Last year Pandora created a fire-storm by releasing its own home-grown average quarter-hour (AQH) ratings.
The company defended itself by claiming its amateurish effort was the first step in providing media buyers an apples to apples metric, “to help advertisers determine the value of running campaigns on Pandora.”
Now that Triton Digital, a reputable ratings company, has gotten involved, Pandora has finally achieved its goal of having credible listening metrics comparable to broadcast radio.
And the company may come to regret its efforts.
When the company rolled out its first AQH numbers generated by re-purposing music logs, their press release declared:
Radio is radio. Pandora is simply a smart buy for local advertisers as well as national ones.
But the numbers suggest otherwise.
The ratings reinforce previous Radio Insights estimates that show despite the service’s dominance in streaming, it is little more than a niche player when compared to local radio.
The first graph at the left compares Adult 25-54 Pandora AQH to the comparable leading station in each of the eleven markets for which we have Pandora numbers.
Local radio beats Pandora in six markets and ties it in a seventh. In A18-49 it's a split decision. Local radio wins in three markets, and ties in two.
Pandora easily wins A18-34, winning in nine out of eleven, and tying in the remaining two markets.
The purpose of Pandora's local ratings was ostensibly to show why the service is a great advertising vehicle, but when it comes to media buying, AQH is only one component.
Decades of academic research has shown that an effective media buy has two components, reach and frequency.
Reach is the number of consumers who hear a message. Frequency is how often they hear it.
Reach without frequency is ineffective, but frequency without reach is even worse.
Local radio is an effective advertising medium because a buyer can easily place a buy that maximizes reach while minimizing wasted frequency.
The second graph above shows Pandora’s reach (cumulative audience) compared to the same stations shown in the AQH graph.
Note that Pandora has one-half to one-third the reach of leading local stations.
So what? What does it mean?
It means that Pandora is not a good advertising vehicle. It falls well short of local radio when it comes to balancing reach and frequency. The third graph illustrates why.
The graph shows what happens when a local radio station and Pandora run a similar commercial schedule. As Pandora continues running spots, reach climbs until it hits the service’s cume, generally in the mid to high 20s.
In other words, no matter how many times Pandora plays a spot, no more than 30% of consumers will hear the spot even once.
Once the service's cume is reached, the only thing that will happen is that the same people will hear the spot over and over.
(It should not come as a surprise that the number one complaint about Pandora by its users is that they hear the same commercials over and over.)
In contrast to Pandora, as a spot schedule continues to run on a local radio station, both reach and frequency continue to grow until the station’s much higher cume is reached.
It is the relationship between reach and frequency that makes local radio a much more effective vehicle than Pandora.
Despite Pandora’s millions of users, the seemingly competitive AQH rating is a consequence of a relatively small number of heavy users spending a great deal of time listening to it.
For this reason, Pandora isn’t a good advertising alternative to popular local radio stations--unless you’re Kyle Taylor proposing to Maggie.