Brief:

• Pandora Media, the streaming music provider that's being acquired by satellite radio broadcaster Sirius XM, is rolling out a pilot program for its new podcast service. The service relies on the platform's Podcast Genome Project technology to catalog podcasts and deliver customized picks to audiences based on their listening habits, according to a company statement.
• Similar to Pandora's Music Genome Project for music recommendations, the podcast service evaluates content using 1,500 criteria including topic, audience maturity, production style and host profile. Pandora has an in-house curation team to evaluate content, while also using machine-learning algorithms and natural language processing.
• Pandora had offered hints about an upcoming podcast service during its Q2 conference call with investors and analysts. Now, select mobile listeners will test the service before it rolls out to the public in the coming weeks. Podcast Genome is aimed at the 28% of non-music listening on radio, Pandora CEO Roger J. Lynch, said during the call.

Insight:

Pandora's steps to build a business in podcasts likely will be a source of incremental revenue for the company that has a history of losing money, as its public statements show. The new service comes as consumer interest in mobile audio and podcasts, in particular, surges. Advertising revenue for the U.S. podcasting market jumped 86% to $314 million in 2017 from a year earlier, according to an IAB/PwC study. The report forecasts the podcast ad market will more than double to $659 million by 2020.

The new podcasting service will beef up Pandora's content as the company faces greater competition from Spotify and Apple Music. Sirius XM has about 28.5 million self-pay subscribers and Pandora has 6.8 million paying subscribers, compared with 87 million for Spotify and about 45 million for Apple Music. Despite lagging behind competitors, Pandora grew its subscription revenue by 49% to $125.8 million in Q3 2018 from a year earlier, according to its quarterly report.

Podcasting offers the possibility for more content providers to build a following, although traditional media organizations dominate the market. National Public Radio was the top podcast publisher with 41 active shows and a unique monthly audience of 16.4 million in September, according to researcher Podtrac. This American Life/Serial, iHeartRadio, WNYC Studios, PRX, ESPN, the New York Times and Barstool Sports were among the top 10, according to the ranking.

Host-read promotions are the most preferred kind of podcast ads, making up more than two-thirds of ads in 2017, according to the study. Direct response ads sold on a cost per thousand (CPM) basis account for the majority of campaigns, followed by brand awareness ads (29%). Native ads integrated or edited into programming made up 58% of podcast ad inventory in 2017. Among industries, financial services spent the most on podcast ads with a market share of 18%, followed by direct-to-consumer retailers at 16% and arts and entertainment at 13%, according to the study.