“After surveying 17 U.S. ad agencies, OTR Global reported that the agencies plan to increase their spending on Pandora’s ads by a larger amount this year than last year. The agencies are taking this action because they are happy about the performance of their ads on Pandora, OTR reported. Additionally, OTR said that local buyers’ spending on Pandora’s ads soared about 90% last quarter versus the same period a year earlier.”
The survey results are consistent with data presented in last week’s Internet Radio Trends Report 2015™ that highlighted the rapid growth in advertising spend. If we break down the commentary, there are three clear components:
- Agencies plan to increase advertising spend on Pandora
- Agencies have been pleased with their ad performance on Pandora
- Local advertising grew 90% compared to the same quarter in 2013
Increased Advertising Spend on Internet Radio
Pandora is the biggest player today in Internet radio in terms of active monthly listeners and total ad-supported listening in the United States. It logically follows that the rapid growth in Pandora revenue as evidenced by its quarterly SEC filings has lifted the entire industry’s ad-supported revenue. However, the interest in Internet radio ad-revenue goes beyond Pandora. A recent review of six leading Internet radio services showed a strong variety of advertisers.
Analysis by eMarketer and BIA/Kelsey suggest the U.S. ad-supported revenue for Internet radio will climb from about $2 billion in 2014 to over $4 billion in 2017. OTR’s agency survey confirms the forecasted revenue momentum from earlier estimates.
Agencies Pleased with Pandora Performance
Similar to mobile advertising, Internet radio advertising is relatively new to most marketers. As a result, a key question for advertisers and agencies is how it will perform. The OTR survey responses from agencies were favorable. Again, this is not surprising and is consistent with other data. Unlike broadcast, Internet radio is instantly measurable. Unlike visual display advertising on mobile, Internet radio offers spotlight advertising where a single audio ad is played at a time. This reduces the ad clutter that can undermine the effectiveness of online visual display formats. Advertisers may also be pleased with the rapidly growing reach of Internet radio that now exceeds 50% of the U.S. population.
Local Advertising Grew by 90%
The other big number is the growth in local advertising. Pandora actually reported 118% year over year growth in local advertising in its third quarter earning call, which exceeds the OTR survey number of 90%. Either way, we are talking about roughly a doubling of local ad revenue in one year. That is a good indicator of interest and opens up a much larger pool of advertising budgets that have traditionally favored radio than the past focus on national advertisers. XAPPmedia commented in an Adotas article that we predict the number of local advertisers on Internet radio will grow five fold in 2015.
Learn more on Internet Radio Trends
As we said last week, researchers are now focusing more on Internet radio. Today’s challenge is making sense of the weekly barrage of data. To see XAPP’s conclusion on what the data means for advertisers today, download the Internet Radio Trends Report 2015™ below.