Pandora Tests New Ad Unit 'Promoted Stations' With Taco Bell, Diageo

Brands Can Promote Their Stations to Pandora's Users

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Pandora is testing a new ad unit in hopes of pumping up revenue: "Promoted Stations."

On Monday the digital music streaming service will begin a test of the new ads, which allow brands to promote their own stations.

Taco Bell, Diageo's Crown Royal, Skechers and Sonos are among the ten brands participating in the beta, which will be exposed to 10% of Pandora's roughly 75 million monthly listeners.

"This is the first time we will be testing an ad product within the station list," Pandora's VP-digital Lizzie Widhelm.

The Promoted Stations ads will appear atop the "Stations You Might Like" section of Pandora's listeners' station lists. The section is similar to Twitter's "Who to Follow" box.

The streaming music service's first salesperson when she joined eight years ago, Ms. Widhelm sold the first marketers on creating their own Pandora stations. Like a branded YouTube channel, those stations are meant to drive the amount of time people are exposed to a brand.

Pandora has a dedicated team that helps brands create their own stations. The team is comprised of salespeople, artist partnerships staffers and curators from the company's Music Genome Project who catalog songs, albums and artists, she said.

Pandora is still working through how often to cycle through the Promoted Stations and which branded stations to target to which users.

If Pandora decides to advance the test into an official ad product, it will need to figure out how to sell them. A critical mass of advertisers is necessary to sell targeted ads, which command higher rates.

But Pandora hasn't decided yet whether to price them on an impression basis or based on an action, such as when a user adds the station to their play list. "We're not quite there yet on the mechanics of packaging [the ad buys]," Ms. Widhelm said.

Pandora makes about 80% of its money from advertising and is relying on the revenue stream to offset its large content acquisition costs. The company grew its advertising revenue by 45% in the first quarter to $140.6 million.

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