Brief:

• Pandora announced via a statement that its ad inventory is now available for programmatic buying. That means marketers can potentially reach an audience of millions of listeners who use the company's free, ad-supported service, which is used by 92% of its audience.
• The company also announced that its Q2 2018 revenue rose 2.1% from a year earlier to $384.8 million, while its loss narrowed to $99.5 million from $289.7 million in Q2 2017. Subscription and other revenue jumped 65%, but ad revenue declined 2.6%, per Reuters.
• AdsWizz, which Pandora acquired in March for $145 million, powers the company's programmatic marketplace. Volkswagen, Procter & Gamble, Gatorade and Sony Pictures were among the more than 20 brands that participated in Pandora's test of programmatic audio ads starting in February.

Insight:

Pandora's push into programmatic sales could help the company cut costs and reverse declining ad revenue. While streaming services like Pandora, Spotify, Slacker Radio and Tidal naturally want the steady income that comes with paid subscriptions, ad sales are an enticing way to boost their revenues and broaden their audiences with free streaming services that help to lure new subscribers. The shift toward programmatic selling for audio content comes after the U.S. market for audio ads jumped by 39% to $1.6 billion in 2017, with $364 million of ad sales on mobile devices, according to the Interactive Advertising Bureau.

While audio advertising makes up a tiny slice of the $88 billion digital ad market, programmatic ad buying is becoming more popular among other kinds of mobile ads. Programmatic ad buying uses software to place ad insertions, which helps to speed up ad buying but also has spurred complaints about the lack of transparency and brand safety issues. Still, mobile programmatic ad spending will reach $32.8 billion, or 70.4% of all programmatic digital display outlays in the U.S. this year, researcher eMarketer estimated. Pandora rivals Spotify and iHeartRadio began offering audio ads through programmatic late last year.

Pandora was a pioneer in music streaming, but lately has played catchup to rival Spotify and also faces growing competition from giants like Alphabet, Amazon and Apple, who have all begun to dip their toes into music streaming. Spotify last week said its ad-supported monthly users had reached 101 million in Q2 2018 while paid subscriptions had reached 83 million. Spotify forecast that its paid subscribership will reach 85 million to 88 million by the end of September, pointing to Pandora's growing competition and suggesting the need to streamline its ad-buying system.