For the first time since its founding in 2000, music-streaming site Pandora is directly competing with radio stations for the largest ad services, in an industry valued at $14 billion per year.
By May 2013, these services will be employed by advertisers to determine how Pandora's audience ratings stack up against those of radio stations.
These services account for 80 percent of local ad sales, according to Pandora Chief Operating Officer Joe Kennedy as relayed by Bloomberg Businessweek. In the past, ad buyers were forced to research Pandora's ratings manually.
Kennedy says this revision to his site's business plan "eliminates a hurdle" for both Pandora and ad buyers alike. Pandora will also be opening sales offices in "the 25 biggest U.S. media markets."
These changes will allow for a more simple process in ad sales, says Kennedy, who feels the revision will permit a larger sector of marketers to be exposed to Pandora.
Pandora has already been experimenting with the concept of working with larger ad services, as its ratings were included on the Strata Marketing Inc. network as early as January of this year. Strata is based out of Chicago and encompasses nearly 1,000 ad agencies.
Kennedy anticipates that New York-based ad service Mediaocean — which has a similar market share to that of Strata and is in the testing phase right now with Pandora — will account for the music site's ratings by the end of April.
"We get terrific visibility on these systems," Kennedy says. "Pandora will now be there side by side, apples to apples, in the same systems used every day to purchase radio advertising."
Investors will be able to see how the new Strata connection will affect Pandora's fiscal viability, when the site reports its quarter ending in Jan. 31 on Thursday, March 7. Investors will also be able to see how Pandora's new cap of 40 hours a month of mobile listening (in order to "contain costs") will affect the company's innate value.
Pandora could definitely use the boost from new ad service exposure right now, as stock fell 2.4 percent to $12 on Monday, March 4. This, despite the fact that the site attracted more than 65 million listeners in January with an eight percent share of the U.S. radio-listening audience.
The need for some breed of financial boost is especially salient as the company's cost to stream music is increasing at a greater rate than its ad sales, Businessweek says.
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