Pandora Media Inc., the online radio service, began selling ads that only listeners in autos will hear, creating a potential new revenue source. The shares rose the most in 10 months on December listener data.
BP Plc, Taco Bell, Ford Motor Co. and State Farm insurance signed on as the first advertisers for the 15- and 30-second spots, Oakland, California-based Pandora said in an e-mailed statement.
By offering a targeted service, Pandora is seeking to claim more of the $15 billion it says is spent annually on local radio by U.S. advertisers. The service, built into 130 vehicle models and 270 aftermarket devices since 2010, has been activated by 4 million users in cars, the company said.
“Nearly half of all radio listening takes place in the car,” Simon Fleming-Wood, Pandora’s chief marketing officer, said in the statement. “We knew early on that to redefine radio, we would need to seamlessly deliver Pandora through in-dash entertainment systems.”
Pandora rose 14 percent to $31.49 at the close in New York, the biggest one-day advance since March 8. The stock almost tripled last year.
The company also reported audience listening hours totaled 1.58 billion across all platforms in December, an increase from 1.49 billion the previous month. Active listeners last month climbed to 76.2 million from 72.4 million in November.
“We continue to look at these results as demonstrating that competition is not significantly impacting Pandora’s active listener growth or listener hours,” John Blackledge, a Cowen & Co. analyst in New York. said in a note. He has an outperform rating on the stock, the equivalent of a buy recommendation.
With Pandora built into cars, drivers can change stations, choose songs and skip tracks using in-dash entertainment systems, the company said.
As an online service, Pandora can identify listeners better than conventional radio. Targeting drivers attracted Ford, State Farm and Taco Bell, all of which seek to appeal to people behind the wheel. Taco Bell is owned by Yum Brands Inc.
“This next partnership phase lets us effectively reach highly engaged customers where they are most likely to enjoy radio and is incredibly exciting for our business,” Erica Bigley, Ford’s digital marketing manager, said in the statement.
Pandora said there will be fewer ads in cars than listeners hear elsewhere on the service. Pandora One subscribers won’t hear any ads.