Streaming media giant Pandora has about 400 salespeople, more than it needs to sell advertising space in Pandora’s audio streams. Smaller streaming media sites have lots of audio ad inventory to sell but don’t have Pandora-sized sales departments and tools to do the job.
Screenshot from the Pandora for Brands website.
Surely it makes sense to bring the two sides together, with Pandora selling ads on behalf of these smaller sites in exchange for a cut of their ad revenues. Such a shared sales arrangement would benefit both participants, while giving advertisers more targeted buys over a range of internet radio stations.
That’s the thinking behind Pandora’s Harmonic Audio Network; but some broadcast observers are skeptical.
Launched in November with third-party streaming platforms TuneIn and AccuRadio.com, Harmonic is now the exclusive sales agent for a portion of TuneIn’s and AccuRadio’s in-stream “audio inventory” or available commercial slots. It will also sell a portion of Pandora’s own inventory, said Steven Kritzman, Pandora’s senior vice president of sales.
Harmonic’s goal is to woo other third-party streaming sites to sell their audio inventory through the Pandora sales force.
This would give the company increased ad revenues without increasing its “less than four minutes of ads per hour limit on our own streams,” said Kritzman. “At the same time TuneIn, AccuRadio and other Harmonic partners benefit by having our well-informed sales staff selling on their behalf, while advertisers are offered better-researched, tightly-targeted spots for their commercials. Everybody wins.”
“We have a relatively small sales force for direct selling,” said Bill Hartman, TuneIn’s VP of strategic partnerships and business development. “Pandora has built a massive, proven, audio sales team. Partnering gains access to their resources and allows us to focus on bigger content-led sales opportunities.”
WHAT HARMONIC DOES AND DOES NOT OFFER
By joining the Harmonic network, streaming sites get access to a number of Pandora’s sales tools. These include Pandora’s direct sales force, commitment to “capped ad frequency” (meaning that the same audio ad will not be played repetitively in TuneIn’s audio streams) and playout data compiled for advertisers, so that they can “see” where and when their spots were played for, and for whom.
This said, Pandora is not putting the full range of its audience analysis tools at Harmonic’s disposal. Advertisers buying ads through the Harmonic Audio Network will be able to specify placement in terms of listener age and listening habits, audio genre and the kind of listening devices being used (i.e., web or mobile). But this will be it for now: Providing access to the streaming giant’s most sophisticated audience measurement tools will have to wait. “We are thinking about down the road layering on additional segments,” Pandora VP of Local and National Broadcast Andy Lipset told advertising industry website adexchanger.com.
WHY TUNEIN SIGNED ON
Founded as Radio Time in 2002, today TuneIn offers some 100,000 radio stations via its website and mobile app, plus a massive library of podcasts and other on-demand content. Its audio advertising opportunities occur within audio streams (mid-roll), as well as on certain stations when the user selects the stream, or podcast.
Under its current system of selling such ads directly, “we have an abundance of audio inventory,” said Hartman. “Joining Harmonic is an efficient and effective method of monetizing this ad format, as opposed to building a large team to monetize it ourselves. For TuneIn, partnering with an experienced sales force of Pandora’s magnitude is a plus.”
Ideally, the Harmonic model is a win-win-win approach to online audio ad sales.
Pandora earns more money from its existing sales force without having to increase its own ad playouts per hour. Third-party sites like TuneIn get much more of their ad inventory sold, offsetting lower per-ad revenues (due to Harmonic getting a cut) by generating a much higher sales volume overall and thus higher revenues overall. Advertisers get access to more streaming sites that have the ears they are trying to reach, through a sophisticated sales portal like Pandora.
Pandora, of course, has been viewed by broadcasters as a direct competitor for traditional radio advertising, and not everyone is impressed by the Harmonic sales model. One skeptic is Thom Callahan, president of the Southern California Broadcasters Association.
“Pandora is for sale and has been for months; the business is losing millions every year, and their business model is just not sustainable,” said Callahan. “Pandora is desperate to keep their sales staff, and since their core business is failing, the thinking is this will keep those sellers from leaving.
“By stating they have a new revenue stream and new partners, the value of the company becomes a bit more appealing for a buyer. However, any company looking at Pandora will see that the streaming space is a low fruit, low-CPM business with minimal market demand.”
Radio World asked Pandora for a reply comment. The company’s response via its media relations department was that “as a policy, we don’t comment on rumors or speculation” but also stated that it is “one of the biggest advertising platforms in the U.S., generating over $1 billion in annual revenue … streams more hours of music than YouTube streams hours of video each month on mobile” and “is the #1 radio station in 49 markets (Scarborough 2016).”
Harmonic Audio Network’s viability will be proven (or not) by how many extra ad sales the partner streaming services achieve via Harmonic, and whether those sales are enough to drive overall revenues up despite Harmonic’s cut.
“The Harmonic deal doesn’t kick in until 2017, so it’s too soon to determine how Harmonic will work for us,” said TuneIn’s Hartman in December. “But the model makes sense, and Pandora has the sales force to do the job. So we are very hopeful.”