While Spotify and Apple Music have focused their streaming music business on growing subscriptions, Pandora CEO Roger Lynch says his mandate is to “double down on its older advertising-based internet radio service,” according to an interview with Business Insider. "Our free service really is our core business. It's not about using our free service to drive subscriptions," he says. “It's about increasing engagement in that and driving ad revenue."
In fact, showing its dedication to an advertising-supported platform, Business Insider points out that the company recently acquired ad technology company AdsWizz; and as Inside Radio reported, it recently announced a deal with Snap that allows customers of its ad-supported service to share full songs with each other through Snapchat. In addition, last year, Pandora addressed a longstanding complaint of customers of its free service, introducing a new feature that allows them to play songs of their choice on demand — after watching a video ad.
The interview with Lynch comes on the eve of his first anniversary Aug. 14 as the new chief of Pandora. A year later, the company has yet to post a full-year profit. “Lately, the company has seen its sales growth slow to a crawl and its losses swell as its total number of users and the number of hours they tuned into its service declined markedly,” Biz Insider points out. “Those user and usage declines have come as Apple Music and Spotify have garnered new subscribers by the millions.”
Lynch responds, "If you believe in the growth of digital audio, both with subscriptions and with ads, I think Pandora is incredibly well positioned for that.” He is particularly optimistic with the acquisition of AdsWizz, which allows for programmatic advertising for digital audio services, which he says should allow Pandora to sell out its ad inventory and increase the money it sees per impression from ads, without having to increase the number of ads that users hear. "All those factors go into improving the monetization on digital audio for us," he said.
He also believes he can fix Pandora's decline in users. Biz Insider explains: When Pandora asked why people stopped listening to its services, the vast majority of them said it was because they couldn't play a particular song or album on demand. The company's free radio service allows users to create radio stations that are inspired by particular songs, but they couldn't just start playing them. In December, it launched a feature that addresses that objection: Users can now listen to just about any song they want on demand, after watching a 15-second video ad.
For the company, the feature has an added benefit — those kinds of ads are in high demand, according to Lynch. Pandora can just about guarantee users will watch them, and users generally don't object to them, because they get rewarded for watching them.
"That ad unit is incredibly valuable," he said. "Advertisers love it."
Lynch also believes that Pandora complements Spotify, rather than competing with it. Pandora made a name for itself by creating lots of different streaming channels that appeal to a variety of tastes and for customizing playlists for users based on what it knew about their personal musical tastes. Spotify stands for something different — the ability to play whatever song you want when you want it, Lynch tells Business Insider. To put it a different way, Pandora offers more of a lean-back experience than Spotify, he said.