WSJ.com is reporting that Pandora will be introducing new ad services next week that rely on political targeting. This rollout speaks to Pandora's ability to profile its listeners and is certainly big news in the ad world. But it's also the kind of news that musicians and the music industry should be paying attention to despite the fact that it probably sounds incredibly boring. Don't think it matters? Let me help you do the math.
Pandora To Debut Political Ad Targeting
Pandora is said to be:
"roll[ing] out a new advertising service next week that would enable candidates and political organizations to target the majority of its 73 million active monthly Pandora listeners based on its sense of their political leanings."
How does this work if people don't check a little box for political orientation?
"The company matches election results with subscribers' musical preferences by ZIP Code. Then, it labels individual users based on their musical tastes and whether those artists are more frequently listened to in Democratic or Republican areas."
While that means some musicians will have ads in juxtaposition with their music from either one party that they hate or two parties that they hate, that's not why this news is important to musicians, labels and rights owners.
Why This Matters To Musicians
Here's the math and, no, I'm not using numbers yet it can still be math:
If streaming music is an increasing share of music revenue; and,
If streaming music is increasingly monetized by advertising;
Then rights holders will find themselves increasingly dependent on ad revenue for income.
For musicians monetizing YouTube, the era of ad-supported music is already here. It's long been under discussion. Hypebot has a whole category solely for ad-supported music that speaks as much to past innovation as current coverage. Now ads are just part of the assumed landscape though advertising is only now showing its potential.
What that means is musicians' income will begin to have more ups and downs based on the ad market.
Political ads mean a surge of money every 4 years in the States. Fortunately political ads are only one part of the mix and companies like Pandora are beginning to offer a wider range of advertising options with new forms, for them, of market targeting.
Ad Revenue Is Often Feast Or Famine
But there are related issues to consider that heighten the feast or famine dynamics of ad-supported music.
Remember the recession? Some people have not recovered and will never recover going into an early tax payer supported, low income retirement because their jobs are not coming back and they're too old or physically unable to work at fast food joints and the like. That's real.
But for those of us in "ethnic" media that got real even quicker than for most.
Since ProHipHop, my main claim to minor fame, had a predominantly black audience, it was considered "ethnic" media by the ad industry. We saw cuts in ad spending before headlines started referencing a potential recession. Months before.
At the end of the day, though I was somewhat burned out by the harsh environment of hip hop media, the combined collapse in ad spending and ad rates killed that business because I had not adequately diversified my revenue streams.
With advertising providing an ever larger chunk of music revenue, musicians and the music industry will be increasingly vulnerable to the ups and downs of the ad industry.
Keep in mind that most ad-supported music services will likely be chasing the same ad dollars.
Keep in mind that they'll also be competing with established music media outlets.
Keep in mind that advertising dollars are inherently limited and possibly better spent on sites like Facebook, assuming they get the fake account thing under control, because Facebook will always do a better job of targeting ads to what people care about beyond music than will music services.
That does not need to be cause for despair especially since most musicians aren't counting on streaming music to make a living.
Diversify Your Revenue Streams
That does mean that you should be diversifying your revenue streams as much as possible on an ongoing basis. Fortunately most musicians already do that out of necessity but only relying established revenue streams can still leave you behind.
In addition, many revenue streams will drop along with ad buys since it mostly comes down to consumer spending.
And that's a difficult puzzle to solve. One with which musicians and the industry will continue to struggle. Doing so in a proactive rather than reactive manner will help you not only survive but potentially thrive.
[Mad Men graphic via Wikipedia.]
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Hypebot Senior Contributor Clyde Smith (Twitter/Facebook) is currently relaunching All World Dance. To suggest topics about music tech, DIY music biz or music marketing for Hypebot, contact: clyde(at)fluxresearch(dot)com.