Pandora, the popular internet radio platform, is testing out an aggressive new ad model to boost revenue and improve conversion. Under the new model, registered users can listen to Pandora for an hour ad free after clicking on a Sponsored Listing, which is essentially an on-air commercial.
Partnering with Fox and Sony PlayStation as sponsors, Pandora has rolled out a beta version of this new ad model to 20% of Pandora’s non-paying listeners (about 14.6 million listeners, based on 73 million monthly users), with a full rollout expected in 2015.
Listeners receive the obvious benefit of an hour of commercial-free music, and advertisers like Fox get a chance to show off their latest projects, like the new drama Gotham. Ad sponsors are presumably getting in front of their target audience, or at least getting the opportunity to share their brand widely among Pandora’s customer base. If this new ad model is successful, Pandora will be able to attract other big name partners to purchase Sponsored Listings which could give profits a much needed shot in the arm, in turn boosting the value of the company’s stock, which has had a rocky year.
Despite the low monthly price tag of $4.99 for Pandora One, the subscription offer for ad-free listening, Pandora has had a hard time converting new subscribers. Of its 73 million users, only 3 million are paid subscribers. The one-ad, one-hour-free model might improve that by getting free users to experience an hour of ad-free listening without subscribing. It’s much like a trial offer, but with the added bonus of Pandora receiving advertising dollars from sponsors.
Normally, we recommend subscription sites create paid trials to entice new subscribers, as paid trials tend to have higher trial-to-paid conversion rates than free trials. But this is an interesting riff on the free trial offer since it still generates revenue. However, because these “trial takers” aren’t signing up with a credit card, the trick will be converting frequent users of this service to paying subscribers. At the same time, the gimmick will definitely help Pandora identify more qualified prospects.
For more best practices in creating trial offers to convert subscribers, check out our On-Demand Video on Subscription Site Insider.