Pandora Names Former aQuantive Chief Brian McAndrews CEO

Internet Radio Service Faces Stiff Competition for Rising Stream of Ad Spend

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Pandora has turned to the advertising industry for its new chief executive, naming Brian McAndrews the Internet radio company's CEO, president and chairman on Wednesday.

Mr. McAndrews replaces Joe Kennedy, who has served as Pandora's CEO since 2004. The company announced in March that it had begun a search for Mr. Kennedy's successor. Mr. McAndrews was president and CEO of early online advertising company aQuantive, onetime owner of early digital ad agency Razorfish, ad-server Atlas and ad network DrivePM. Microsoft bought aQuantive for $6 billion in 2007 -- its largest acquisition at the time -- in a bid to keep up with Google, which had just bought DoubleClick.

Pandora's new CEO Brian McAndrews
Pandora's new CEO Brian McAndrews

"No one better understands the intersection of technology and advertising, which he clearly demonstrated during aQuantive's meteoric rise. He has a recognized ability to set strategy, lead large teams and drive growth and innovation at great scale," said Pandora founder and chief strategy officer Tim Westergren in a company statement.

Pandora' stock was up more than 6% in after-hours trading immediately following the news.

Mr. McAndrews ran the Redmond, Wash.-based software giant's ad business for a year and then left to join the venture capital world with Madrona Venture Partners. Microsoft would later take a $6 billion loss on the deal as it divested its ad-tech assets. Mr. McAndrews sits on the boards of The New York Times Company and ad tech company AppNexus.

The hire of Mr. McAndrews underscores the importance of advertising to Pandora's bottom-line. As one of the major digital music streaming services in the market -- with 72.1 million monthly active listeners -- Pandora is banking on the migration of terrestrial radio ad spending to digital. But it is also competing with some popular and well-funded services like Spotify, Clear Channel's iHeartRadio and Apple's iTunes Radio that are looking for their share of advertisers' budgets.

In the second quarter, advertising accounted for 82% of the company's revenue, and the segment grew its revenues by 44% year-over-year to $128.5 million. Pandora has a subscription service that's ad-free.

Last month Pandora walked back an effort to convert users of its free service into subscribers by capping the amount of music they could stream on the service. The company's chief revenue officer John Trimble told Ad Age at the time that the shift resulted from greater success with Pandora's ad business, including mobile ads on tablets and smart phones.

"We don't need a cap anymore. We used the cap as a lever to control some of the [content] costs, but we've always looked at the business as 80% ad-supported and 20% subscription-based," Mr. Trimble said at the time.

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