Dive Brief:

• Pandora created a private ad exchange to auction highly-targeted in-app banner ads allowing brands to pinpoint listeners based on first-party data.
• When listeners sign up for the streaming music service, Pandora collects data such as age, gender and zip code, and the ad exchange provides brands access to users meeting specific criteria based on these data points.
• One of the company’s goals is help close the gap between ad performance on its app as compared to its desktop solution, a $23.84 per thousand listener difference.

Dive Insight:

Pandora, the online streaming music service, created a private ad exchange to auction in-app banner ads to brands. The ads auctioned via this exchange are highly targeted and are based on data collected by Pandora on its users at sign-up such as age, gender and zip code. Another factor for consideration is Pandora’s 350 targeting segments it created by combining its own data with information from third-party data brokers, which is further targeted to reach listeners on Pandora in the moment rather than reaching a broader range over a longer timeframe.

The exchange has been in testing since March with a select group of advertisers, and is now being fully rolled-out. This model for selling in-app banner ads is part of an evolving level of targeting and specificity offered by Pandora. Initially brands could reach users who had previously visited their websites, later in 2014 advertisers could access Pandora’s first-person data for targeting, and now brands can target specific audiences within Pandora’s current listeners. The exchange is also limited to advertisers who have purchased ads directly from Pandora.

Adding features to its in-app advertising will possibly help Pandora improve in-app advertising performance as compared to its desktop ad performance. Even though mobile accounted for 78% of Pandora’s Q1 2014 revenue, its in-app ads lagged its desktop ads in revenue per thousand listeners -- $34.92 to $58.04.