"It's no longer good enough for a programming director or DJ to say, 'This is what you're going to listen to, and you're going to like it,'" Gabe Tartaglia said. Not when users can decide: 'I'm going to create a playlist of upbeat songs to listen to as I work out.' That's what listeners expect."
CLEVELAND, Ohio -- Gabe Tartaglia, vice president of sales for Pandora internet radio, compares the evolution in how to listen to music to what happened to the television industry 25 years ago. Streaming Internet and satellite radio have permanently altered the audio landscape, he told members of the American Advertising Federation - Cleveland Chapter, and radio will never be the same.
"Back in 1980, there were three networks: ABC, NBC and CBS. And if you wanted to watch something on TV, you turned on one of these networks," Tartaglia said. "By 1990, there were 153 networks with original programming." And with more shows and more channels to watch, overall TV viewership went up. The pie got bigger, except for at the original three networks, whose shares of the audience got smaller.
Now with Internet and satellite radio, there are so many new ways to listen to music. Although the choices for consumers have exploded, advertisers have not yet caught up to where their listeners have gone, Tartaglia told nearly 100 attendees at AAF-CLE's networking luncheon Wednesday.
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View full sizeGabe Tartaglia, VP of Sales, Pandora radio Tartaglia, a native of Bay Village and a graduate of Miami University of Ohio, currently oversees Pandora's 17-state central region from his office in downtown Chicago.
What are the major changes on the audio front? For one thing, technological innovations have given listeners different ways to get their music, he said.
Second, consumers want more personalization. "It's no longer good enough for a programming director or DJ to say, 'This is what you're going to listen to, and you're going to like it,'" he said. "Not when users can decide, 'I'm going to create a playlist of upbeat songs to listen to as I work out.' That's what listeners expect," he said. With a mobile device or tablet, "I can take a long stroll on the beach and I can take my music with me."
So how does Pandora work?
When listeners sign up for Pandora radio either online or via its mobile app, they're asked to provide three key pieces of information: their year of birth, their gender and their ZIP code. "We know who's listening to what by demo and geo, so we can target advertisers directly to them," Tartaglia said. If Heinen's wanted to target women ages 25 to 44, for example, Pandora could tailor its advertising only to that band of consumers.
Cleveland's DMA (Designated Market Area), which includes Cleveland, Akron and Canton and stretches roughly from Lorain to Ashtabula counties, is the nation's 35th largest radio and television market. The market skews slightly more female (52 percent), with a median age of 32.
Within that DMA, Pandora streams its music to 465,000 unique listeners per month, including 311,000 weekly unique listeners, who spend an average of 6.5 hours per week listening.
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View full sizeGabe Tartaglia, a Bay Village native, now at Pandora internet radio What's unusual about the Cleveland market is that the percentage of listeners who are streaming Pandora via their smart phones is 83 percent -- 5 percentage points higher than the national average of 78 percent. "Our listeners are big mobile device users," Tartaglia said. "This is either a very tech-savvy marketplace, or people here are on the go, and they're not tethered to their homes or offices."
"The beauty of Pandora is that, say, I like Jimmy Buffett. Pandora will create a 'station' that includes Jimmy Buffett songs, as well as other songs similar to his that I can thumb-up or thumb-down" via the website or app. The minute a listener "edits" his station with that feedback, the station becomes unique to his taste, and won't be exactly the same as his neighbor's Jimmy Buffett station. Listeners can pick up to 100 stations organized by artist, by song, or by genre, as categorized by Pandora's "musicologists."
Pandora also provides song lyrics and artist's biographies, suggests similar artists or composers, and provides other details listeners can't get from what Tartaglia calls "terrestrial" radio stations.
Pandora doesn't offer news, traffic or sports, because there are so many other outlets that already do that. "We're music operators. If you've got to pick a hill and own it, what we do well is Internet radio," Tartaglia said. "Our only spoken-word genre is comedy, but the comedy bits are like songs."
That's how 97 percent of Pandora listeners get their favorite music. In most cases, advertisers pay the royalties, licensing fees and operating costs of streaming the music. In exchange, Pandora puts the advertisers' audio, video or display messages out to their desired listener demographic.
Listeners who don't want to hear ads can upgrade to PandoraOne service and pay $4.99 a month, which covers the royalties and other costs that advertisers would otherwise pay. "That represents 3 percent of our listeners" and isn't Pandora's main objective, Tartaglia said.
So who is advertising on Pandora in Cleveland?
"Local businesses have done really well. We have 125 local advertisers who are working with us, including 30 different auto dealers, and 18 high schools and colleges," he said. Positively Cleveland just launched a campaign with ads in five markets within a one-tank drive of Cleveland to attract their residents here. "We can ZIP-code target down to a five-mile radius" of where a business is located, he said.
Laurel School, a private K-12 girls school in Shaker Heights, could advertise to adults in certain suburbs who might be interested in its school and send an entirely different message to female listeners 13 or older in those neighborhoods, Tartaglia said. Similarly, he could receive ads from furniture stores and car insurance companies, but his teenaged son might hear ads promoting Mountain Dew or Six Flags.
Whether audio, video or display ads, "our ads are not skippable," Tartaglia said. "That's incredibly valuable to advertisers." Pandora "knows" listeners are there when they switch stations, skip songs or otherwise interact with the site. But if someone hasn't touched the screen in a while, it will pause and ask "Are you still listening?" before continuing.
As the number of occasions where people can listen to music has increased, overall audio consumption has also gone up, he said.
According to Edison Research, a consumer market research firm in Somerville, NJ, the percentage of people who say they have listened to Internet radio within the last month has soared, to an estimated 124 million in 2014. That includes 75 percent of listeners ages 12 to 24; half of listeners ages 25 to 54; and 20 percent of listeners 55 and older.
The average amount of time people spend listening to all sources of Internet radio (not just Pandora), has more than doubled, from six hours in 2008 to 13.19 hours in 2014. At the same time, the amount of time spent listening to broadcast radio has declined 26 percent, from 19.46 hours in 2007 to 14.46 hours in 2012.
Pandora, based in Oakland, California, has big plans for Ohio, having grown from zero to 14 employees here since the beginning of 2012. That includes eight people in Cleveland, mostly salespeople and client services representatives, who are about to move into another office space with room for three times that sized staff (although Tartaglia won't say where). "We're one of the few digital publishers that's invested in the marketplace," he said.
Tartaglia said Internet radio is also growing as a "share of ear," the total amount of time Americans spend listening to all sources of audio, from music they own on CDs, to SiriusXM satellite radio, to AM/FM, to podcasts and other sources. Internet radio represents 18.2 percent of share of share of ear for people 13 and older, 55 percent of which comes from Pandora, he said.
The percentage of people aged 13 and older who listened to Pandora Internet radio within the past month is 31 percent. Of those listeners, 75 percent to 80 percent of them are listening via their mobile devices. And that percentage is definitely going to increase, he said.
A recent study found that the number of mobile phones worldwide now exceeds the number of working toilets, the number of people with regular electricity, and the number of people who brush their teeth daily, Tartaglia said.
And while people will wait an average of 26 hours after they lose their wallet before reporting it missing, they will report a lost phone after missing it for only 68 minutes. "The average person touches their phone 16 times an hour. My children touch their phone 60 times an hour," Tartaglia said. "If you're missing it, you know it instantaneously."