Bloomberg News
Pandora Media Inc. is one of the best performers in tech this year, with shares up nearly 75%. But with the stock far off its all-time highs, the company has been looking for new ways to generate long-term growth.
On the heels of a new partnership arrangement with AT&T Inc. Pandora’s Chief Financial Officer Naveen Chopra spoke with MarketWatch about how relationships with other tech companies can help the streaming-music pioneer drive more listeners to its products.
The AT&T arrangement, through which subscribers to a recently introduced AT&T unlimited plan can get Pandora Premium or another of a few streaming media services for free along with their plan, is one way the company is trying to leverage partnerships to acquire new users more efficiently, Chopra explained. Pandora also has a new partnership with Snap Inc. which will let Snapchat users share Pandora songs with their friends through the app.
While the AT&T deal focuses on Premium, Pandora’s paid-subscription offering, the company also sees potential in ad-supported listening and recently completed the acquisition of ad-tech company AdsWizz. Chopra said the purchase will help the company benefit more broadly from increased interest in audio, beyond its own platform.
Excerpts of the conversation follow.
What can you tell us about the financials of the partnership?
We have a relationship with AT&T in the background that handles the economics of it. We don’t disclose any of those specifics, but we have a wholesale relationship with AT&T. They help us acquire the customers by way of funneling Pandora in these plans. That’s a very efficient way for us to acquire subscribers and for AT&T to make their own services more sticky and reduce churn.
What’s been your partnership strategy lately?
We see meaningful opportunity to fuel growth of both our subscription and ad-supported business through a variety of partnerships. We have a relationship with Snap to create a slick way of sharing access to music with a social network. Pandora has done a good job in the past of getting the service integrated from a product perspective with various devices. Now we’re really focused on how we can team up and align with various players to help drive awareness of our new product.
When you and the new team came in late last year, many thought Pandora would de-emphasize the Premium product. With the AT&T arrangement, it seems like Premium is still a priority.
The approach we have taken is to really pursue the subscription market as well as the ad-supported market. We’ve probably brought a bit more balance to that. The company had gotten very focused on subscriptions and perhaps wasn’t able to invest enough in the ad-supported side. We’ve found ways to do both and both are very important parts of the market. Subscription services are growing very rapidly and we want to be a part of that. There will still continue to be a large base of customers for whom ad-supported is a greater model, and we’ve introduced more interactivity in the ad-supported tier with Premium Access.
The AdsWizz acquisition recently closed. How are things going there?
We continue to be excited about the potential there and what it does to accelerate our adoption of programmatic audio inventory. Continuing to build a broader ecosystem takes us from being more of a publisher to more of a platform. Discussions with other publishers show us that the growth of the audio ecosystem can help all boats rise. If you go back to the early days of display or social, any major digital format, the thing that really helped a lot of those take off besides the presence of a large publisher was that those publishers built platforms that allowed smaller publishers to take place in marketplaces where all of the supply could be aggregated. That made it much simpler for buyers because you didn’t have to go to 16 different places to address your audience. That hasn’t really happened yet in audio but we think it’s a good opportunity.
Are smart speakers one of the things fueling interest in audio ads?
That’s certainly one of the things creating interest in audio as a category. Consumers are spending a lot more time with smart audio devices or interacting with their smartphones more using voice-driven interfaces. A lot of advertisers are saying the traditional ways of reaching people that relied on screens are perhaps not optimal. There’s a lot of focus today on how to engage customers based on audio advertising. We’re entering a new genre of audio advertising. We’re the largest publisher there and think it’s beach-front real estate.
Pandora shares are down 1.3% in Friday trading, while the S&P 500 has gained 0.4%.