Nearly all time spent with digital radio, Pandora takes place on mobile
Music listeners are a mobile bunch, based on recent research by Triton Digital. The firm, which provides digital services to traditional and online radio companies, monitored clients’ weekday streaming activity from 6am to 8pm through the month of May 2015 and found that mobile accounted for 75.8% of US digital audio listening during the analysis, vs. a 24.2% share for desktop.
Triton conducts this analysis on a monthly basis, and past figures indicate that mobile isn’t stopping expansion any time soon. For example, in January 2015, it accounted for 72.4% of digital audio listening, vs. 27.6% for desktop.
eMarketer expects US adults to spend an average of 43 minutes daily with digital radio in 2015, or 11.9% of total digital time each day, and nearly all of that will be on mobile (38 minutes). Leading digital radio service Pandora will account for 27 minutes of daily radio time, or 7.5% of total time spent with digital, with mobile taking in 23 minutes.
Other research points to Pandora’s huge mobile presence. When February 2015 polling by Triton Digital and Edison Research asked US smartphone owners which digital radio apps they had downloaded, Pandora led by a long shot, at 50% of respondents.
Pandora also shines among mobile apps as a whole. According to May 2015 research by comScore, Pandora was the seventh most popular smartphone app among US smartphone app users, with a 44.0% reach. And March 2015 research by Sandvine Incorporated found that Pandora accounted for 3.33% of downstream mobile internet traffic in North America during the peak period (when bandwidth utilization is heaviest).
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Advertisers on Pandora are following the earbuds. eMarketer estimates from March 2015 forecast that Pandora net mobile ad revenues worldwide would total $752.0 million this year—up 31.7% and representing nearly 80% of the services’ total ad revenues. Most of that spending will come from the US, where Pandora mobile ad revenues will total $737.0 million.
Pandora recently reported second quarter 2015 revenues of $285.6 million, a 30% year-over-year increase. Advertising revenue was $230.9 million, a 30% year-over-year increase. Subscription and other revenue was $54.6 million, a 31% year-over-year increase. Total revenues for the trailing 12-month period exceeded $1 billion. Revenue is expected to be in the range of $1.175 billion to $1.185 billion for the year ending 2015. If the latter guidance total holds, Pandora will represent nearly one-third of total forecasted internet radio ad revenues for the year 2015.
COMMENTARY: In January 2015, XAPP Media prepared "The Internet Radio Trends Report," showing how popular internet radio has become among users and its importance as an interest ad medium. Here are a few exerpts from that report.
User Growth: Up and to the Right
The first consideration for advertisers or anyone assessing the industry will no doubt be audience size. eMarketer reported in 2014 that U.S. monthly digital radio listeners had grown to 160 million. That is over 50% of all U.S. citizens and 63% of Internet users. The audience is expected to grow to 183 million by 2018, significantly outpacing population growth. Nielsen reported in January 2015 that 67% of all music listeners access streaming services in a typical week.
The conclusion for marketers is simple. Internet radio now reaches a large audience and can be an important channel for reaching consumers. However, the story doesn’t end here.
Time Spent Listening Growth
The more important trend may be the growth in time spent listening. Consumer audio listening habits are changing. On a per-user basis of weekly listeners, the growth has been impressive. Edison Research’s 2014 Infinite Dial report showed that listening time more than doubled over the past five years, exhibiting a 13.5% compound annual growth rate.
eMarketer also reported Accustream data that illustrates how user growth and time spent listening have dramatically increased the number of listening hours on Internet radio. Between 2009 and 2014, the data show that listening hours on Shoutcast, Napster, Rhapsody and Pandora have grown from 0.86 billion monthly listening hours to 4.22 billion in 2014 – a five-fold increase. This growth is impressive and only represents a portion of the Internet radio listening market. Accustream also forecasts listening hour growth rates to range from 20-30% over the next two years. Nielsen data reported in January 2015 showed an even faster growth rate of 60.5% for audio streams in 2014. Nielsen’s conclusion: “streaming music is surging.”
More Listening, More Ad Exposure
If we consider data from Edison Research’s 2014 Share of Ear study we can estimate that Internet radio listening now averages about 14 hours and 12 minutes per month across the listening population. Listening hours are critical. They represent opportunities to reach real people with advertising messages.
A review of four leading Internet radio pure plays in November 2014 revealed an average of 2.68 minutes of ads per hour. At 14:12 hours of listening per month, that reflects about 38 minutes of ads. Recent analysis shows the average Internet radio spot length is 25.88 seconds, which translates into about 88 ad impressions per month, per listener.
Not surprisingly, growth of industry revenue has accompanied the rise in audience size and listening hours. There are two sources of revenue that most Internet Radio streamers draw from: subscriptions and advertising. There is no public information on subscriber revenue other than Pandora and some estimates on Spotify’s model. However, there is now attention focused on advertising revenue.
An analysis by BIA/Kelsey suggests the 2014 U.S. ad revenue of $2.09 billion will grow to $4.01 billion by 2017. That is a compound annual growth rate exceeding 24%. BIA/Kelsey and eMarketer estimate that Internet radio ad revenue will grow from about 11.7% to 20% of overall radio industry revenue during the period. Additionally, SNL Kagan reports that music represents nearly 20% of all mobile entertainment revenue.