Brief:

• Pandora has developed three audio ad formats designed to help marketers target their promotions with personalized messages, according to a statement shared with Mobile Marketer. The new formats are part of Pandora’s effort to help advertisers develop nonintrusive and engaging spots.
• The Dynamic Audio format provides personalized ad placement in real-time based on listener data; Sequential Audio lets advertisers engage listeners by telling a brand story in real-time through sequentially targeted audio ads; and Short-Form Audio consists of spots ranging in length from 4 to 10 seconds.
• Snack brand Lay's tested Short-Form Audio and saw a 56% higher return on ad spend, with highest results for ages 35-59 and highest lifts in awareness for the 18-34 demographic. Lay's also found that the first and last flavor mentioned in the spot were the most effective, Pandora said.

Insight:

Pandora's personalized ad formats are the company's latest effort to fend off growing competition from rivals that are seeking to boost subscriptions and ad growth. The music streaming pioneer has 6 million paid subscribers, which is dwarfed by Spotify's larger audience, while giants like Alphabet, Amazon and Apple also are promoting their music and video streaming services. The new line of personalized audio ads could make Pandora more attractive to advertisers that want a better ROI on their ad buys.

A significant portion (92%) of Pandora's audience tunes in to its free, ad-supported service. The company this month opened up its ad inventory to programmatic ad buying, giving marketers a chance to reach millions of people. To power up its programmatic marketplace, Pandora acquired AdsWizz in March for $145 million. Since then, Volkswagen, Procter & Gamble, Gatorade and Sony Pictures have been among the more than 20 brands that participated in Pandora's test of programmatic audio ads. Pandora has boosted ad revenue 54% during the January to July period of 2018 from a year earlier, according to Standard Media Index.

Pandora still must do a lot to catch up to competitor Spotify, which last month 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 next month, per CNBC. The company got a boost this month by partnering with electronics giant Samsung to provide music streaming services to the company's new Galaxy Home smart speaker that is aimed at rivals Amazon's Echo and Google's Home devices. Spotify this month also started testing a feature in Australia that lets non-paying users skip audio and video ads as it seeks to differentiate its service from Pandora.

While audio advertising makes up a tiny slice of the $88 billion digital ad market, there is ample room for growth as the audience for music streaming increases. In 2017 the U.S. market for audio ads jumped by 39% to $1.6 billion, with $364 million of ad sales on mobile devices, according to the Interactive Advertising Bureau.