Pandora Learns More Ads Doesn’t Mean More Subscribers

Having been in financial hot water for some time, Pandora is anxious to crank up its revenue, and so has increased the number of ads which play on its free tier. Unfortunately, although perhaps not surprisingly, this uptick in ads seems to have blown up in Pandora's face.

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Guest post by Bobby Owsinski of Music 3.0

The streaming music service Pandora has been in financial difficulty for quite a while now, and it really needs to generate more revenue to stay afloat. One of the things that it tried was to increase the number of ads served up to free users, but it looks like that strategy has backfired.

Everyone hates ads, but they’re a necessary evil when it comes to a free service tier. There does come a point where too many ads become just too much for listeners. Pandora has just experienced that, and maybe radio will be next.

In music streamer’s case, the hope was that the increased ad load would force users to the paid subscriber tier. While that worked to a degree, a new study by the company found that what happened most often was that the user just abandoned the platform for an alternative. The additional subscription revenue did not make up for the lost ad revenue from those who listen less or leave the service.

While this may be an unexpected turn to the execs that run ad-based free services, its no surprise to consumers. Television users already use their clicker to change to another favorite channel during a commercial, and radio presets mean that listeners change during one of the now notorious ad blocks.

With radio, the ad block is especially frustrating. The 6 to 7 minute block was created so more music or content could be presented without interruption. The problem is that the ad blocks are now so long that it’s very easy to use a listener’s attention. Given the fact that radio ad sales are now so slow that many of the ad spots are taken up by public service announcements, the ad block seems to be self-defeating in its strategy.

Hopefully the study and experience from Pandora will open up the eyes of other execs on the free-tier ad-supported side of the business. There is a limit to the number of ads that we will consume!