10 minute read: The question isn’t whether or not your brand should be doing audio ads, but HOW & WHERE. In terms of cost, functionality, and convenience, which platform – Spotify or Pandora – aligns best w/ your company’s needs? Keep reading to find out!
There is untapped marketing potential in the music streaming world. Specifically, a debate has sparked up in the past few years about streaming services like Pandora and Spotify and the breeding ground they offer for digital audio advertisements. Consumers spend two-thirds of their digital media minutes on mobile devices, and “digital radio” (e.g. music streaming, podcasts, satellite radio, etc.) accounts for 15% of this fraction, according to the Mobile Marketer. Especially considering that less than 10% of U.S. adults are willing to pay for their audio entertainment, the advertising opportunities in this realm are a marketer’s dream. However, just because there is an abundance of potential for audio advertisements does not mean that the challenges to mastering cross-channel marketing are not daunting.
As digital media continues to evolve (it seems like new methods of entertainment and technological advances are around every corner nowadays), so does digital marketing. The way that people connect with each other and are entertained is shifting… and many experts believe it’s shifting towards sound. And when considering the entertainment habits of today, it’s easy to see why: people are always plugged in, whether they’re listening, scrolling, multitasking, or being distracted by the digital abyss that is modern technology. But if left untapped, this reality becomes a significant obstacle to marketers: how can we reach our audience if we’re fighting for their attention? By playing into the fact that users are constantly plugged in and on-the-go, audio advertisements offer a relevant and timely solution to the dilemma.
What You Should Know About Audio Ads
In order to make audio advertisements work for you and your brand, it’s first important to understand what they are, how they operate, and what your best options are in terms of launching an audio campaign. Unlike traditional radio advertisements and blanketed marketing campaigns, in-stream audio ads can target specific demographics. Generally, these advertisements run within playlists or during radio or ad breaks, guaranteeing impressions for users who do not pay for premium (or ad-free) memberships; they are curated to target the on-the-go listeners that matter the most to your brand, allowing for unique audience segmentation and specification.
The value proposition of audio advertisements, though numerous, can be narrowed down to three significant points: 1) the number of consumers and time spent listening to audio on devices is high and growing. According to the Infinite Dial, the longest-running survey of digital media consumer behavior in America, an estimated 180 million Americans are consuming digital audio on a monthly basis. With the rise of consumers also comes the rise of consumption; this relation indicates that the average time spent with digital audio is increasing as well, giving the companies that participate in audio advertisement a greater consumer access opportunities. And now, as consumption goes mobile, streamed audio while a device’s screen is off or locked is becoming more of a trend, proving that digital ads do not need a screen to impact the consumer: this concept – crafting an audience-specific message without a mandated visual – is a marketing revolution. 2) Secondly, digital audio is a both an active and a diverse arena. Infinite Dial reports that over 70% of monthly users are between the ages of 12 and 54, an extremely wide age demographic with even greater potential for audience profiling and targeting. Levels of engagement with audio advertisements are also high, especially in podcasts: in a survey conducted by Midroll Media, podcast listeners have spectacular brand recall (likely due to high levels of concentration during their consumption) and over half of them stated that they would consider purchasing from the target brands. 3) Lastly, when compared other digital ad services, audio advertisement is extremely measurable. Tracking ROI is the key to increasing ad investments in digital media, and streamed audio data is made available by streaming platforms and can be verified by third party tracking services. This measurable component of audio marketing introduces even more targeting opportunities (over 2,000+ unique audience segments) due to data collected on listener demographics, behaviors/preferences, and locations. All in all, for advertisers looking to achieve greater reach, targeting, engagement, and measurability and to make a more significant impact on consumers, look no further than digital audio.
A prime example of a brand that optimized digital audio to reach their audience, drive sales, and generate traffic is Baskin Robbins. Their campaign is featured as an ad experience in Spotify’s “Spotify for Brands,” which outlines how cross-platform ad presence, precise targeting, a strong CTA, and creative audio drove 430k in-store visits: a 12% lift in visits to Baskin-Robbins stores, an outcome over 4x above the ASR benchmark. With results like these, it’s understandable how marketers and advertisers are demonstrating peaked interests in digital audio advertising and consumer targeting with streaming platforms like Spotify and Pandora.
Convenience, Cost, & Functionality as Prime Considerations
It’s no secret that Spotify and Pandora are two major rulers of the music streaming business. Their reigns extend past this realm and into the audio advertising industry, dominating the ways in which marketers can reach their target consumers. Though the two platforms are similar in their purpose and functions, they each offer unique capabilities to the advertiser. Each platform boasts its own advantages over the other, yet they also each fall short in some categories. Before deciding whether you’ll go with Spotify or Pandora for your audio ads, it’s important to carefully evaluate what exactly your brand’s high-level needs are in order to seek the service that is right for you.
Founded in 2006, Spotify is the youngest of the two companies and also boasts a larger number of listeners than its 19-year-old opponent: in the third quarter of 2018, Spotify’s monthly report of active users was 191 million while Pandora’s was nearly 69 million. However, the areas where Pandora might be outpacing its competitor is data-driven marketing strategy and technology, as well as faster growth projections. Though Spotify has been growing at impressive speeds in the past few years, the company’s high royalty and operating costs open up opportunities for advertisers who stay on Pandora’s platform. Pandora’s steady growth (e.g. a generated revenue of $316m in Q1 2017 and $319.2m in 2018) versus Spotify’s loss making at its operating level (its SG&A and R&D expenses will continue to increase) could be a deciding factor when choosing between the two platforms.
When it comes to cost of advertising, there is no obvious victor between Spotify and Pandora. Depending on your budget and/or the size of your company, both platforms offer pricing options that vary according to the target audience(s) you select. They each operate according to Cost Per Thousand (CPM), a price that fluctuates depending on whether you run a visual, audio, or video ad. The minimum for a campaign run on Spotify is $25,000 with the option to run individual ads through their Ad Studio with a minimum budget of $250; the average CPM with Spotify is between $5 and $30. On the other hand, Pandora does not require a minimum, yet their basic packages start at around $1,500 per month. Their Cost Per Thousand runs as the following: $5-$7 for display ads, $8-$12 for audio ads, and $15-$25 for video ads. As you can see, Pandora might be the best option for smaller, newer, or struggling companies who are tight on cash, whereas Spotify is the way to go for larger companies with higher budgets who are hoping for their ads to have a farther reach.
Ease of use should also be an important consideration in the audio advertising space. Spotify’s self-serve platform, Ad Studio, gives you the freedom to either create or upload your own audio ad. The Ad Studio Guidelines offer marketing, creating, and mixing suggestions for every step of the creation process. You will need a Spotify account in order to access the platform, but once signed up, you will be guided through a three-step process (1. Set up, 2. Budget & Audience selection, 3. Create) that is relatively self-explanatory and quick. Once published, your ad will be featured on all Spotify-enabled devices.
Alternatively, Pandora’s platform, Audio Everywhere, lacks the convenience that Ad Studio offers. In order to advertise on Audio Everywhere, interested parties must first register as an official Pandora advertiser: a process that requires filling out a brief questionnaire and then waiting for approval by a Pandora representative. Their standard lead time – from initial design, through feedback, revisions, and approval, and to production and trafficking – is around 12 days. However, their recent partnership with Ad Council indicates that they are migrating towards a platform that is also self-serviced and hyper-personalized.
Capability Comparison of Each Platform
The audio advertising game is not an easy one to navigate, so in order to give you all of the additional information that might impact your decision between Spotify and Pandora for your marketing needs, we have created this capability comparison chart to track each platform’s advantages and disadvantages side by side:
for the sake of consistency, we will be looking exclusively at the ad specs for audio ads with visual banners (not videos)
Your Decision & What Fifth Tribe Recommends
As referenced previously, the decision regarding which platform you choose for your audio advertisements should be determined by your brand’s goals, challenges, and limitations. If you want creative control and as close to free reign as you can get with advertisement creation, Spotify’s Ad Studio will probably be your best bet. In terms of audience targeting and segmentation, Pandora’s technology and their highly individualized and dynamic ad sensitivity is superior. But if you’re simply looking for a quick, effective, and relatively easy process, Spotify’s trumps Pandora’s because of the level of involvement required in Pandora’s method. And if you’re cash-strapped, Pandora’s flexible pricing will most likely work better in your favor. Fifth Tribe chose to advertise with Spotify for one of our clients simply due to Ad Studios’ practicality and launch time, but we would recommend Pandora as a solid choice for a company of any size and with any budget. Unless you’re in a time crunch or want your ads to have a global reach (an option that Spotify offers while Pandora does not), then Pandora’s superior audience targeting and metric reporting deserve an advertising gold star. Which one will you choose?