NEW YORK (AdAge.com) -- Pandora has ambitions to be "the world's biggest radio station," as founder Tim Wetergren told Ad Age in July. One step toward that goal is apparently a newly struck ad sales pact with Clear Channel.
Clear Channel's radio ad sales rep firm, Katz Media Group, will start selling audio ads for Pandora through its Katz 360 digital sales group, lending a hand to Pandora's in-house team of 18 digital sales execs and five audio sellers.
'Point of leverage'
"What this provides is a way to scale our ad-sales effort immediately," Mr. Westergren said in an e-mail interview. "When you grow as fast as we have this quickly, your inventory gets ahead of you. Plugging into an endemic, national network of sellers is a great point of leverage for a company like Pandora that is experiencing hypergrowth. Over time, as we grow into our shoes, this relationship will naturally evolve."
That "natural" evolution could include a content partnership, rumors of which have been surfacing in the year since Clear Channel launched iHeartRadio, a streaming radio site and mobile application that has helped the company amass 22 million unique listeners to its web properties and more than 2 million mobile downloads.
Mr. Westergren said the Katz partnership is "really about ad sales, nothing more."
And that's an important point to the Pandora folks. If the proudly independent Pandora were to share content with the actual biggest radio company in the world, "they would make strange bedfellows," said one executive familiar with talks.
But Pandora's 30 million registered users and 4 million monthly unique listeners make it a leader in an increasingly crowded category that also includes Last.FM, Slacker Radio, Spotify and the soon-to-launch Goom Radio, whose co-founder Rob Williams is a Clear Channel vet. (Why are 4 million monthly visitors out of 30 million registered users a good thing? Last.FM, for example, has upward of 30 million registered users too but only gets about 2.8 million uniques a month. Pandora's cumulative uniques for 90-day periods most likely tend to be higher because of casual listeners.)
And it's a pool that's only going to get bigger with cheaper royalty fees at stake. "Now that it's safe to go back in the water, everybody that's a streamer -- big, medium and small -- can really build a business plan with a five-year horizon of what your variable costs are going to be," Patrick Reynolds, chief marketing officer of online-radio-measurement firm Ando Media, told Ad Age.
Pandora comes to Katz 360 with a fledgling display-ad business that just introduced audio inventory in late 2008, yielding a total $18 million in 2008, or 95% of the company's revenue. Doug Sterne*, Pandora's director-audio sales, expected that total to double by the end of 2009 before the Katz 360 deal, and is now even more optimistic that Pandora will fit into advertisers' mind-set as often as it does listeners.
Coup for Katz
"We're seeing a gradual transformation where we kind of see Pandora Audio as radio, and that listeners aren't differentiating about the channels where they're listening to their favorite music -- they see it as music. If we can deliver gross rating points that complement a spot buy or radio buy we should be part of the media mix," he said.
Selling Pandora is a big coup for Katz 360 and Clear Channel from a competitive standpoint, which has raced to keep up with CBS Radio and its 2007 acquisition of Last.FM as well as recent addition of Yahoo and AOL's streaming radio players to its network. But industry vets see the Pandora pact as a rising tide to lift all sails.
"It proves the market in a way we always thought it would be valued," said Eric Ronning, co-president sales for TargetSpot, an online radio rep firm that sells inventory for CBS Radio, Yahoo, Slacker and others. "Clearly it's a statement that working with traditional radio contracts and escalating radio's growth through those who already understand radio is an excellent way to grow the radio market and radio as a whole."
John Partilla, Clear Channel's newly appointed president-global media sales, called the deal an "unprecedented opportunity for CMOs and brand managers. Only Clear Channel Radio could assemble this kind of reach, engagement and flexibility. And no one else delivers this kind of complete transparency of impression delivery to forward-thinking marketers."
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CORRECTION: An earlier version of this story reported that Katz Media Group will be selling display and audio ads for Pandora. Katz will only be selling audio ads for Pandora, which will continue to sell display ads from its existing sales team. Also, Doug Sterne's name was spelled incorrectly.