Pandora Struggles To monetise Mobile Effectively

Pandora is struggling to boost mobile monetization, even as mobile usage skyrockets.

In its most recent quarter, Pandora reported mobile revenue of $80.3 million, or 64 per cent of total revenue. That’s up from $73.9 million a quarter prior when mobile was 62 per cent of revenue.

However, mobile’s revenue share still lags its usage share on Pandora, since tablet and smartphone users accounted for 77 per cent of listener hours in the quarter. 

The broader challenge for Pandora is that advertising rates on mobile are basically flat. In fact, the company’s revenue per thousand impressions (RPM) fell slightly from a quarter prior and was basically flat year-over-year. Mobile RPM only grew 7 per cent between the last two fiscal years, while desktop RPM actually declined 14 per cent. Overall advertising RPM dropped 10 per cent in the same period.

Even taking the desktop RPM decline into account, mobile RPM was only 42 per cent of what it was on the desktop. 

(Note: Pandora’s most recent quarterly earnings release covered the three months through January 31, 2013.)

The monetization gap is probably attributable to the surge in mobile ad inventory as usage behaviours shift — a glut of supply driving down prices. It also seems likely that mobile inventory simply doesn’t support the same ad rates as desktop ads. This is worrying short-term, since some mobile usage will inevitably cannibalise desktop engagement. 

Effectively, these patterns mean that Pandora is squeezing less money out of each listener hour that it used to.

Recently, the company instituted a 40-hour cap on free mobile hours per month. Once breached, users would be prompted for a one-time 99 cent monthly payment, or invited to sign up for an advertising-free “Pandora One” subscription. The change should only affect about 4 per cent of mobile users, but it represents an effort by Pandora to boost mobile monetization as they hope for higher mobile ad rates.

Click here to view a larger version of this chart.        

pandora ad monetizat

Photo: BII

While Pandora leans heavily on advertising, it also has a subscription business. However, even taking the subscription revenues into account, the overall monetization picture looks pretty much the same.

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pandora total

Photo: BII

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