Pandora Finally Launches Programmatic Audio

Call it fashionably late: Pandora has finally performed at the audio programmatic party.

The digital audio platform said on Tuesday that buyers can now buy their audio inventory programmatically through a private market (PMP) through The Trade Desk, MediaMath and AudioMatic DSP from AdsWizz. Pandora is testing the PMP in a pilot program with five to 10 customers of Omnicom Media Group, including Volkswagen, said Chris Record, senior vice president of revenue operations at Pandora.

"We want to get some early learnings and build on the successes as we build the channel even more and then get that offer of full availability," he said.

The record of said expenditure that flows through the PMP is in the six figures. He did not share when the PMP will open for all advertisers.

The incursion of Pandora into the programmatic audio has been slow to arrive. IHeartRadio launched the first PMP for programmatic audio with AdsWizz in 2014. Spotify continued with its own programmatic audio PMP working with The Trade Desk, AppNexus and Rubicon Project in July 2016.

Meanwhile, Pandora has launched programs to show and make videos in recent years, but has been slower than its peers with other programmatic products because it had legacy systems of ad purchase and relations with advertisers. As the market matures, Pandora wants to take advantage of its scale: it has around 73 million monthly active users in the US. UU

"We've been working on updating our programmatic infrastructure for quite some time," said Eric Picard, vice president of product management at Pandora. "When we look at the amount of inventory volume [and data] that we have, it's pretty clear that those are the two key pieces that have hurt the adoption of audio in the program space."

Now that Pandora can sell audio programmatically, it will be easier for buyers to make transactions. Advertisers can not group Pandora's inventory with, say, the Spotify inventory in the same purchase. However, with the Trade Desk, which works with both publishers, ad buyers can get aggregated reports or coordinate creatives on both platforms.

Buyers using Pandora's PMP will be able to take advantage of its 2,000 owner audience segments based on the data it collects from the listening habits of its registered user base. Marketers will be able to bring first-class and CRM data to their purchases, although they may want to wait until Pandora releases more inventory in the market so they can point granularly at scale, Picard said.

"Finding small inventory groups, especially as you begin to stratify the geography guidance data, starts to be very tight," he said. "Opening that up on a large scale is something we are investigating: Before opening the floodgates for all the demand, we must make sure we understand how the different systems interact."

Pandora said it is entering the program with caution because flooding the market with audio supplies can reduce prices, Picard said.

"Things have not escalated from a volume perspective the way the market wanted in the audio space," he said. "The main component of this has been not only to intervene and offer a remaining solution."

The entry of Pandora into programmatic audio reaffirms the importance of advertising for its business model. Despite the launch of a subscription service on demand in December 2016, the company continues to be financed mainly with advertising, said Picard. However, advertising revenues remained stable in Pandora in the third quarter of 2017, as buyers began to move away from the platform because they lacked a programmatic solution.

"If you look at some other services in the market, the level financed with advertising is an entry-level level designed to make someone go to a subscription level as quickly as possible," said Picard. "We are building a very healthy, sustainable, long-term business, financed with advertising."

The agencies are pleased with Pandora's programmatic audio capability, especially as audio becomes a bigger focus for brands, said Emily Kramer, senior director of media at Merkle. To reach the rest of the market, Pandora will have to open its inventory to more top-level DSPs and scale up its quality inventory, he added.

"As audio becomes more scaled, accessible and important, especially as voice-controlled devices continue to enter the market, it is not a secondary consideration as part of our customers' initiatives," he said in an email to AdExchanger. "The more inventory you can buy through programmatic channels, the better."

Pandora reports earnings for the fourth quarter and the full year 2017 on Wednesday.