Pandora has recently expanded its presence in both Seattle and Portland, trying to take a bite out of the billion-dollar local advertising market.
Pandora’s presence in the Northwest offers a new twist on satellite offices. It has become common for tech companies to setup engineering centers in the Northwest to recruit developers away from other companies.
But in this case, Pandora’s offices are all about ad sales.
The digital music pioneer Pandora calls Seattle and Portland home to two of its 36 U.S. sales offices. In Seattle, Pandora employs 18 people, up from seven two years ago. In Portland, it employs seven, up from five a year ago.
Local revenues are becoming a larger contribution to the company’s revenues. In the first quarter, local ads represented nearly a quarter of all advertising revenue, and totaled $43.4 million, up 67 percent year over year.
“Our local business over the past four years has grown substantially,” said Andy Lipset, Pandora’s VP of local and national broadcast. “It was in a handful of cities four years ago, and represented a sliver of Pandora’s revenue.”
Lipset said Seattle and Portland particularly stick out because both markets feature a tech-savvy population with robust media and advertising markets.
Pandora’s pitch to local advertisers is simple. The company says it can target consumers with much greater accuracy than a traditional radio station because it knows a person’s zip code, age and gender, which they disclosed at the time of registration.
However, it does not yet target based on music tastes for all subject matters. So if you get an advertisement for a nearby pediatrician while listening to the Casper Babypants channel, that’s more based on your demographic than your listening preferences.
Pandora’s digital music service is for the most part an ad-supported business, with spots running less frequently than traditional radio, too, so in theory, you are less likely to tune out the message. The company— now led by former aQuantive CEO Brian McAndrews — says it plays a maximum of seven audio spots, or 3.5 minutes worth of commercials, per hour. Listeners can opt to pay for a premium level that has no advertisements, but these users represent a small fraction of the company’s audience.
Frequent local advertisers include credit unions, healthcare providers, non-profits and big events, like boat shows.
Founded in 2005, Pandora is an Internet radio service, meaning that listeners enter an artist of their liking and then will be played similar songs, unlike other streaming services, like Spotify, which allow users to listen to a particular artist or track of their preference.
Nationwide, Pandora currently has close to 80 million active listeners on a monthly basis, with 700,000 in Portland and 1.1 million in Seattle. In comparison, Austin has 450,000 monthly listeners, while Los Angeles has 3.8 million.
Pacific Northwest residents are also active participants, frequently giving a song a thumbs up or thumbs down to help the service adapt to their music tastes. In December, listeners in Portland activated 12 million thumbs, and in Seattle, listeners activated 16.6 million thumbs.
Nationwide, listeners have provided over 50 billion thumbs since 2005.
Late last year, Pandora opened up a new office in Seattle’s Pioneer Square to support its growth here. The office was designed specifically with the Northwest in mind, with chopped firewood acting as the backdrop to Pandora’s logo, and other features, such as exposed brick and duct work. In addition, a wall was dedicated to local artists.
“Each one of our offices takes on its own look and feel,” Lipset said. “You’ll never see that in New York!”