With its strong quarterly beat and raise six weeks ago still ringing in investors' ears, Pandora Media Inc. (NYSE:P) is making good on its promise to sustain that momentum. On Tuesday, the company unveiled its new "visual ad experience," marking its latest effort to more effectively monetize the 80 million monthly active listeners who tune in to its streaming music platform.
More specifically, Pandora says its new visual ads are comprised of "a series of native, mobile ad formats that make rich media, video and display ads more impactful and effective for marketers."
It shouldn't be entirely surprising that Pandora is focusing primarily on its mobile user base. During last quarter's conference call, management noted the company will no longer distinguish between mobile and web RPMs (that is, revenue per 1,000 listening hours) going forward, as mobile traffic now comprises an overwhelming 85% of the company's inventory in any given month.
That's not to say Pandora was doing it wrong before. According to Pandora's chief product officer, Chris Phillips, its current platform still sees "better-than-average performance, and the advertiser continues to have 100% share of voice in a relatively uncluttered environment." After all, the "old" experience helped drive a 23% year-over-year increase in advertising revenue last quarter, including healthy 19% growth in ad RPMs, to $45.47.
"But we don't want to be good," Phillips insists, "we want to be great, and we want to solve an industry wide problem."
So what, exactly, makes these new mobile ads so effective?
For one, much in the same way Pandora enables its 80 million listeners to cull the types of music they enjoy, the new platform gives these listeners greater control over the ads with which they're served through an intuitive swipe vs. tap to dismiss functionality. And rather than manifest in a closable pop-up box as before, the ad canvas will automatically adjust to the size of the phone's screen and live within the square space that typically houses album art.
Advertisers also enjoy greater control, with abilities to measure listener engagement metrics including time spent and viewability, as well as support for IAB standard ads and programmatic needs. Advertisers can also serve videos within a responsive display unit, which appears on mute by default as Pandora's music plays, enabling listeners to tap on the video to unmute and watch in a full-screen view if they so choose.
The proof is in the pudding. Though the ads won't be available to all advertisers until later this year, initial beta testing with 1% of Pandora's mobile audience has indicated an 11% increase in time spent on brands' landing pages. Meanwhile, Pandora saw the number of listeners who engaged with a brand's landing page for more than 30 seconds double when compared to its existing platform.
In short, Pandora's new platform allows the company to send an even more qualified audience to advertisers, largely by giving both parties more control over a more quantifiable, seamless ad experience.
In the end, if Pandora's new visual ad experience is able to expand its early success to the rest of its listener base as it exits the beta stage later this year, it could have an enormous impact on Pandora's financial results as advertisers take note.
Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Pandora Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.