c)2013 the St. Louis Post-Dispatch Visit the St. Louis Post-Dispatch at .stltoday.com Distributed by MCT Information Services儲存