Pandora Study: Overexposure to Ads Resulted in 3 Lost Listeners for Every New Paid Subscriber
A new report by Pandora finds that additional ads drive some listeners to opt for ad-free subscriptions, but there’s a catch.
What is the impact of ad oversaturation within digital platforms? Can serving more ads drive paid subscription sign-ups, or does this behavior cause users to bounce for good?
New research from the music platform Pandora, created in partnership with data scientists from Uber and Netflix, sought to identify the impact of advertisements on listening time as well as on paid subscription sign-ups.
Here’s how it worked: Participants were divided up randomly into nine groups each served a different number of advertisements. The “lowest treatment group” received only three ads while those in the “highest treatment group” received as many 12. Those who did not fall into either of these two spectrums were given a number of ads in between this range. For reference, at the beginning of the study, all listeners were receiving an average of six ads per hour.
Almost two years later, the findings of the experiment are in. Generally, Pandora found that unsurprisingly, serving more ads resulted in less listening time. In particular, one additional ad per hour resulted in a 2 percent decrease in average listening time and a nearly identical 1.9 percent decrease in the number of days a user listened. At the same time, however, breaking up ads only seemed to affect the amount of time spent listening to ads.
“We find weak evidence to suggest that redistributing advertising across more interruptions, conditional on the number of ads being held constant, may have a small impact on customers’ propensity to listen to Pandora,” the report stated.
The dips in active listeners due to the ads were attributed to three key factors: shorter listening sessions measured in hours per active day (18 percent), fewer numbers of active days spent listening (41 percent), and leaving the service entirely (41 percent).
The chart below looks at age with regards to the effect of one additional ad per hour and the increase in the probability of not using Pandora due to the exposure of more ads. In the 55 and older age group, each additional advertisement per hour made them 0.021 percent more likely to become subscribers. This compares to only 0.009 percent of those 18 to 24 who claimed they were likely to subscribe to Pandora’s ad-free service, which costs $5 per month.
Based on the findings, one might infer that older generations are more concerned about their time being wasted, whereas those who are younger are more wary of where their money is going. In this vein, they’re more willing to experiment with alternative services with the goal of receiving relevant advertising and more desirable experiences.
Image via Quartz
The findings also showed that for each listener converted to a subscription due to the increased number of ads, three listeners left Pandora entirely. What’s more, WIRED adds, that revenue Pandora earned from these subscribers was “considerably smaller” than the revenue that would have been earned advertising to those who decreased their listening or stopped listening entirely. In short, subscription revenue didn’t make up for the lost ad revenue.
According to Quartz, the experiment was conducted over a 21-month period (June 2014 to April 2016) and involved roughly 35 million of Pandora’s their 80 million active users across the U.S., Australia, and New Zealand. At the time, these were the primary areas in which the company’s Internet radio serviced operated.
The implied lesson for platforms and brands is that an overexposure to ad could drive less time on site. And for platforms in particular, the users you push to a paid model could potentially come at a loss due to lost ad revenue.
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