CHICAGO (AdAge.com) -- Mobile devices have been a boon for web music service Pandora, but with its big, portable screen, Apple's iPad gives it something the other platforms don't: more real estate for display advertising.
The music service is now offering display ads on the iPad to sponsors, in addition to its banner and audio ads, and now has three big takers in Starbucks, Lexus and Budweiser. When clicked, their ads open up a new page but don't interrupt the music. While all three marketers advertise with Pandora on other platforms, the iPad offers a richer media experience, and the company is hoping it can improve on an already-high 3.4% click-through rate.
Pandora now has more than 30 million users on mobile devices -- and 50 million across all media -- and the company is hoping to accelerate usage by way of the iPad. Pandora founder Tim Westergren noted that the company is signing up about 100,000 new mobile users each day. "It's just exploding for us," he said. "And on mobile devices, the advertising -- particularly advertising with video -- has been really effective."
While useage explodes, so do Pandora's costs in the form of royalty payments to the labels. Mr. Westergren recently said Pandora's total revenue in 2009 was $50 million, including one profitable quarter, but that it paid $28 million that year to SoundExchange, the non-profit which collects royalties on behalf of the labels. That figure does not include royalties to music publishers.
Pandora has raised more than $57 million since it launched as a web music innovator in 2000, over five rounds of funding.
The challenge is to keep the ad revenue growing ahead of music consumption, which is where the iPad comes in. Apple's tablet platform is "particularly exciting" for Pandora, Mr. Westergren said, because of the way consumers engage with it. He explained that the iPad is a device consumers carry around their houses, even more so than a laptop. When listening to music, users are more likely to stay engaged with the screen, he said, as they once were with liner notes of records. "I would anticipate, as an advertising platform, it's going to be even more potent than the iPhone," he said.
Pandora incorporated advertising into its web service in 2006, and added banner ads to its iPhone platform in late 2008. Two months ago, it began running audio ads as part of the free radio service within its iPhone application, a key innovation because consumers aren't necessarily looking at their phones while using the service.
According to the company, 70% of users who have downloaded any app to a mobile device have downloaded Pandora. The company's biggest advertisers now include MasterCard, McDonald's, Purina, Walmart, Sprint, Target and Ford.
In the launch ads, Starbucks promotes its "however you want it" Frappuccino by developing a playlist to match a user's beverage preferences. Budweiser is promoting Bud and Bud Light Lime through a partnership with Pandora's festivals page.
"As the exclusive festivals page sponsor, Budweiser gives Pandora users a destination within the application to connect with some of the biggest music festivals of the year," Mark Wright, VP-media, sponsorship and activation at Anheuser-Busch said in a statement. "Additionally, by extending Bud Light Lime's summer-themed stations to the iPad application, users will have a new platform to enjoy the summer state of mind year-round."
Lexus is advertising its LFA model, which revs its engine to a speed that shatters a champagne glass.